Terry Lockridge & Dunn/World Trend Financial on "What if I run out of Money?" – LIVING WELL Magazine

What If I Run Out Of Money?

By Timothy F. Terry, Founder – Terry Lockridge & Dunn / World Trend Financial, Linn County LIVING WELL Magazine

After spending the last 34 years working with clients either planning for retirement or in the “golden years,” I am very sensitive to the anxiety experienced by someone who faces the prospect of living off their savings.

Unfortunately, for many, sound, rational planning is replaced by a response to fear. As a result, I see many in their retirement years making just plain foolish financial decisions.

I recently met with a client to discuss their portfolio. After weathering the market decline of 2008, he wanted to put everything he had into a variable annuity product, which he believed would protect him against any further declines in value.

The request was understandable but not sensible. He had a conservative, well diversified portfolio. His cash needs were easily met from his retirement income supplemented by a retirement income portfolio we created for him. He had just come through the worst investment decade in memory and his portfolio had doubled in value!

As to not running out of money: we were able to provide the same protection at a fraction of the cost then had been proposed with the variable annuity. More importantly, he would not be giving away a large chunk of his estate to an insurance company in exchange for eliminating the perception of risk. It would go to his children instead!

After further discussion, he agreed his fears were unfounded. I joked with him that we had gotten him through 2008 without losing money. In fact, we made him money. Why make the change now?

His answer was enlightening: “Tim, everything I hear on television just makes me nervous.”

He was correct. The news is gloomy. Unfortunately, my client was unaware he was becoming part of the herd. We call this “herd mentality.” It is an investor’s worst enemy because it makes them act irrationally because of fear. This fear based decision-making begins to look rational because everyone is doing it. Like lemmings following each other over the cliff, discovering too late they should have gone in the opposite direction, you are swept up in the emotions of the moment.

Just as a good parent would never let you get away with the excuse, “but everyone else is doing it,” neither will a responsible financial advisor.

As a firm that integrates the discipline of the accounting profession with the forward thinking of sound investment advisors, we are constantly looking to the big picture to protect not only what you have, but also what you will need. Our job is to not only look ahead, but also see around the corner!

Reach Terry Lockridge & Dunn / World Trend Financial at their Cedar Rapids location, 319-364-2945, or their Iowa City location at 319-339-4884.