“Where will I get my income from once I no longer receive a paycheck?”
This is one of the most common concerns of pre-retirees. At Salomon & Ludwin, we strive to answer that question clearly, so that we may help alleviate fears and instill a sense of confidence. Understanding where your “paycheck” will come from, once retired, is just one of the ways that a relationship with Salomon & Ludwin may help.
When it comes to the critical process of Cash Flow Engineering, we follow these guiding principles:
Investments Must Tie to The Plan
We design investment allocations based on the appropriate amount of income required from the portfolio, tax implications¹, and most important, risk parameters. Through our planning process we identify the cash flow requirements that must come from the investment portfolio, now, and in future years.
Determine the Proper Mix Between Stocks (equities) and Fixed Income Investments
Based on individualized goals and objectives, as well as the required need for income, an allocation is recommended between stocks, fixed income and cash. In addition, it’s important to understand where interest rates are and where they may be heading in order to make informed and intelligent decisions regarding fixed income allocations. Depending on the tax status of an account and a client’s tax implications, Municipal bonds², may play an integral role. When constructing your investment portfolio we strive to generate a significant portion of your spending requirement from interest, dividends³, Required Minimum Distributions (from retirement plans) and, if applicable, guaranteed annuity payments4.
Ongoing Monitoring of Distributions
As part of tying back to the plan, we monitor the distributions that are taken from your portfolio to make sure that they remain “in-line” with your plan. This is part of our “checks and balances” to make sure that the plan’s projections are based on the reality of your life. Through the monitoring of cash flows we strive to deal with any potential problems before they become too big to solve.
Replacing Your Paycheck
As part of your accounts with Salomon & Ludwin, we may maintain a “cash” account. This is where all dividends, interest and any other distributions are swept into each month. As a rule of thumb, we will strive to maintain a long-term holding of required cash flow in this cash account. Based on your required monthly spending need, you may request to receive an electronic deposit into your checking account each month (your “paycheck”). At the same time, the cash account is continually refilling itself as we consistently sweep income from all other investment accounts into the cash account.
A Natural Transition Over Time to a More Conservative Allocation
At Salomon & Ludwin we believe your portfolio allocation should become more conservative over time. We believe logic tells us that one of the optimal times to move from stocks to bonds is on strength in the stock market: take partial profits from the stock market to add to bonds/fixed income so that as you age, your portfolio gradually shifts from more growth-oriented investments to more income-generating investments.
This allows us the opportunity to continually increase the dollar amount in fixed income and, in so doing, increase cash flow and help offset the negative effects of inflation. We may choose to accomplish this through the use of our patented TriggerPoint Portfolio Strategy.
Retirement: “Where will my Paycheck come from?”
Planning With Salomon & Ludwin
TriggerPoint Income Strategy
¹Salomon & Ludwin does not provide tax advice.
²Investing in fixed income securities involves certain risks such as market risk if sold prior to maturity and credit risk especially if investing in high yield bonds, which have lower ratings and are subject to greater volatility. All fixed income investments may be worth less than original cost upon redemption or maturity. Income from municipal securities is generally free from federal taxes and state taxes for the residents of the issuing state. While the interest is income tax-free, capital gains, if any, will be subject to taxes. Income for some investors may be subject to the federal Alternative Minimum Tax (AMT).
³Dividends are not guaranteed and are subject to change or elimination.
4Guarantees are based on the claims-paying ability of the issuing insurance company.
The TriggerPoint™ Portfolio Strategy. Fees for this program include advisory fees and trading. Fees are based on assets in the account and are assessed quarterly. Advisory accounts are not designed for excessively traded or inactive accounts, and may not be suitable for all investors. During periods of lower trading activity, your costs might be lower if our compensation were based on commissions. Please carefully review the advisory disclosure document for a full description of services, including fees and expenses. The minimum account size for this program is $50,000. Stocks offer long-term growth potential but may fluctuate more and provide less current income than other investments. An investment in the stock market should be made with an understanding of the risks associated with common stocks, including market fluctuations.