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3 Factors Will Determine Your Investment Returns In Retirement


Today I want to talk about three factors that are going to determine your investment returns in retirement. And if you get this right, it's going to make for a less stressful retirement and the ability to just enjoy everything a lot more. So first I want to introduce myself. My name is Warren Burger. I'm the owner of Luminary Financial Advisors. We're located in Cocoa Beach, Florida, but we serve people across the country and we help people create tax efficient retirement plans. So the idea from this video came from a prospective client that approached me recently and asked what kind of returns I'm getting from my clients on their investments. And it's not a simple answer, and, and frankly the returns that I get from my clients are going to vary because each person's individual situation is different. And really these three factors that I'm going to discuss here are the things that will determine what those investment results are going to look like.

The first factor is the vision and values that you have for your retirement. What does that look like? And it's going to be different for everyone, but it may be that you're looking to accomplish bucket list items. Maybe you are wanting to give to charity. Maybe you have things that you want to do for your children or your grandchildren, such as paying for college or, or helping them out with the purchase of a house. Maybe you feel like you've gotten everything that you, you did everything for the children and, and you want to spend down your money throughout retirement. The biggest factor I see is making sure that you can live through your retirement without running out of money. Once you've established what your vision and values are, now you can start to quantify that. You can put some numbers to the bucket list items, the legacy items, and a couple things you want to keep in mind.

There is one inflation. So, a goal that you might have 10 years from now with inflation is going to be more expensive than it is in today's dollars. And that's part of the calculus in creating your investment account to make sure that there's enough growth there, that you can fund these things in the future. The other consideration here is how much of your investments are you going to actually need to make these things happen. The fact is that you're going to have social security. You may have a pension, you may have other forms of sort of guaranteed money coming in, an annuity, things like that. So, you're going to be able to establish what it is that you're paying for and then how much of your investments you're going to need to pay for that. The second factor is your time horizon. When is it that you're going to need the money?

So if you are 10 years, five years, one year from retirement, each one of those scenarios, your portfolio should look a little bit differently as you get closer to needing that money. And it might not just be for retirement. Maybe there is a wedding coming up that you want to pay for, for one of your kids, or there's a college education that you want to help take care of for grandchildren. Any number of factors can go into when you're going to need the money, but it's a big consideration as to how you're going to structure your investment portfolio. The third factor is your risk tolerance. How do you personally feel about risk? The fact is that there are going to be multiple times throughout your retirement where markets are going to go down substantially. And we're going to hear that the sky is falling throughout all of the social

And the news outlets. And you have to be in a position where you don't feel like your heart is in your throat with your investments every time that goes on. So that's that risk tolerance. And that gets even more complicated when there are couples involved because everybody comes at money from a different perspective and yourself and your partner or spouse you may feel differently about risk where one feels like, Hey, I want to take on more risk and I I want to get more returns. And the other doesn't want to feel that heart in their throat when the markets move. And so we have to try to balance that and find a happy medium because no one should be feeling uncomfortable with the risk that they have in their portfolio. So how do these three factors all come together? Well, the fact is that you have to find out what you're solving for first.

So how much money are we going to need, then? When are we going to need it? And then third, how much risk are we willing to take? And so a 25 year old kid that's just come into the, the workforce, they're going to have a much bigger, greater tolerance for risk. And the more risk you take, the more reward that you're going to get. And so it stands to reason in a given year if the markets are doing well, someone that's taking on more risk, I e someone who's much younger they're going to get greater returns than someone who's taking on less risk, such as someone that's about to be retiring. But if you've structured it correctly and you're working towards those vision and values, you're not necessarily looking to get the highest return out of all of your assets. You just want to achieve the return that's going to get you to the results that you need so that you can achieve those goals, that vision and values.

And you want to do that by taking on the least amount of risk possible in order to get there. And so that's where sort of the art and the math come into play. There's no real one set piece of how to do that. But generally that's a coordination between how much stock, how much bonds, how much cash you hold in your portfolio. But the idea being that once you combine all three of these factors, that's going to determine how you structure your portfolio and how much return that you're going to get on your investments. I hope you found this helpful. If you have any questions about your personal financial situation, I do have a link to my personal calendar below. You're welcome to schedule a complimentary conversation. I always make sure whether or not we work together that I'll get you pointed in the right direction.

It's really important that anyone that comes into contact with me feels like they've gotten some real value out of the situation. I also have a number of links to flowcharts and checklists for people that are going to be retiring. Just helpful things to think about as you're getting closer. You'll find that in the section below as well. And then there's also a link to our 10 years to retirement Facebook group where we put out a lot of educational information. We can kind of ask questions and go back and forth. And I think a lot of people are finding that helpful as well. So thanks for watching the video and I hope to see you again soon.