Retirement phases

While there may be many twists and turns in the road, our financial lifecycle is linear. As we age, financial priorities progress through three phases: Grow, Protect and Spend. It’s possible that as we move forward, we can be in two segments simultaneously, e.g., Protect and Spend or Grow and Protect. On the path to financial security in retirement, you’ll want to maximize each phase to help avoid bumps in the road. The stakes are high, and to succeed you must have a plan. Let’s explore each segment in more detail.

Grow

Why is growth important?

Growing your money is important throughout the journey to retirement – especially in the early years. Growth is the engine that drives wealth creation and may also help you keep pace with the cost of living. When we’re older, we hope that a larger pool of money may generate more income as you move into the later spend phase. A part of your portfolio should always target growth, although it might be less of a focus as you age.

Navigating the waypoints

When you put a plan in place early in life, saving becomes part of your routine. Pay yourself first by maximizing contributions to retirement plans and other savings products. Your future self will thank you. While younger investors can be more aggressive in their holdings, we must be mindful about portfolio allocations and associated levels of risk as we age. It’s clear, however, that no matter what phase you’re in, you’ll want to consider opportunities for growth.

Your feelings about growth

Growing your retirement savings can help you feel optimistic, proud, smart, responsible and in control of your finances.

Protect

Why is protection important?

As your money grows, there’s more at stake. As you get closer to planning for the spend phase it may make sense to pump the brakes a little on your more aggressive holdings and make sure you’re investments are in line with your risk tolerance. Contrary to our younger years, we may not have the time to recover and replenish what might be lost in a downturn. Keeping a watchful eye on risk may be prudent in both the protection and spend phase.

Navigating the waypoints

Is your portfolio overweighted to investments that carry more risk? Rebalancing your portfolio and looking for ways to appropriately protect what you’ve amassed makes sense. Keep in mind, when you enter the spend phase you might not have a salary to cover living expenses. While growth is still important, it’s also important to look for products that can provide protection for your money and future income.

Your feelings about protection

Protecting assets can help you feel safe, secure, prepared for adversity, relaxed about your goals and reassured about your future.

Spend

Why is spending important?

You still have bills to pay – they won’t retire when you do. Think of expenses as either “essential” or “non-essential.” Food, utilities and healthcare costs are good examples of essential expenses. Non-essential expenses are things like hobbies and travel that can be dialed back when needed. Will you be ready to make those payments when you don’t have a paycheck coming every two weeks?

Navigating the waypoints

Your 50s are a smart and responsible time to start thinking about and planning for income needs in retirement. Start by projecting your income and expenses – it may be difficult to look 10-15 years in the future, but it will be an excellent first step. Next, consider supplementing Social Security by exploring investments that can also provide protected lifetime income – running out of money in retirement is not an option. Luck favors the prepared.

Your feelings about spending

You want to feel independent, free to live as you choose, in control of your finances and grateful to maintain your lifestyle – even if you live to an advanced age.

How can annuities keep us on track?

Annuities are unique because they offer benefits not found in other financial products. The table below provides additional ways annuities may help investors in each phase.