Risk & Reward

If you’re 50 to 80 years of age, here is a message for you about risk and reward.

Why am I writing about this now and asking you to pay close attention? Because today, people over the age of 55 face economic conditions much different than previous American retirees. The media attempts to make parallels to past decades, but this situation is different – much different.

I want to make sure that I explain to retirees (and those soon to be retired) important facts like the true impact of investment risk. I want to be sure that people over the age of 55 understand the return needed after a loss just to get back to even. This math is simple and important to understand.

riskrewardAs we age, the amount of time required to recapture our losses and the large gains needed become very difficult. It may take years of gains just to get back to where we started.

There are retirees who fear being embarrassed by their lack of investment knowledge, and thus, blindly trust an advisor. The question is, do you truly have an advisor to guide you through the turbulent times, or do you fear you are in the hands of a financial salesperson with motives tied to his or her own best interests rather than yours?

Tom Brokaw called your age group “the Greatest Generation” for a reason. You worked, you saved, you raised your family, you sacrificed and went without to accumulate the money you now have for your retirement and eventually for your family. Please have the courage to do something positive about it.

By the way, I don’t mean to sound like an alarmist. Nor do I want to profess that I possess all the answers (no one does). However, I’ve been convinced that encouraging you and others to take a comprehensive look at your retirement is a worthy cause. Frankly, I was a little reluctant to mention that many advisors are, in fact, financial salespeople and not advisors at all. But again, my colleagues persuaded me to explain the truth about how the money system in our country really works, so that you can find the courage to take action.

Anyway, this really shouldn’t be about me at all. It’s all about you, your life with your family and sense of security. And it’s about a terrific team of people eager to assist you – eager to serve you and provide plans which are simple, straightforward and easy to understand.

Sound Familiar?

If you invested $100,000 into a mutual fund that experienced a 20% loss, you would lose $20,000. The account value on your next statement would be $80,000.

Question: For you to get your statement balance back to $100,000, will a 20% gain recoup your loss?

Let’s crunch the numbers:

  • $80,000 x 20% = $16,000
  • $80,000 (beginning balance) +16,000 = $96,000

Answer: No, a 20% loss followed by a 20% gain does not get you your principal back. In fact, to regain your original principal balance you will need to get a 25% return.

Our process starts with a proven set of diagnostic reviews, a process we call the Complete Planning Review (CPR), to identify potential financial and family planning problems. We identify problems that may stop you from meeting your goals.

Depending on the issues we identify, we have solutions available to help. The reassurance my team and I offer you is that our experience has allowed us to help others in these situations with ease.

You will never be “high pressure sold” anything. Our success is based on one simple key element: goodwill. We want people in our community to know we are here for them. Way back when, most of us thought getting a better value for our money meant buying the CD at the bank with the highest rate. Estate planning meant having a will. Things have come a long way since then. Although the economy is turbulent and some believe the government has gone wild with our money, opportunity still exists.

It takes courage to face things like volatile markets, fast-talking financial salespeople, long-term care concerns and Wall Street “money traps.” It might seem easier to ignore it or deny it or to just hold on, tough it out and see where it all goes. But I honestly believe you and your family deserve better. If you’re worried, unsure, unhappy, or losing sleep about what your money, your retirement and your financial future will be, then do something about it. Pick up the phone and call us at (317) 660-0929.