Jul 6, 2018
How hot stock tips usually happen after the stock has had its
run. Invest to create income. Your retirement isn’t something to
play around with. Today, we learn what a good solid overall
retirement plan looks like and the retirement pyramid. We also talk
about risk aversion.
Main Questions Asked:
How to create a plan that generates income for the rest of your
How to structure a solid retirement plan?
What are the main parts of the retirement pyramid?
What is risk aversion?
Key Lessons Learned:
The Retirement Pyramid
- The bottom part of the pyramid should protect against risk.
These are things like life insurance, home owner’s insurance,
long-term care insurance, and maybe some type of umbrella
- Without insurance protection you could lose everything.
Insurance simply covers the risk that can take away your assets. It
makes sense to have insurance.
- Long-term care insurance. This is a big one everyone should
analyze whether they need long-term care insurance, because if you
do need it you could be paying over $10,000 a month.
- The middle part of the pyramid should be guaranteed income.
This is consistent income that you can count on living on for the
rest of your life. This includes things like pensions and Social
- Guaranteed income. This means anything you need to create
paychecks for life. Social Security, a pension guaranteed by a big
company, a portfolio that is structured for income. You could even
have some insurance products like annuities or guaranteed
- The top part should be your long-term investments. These are
stocks, bonds, CDs, and mutual funds. These are discretionary as
you can change investments from time to time and take income
- Some people make their investments the foundation of their
pyramid, but if you think about it the pyramid is flipped upside
down and unstable. Once your risk is taken care of, it is then time
to grow your network.
- Now it's time to decide if you have the right portfolio based
on your risk tolerance and things that have happened in your life.
The investment piece needs to be on the top of the pyramid.
- People rarely say that they are risk averse. It's important for
a good financial advisor to listen to a client to understand what
they are describing when it comes to their tolerance for risk.
- When people say words that mean they are risk-averse, their
financial advisor needs to be cautious with managing their money.
They need to explain the risk of a downturn in the market, and make
sure that the client is comfortable with that.
- It's a professional’s job to probe into what the client is
telling them and completely understand their potential for
- Often, people don’t understand that their portfolio is filled
with all kinds of risk. Sometimes they are getting bad advice, or
they are managing their own money and don’t understand what could
happen in a downturn.
- The market will drop. When this happens, people need to be
prepared for that. Part of the problem is not having a plan. You
need to do more than just go over investments.
When An Investment Isn’t Conservative
- Analyze your portfolio to understand the percentage you could
lose when the market drops. When an account drops it is tempting to
get out of the portfolio.
- Finding a good financial advisor has everything to do with how
someone will behave when the inevitable market drop happens.
Links To Resources Mentioned
Money Map Retirement Review
Thank you for listening!