At LIS, we believe there are three general stages in the investment lifecycle – Accumulation, Preservation, and Distribution. The accumulation phase begins when we first start working, and for many of us, this often occurs by deferring income to an employer sponsored retirement plan. If your employer doesn’t offer a retirement plan, you can still save for retirement using IRA’s or a variety of other tax-advantaged options. The three variables that determine how much you will have saved at retirement are your contributions, your growth rate, and time. Of these three, time is more powerful than you might think. Check out our compound interest calculator, where you can try out different combinations of contributions, growth rate, and time, to see what your savings plan might grow to by the time you retire. Adjust the “years to save” input and notice the difference extra time makes!
So, if you haven’t started saving yet, now is the time. Even if it’s just a little bit, the extra time in the market can make a big difference! At LIS, we can assist in this stage of investing by helping you build a savings plan, including what type of account to use, how much to contribute to reach your goal, and how to allocate your investments for optimal growth based on your risk profile.
Investors enter the preservation phase at different points along their journey, but typically it is within 5-10 years of retirement. In this phase we still want to see growth on our assets, but we start becoming more concerned about protection. It has taken many years to build up our savings, and we want to make sure those assets are there when we are ready to start using them! During this phase LIS focuses on and works with investors to reduce risk in their portfolios, or add features that help protect income or principal from potential market losses. The preservation phase is also the time to hone in and become more detailed and specific in retirement planning. For example, determining how much income is needed, where it will come from, tax-efficient withdrawal strategies, etc.
Finally, the distribution phase usually begins when you’ve made it to retirement! Now you are ready to put your plan into action and start living off of the savings that you’ve spent a lifetime accumulating. LIS often recommends additional portfolio modifications at this time as we shift from accumulation to distribution. We take many things into account before implementing your distribution plan- other income such as Social Security, pension or part-time work, and work to identify how much income to take and from where. Longevity planning is a big part of this stage as well. We want to make sure you have enough to live on for 30 years or more, but we also want to ensure you’re able to enjoy what you have saved and feel comfortable to spend in your golden years. Investors have started working with LIS at various points in all of these stages and have had a successful retirement story, so it is certainly true that it is never too late to start. However, the sooner the better is probably a good rule of thumb when it comes to retirement planning. So, regardless of which phase of investing you are in, the advisors at LIS stand ready to assist you in the journey. Contact us today with questions or to schedule a time to review your plan with one of our Certified Financial Planners™.