Know Your Style, so You Know How to Pack

The family and I recently went on a 10-day trip that included New York City, a beach, and four days on a cruise ship. Attempting to pack for three different locations, activities, and weather was a challenge. It took a great deal of planning and forward-thinking to make this work.

We needed to plan for mild to hot days and cool nights in the city, clothes appropriate for walking several miles a day, and warm weather clothes and beachwear. Of course, if you’ve ever traveled with a nine and six-year-old, you know what it takes to get them ready to go. With the wardrobe, activities, books, and devices loaded with movies for the flight. (The six-year-old is really into “Is it Cake?”).

I wrote about the different retirement income styles in one of the last articles. It’s helpful to understand your own retirement income style before you get to retirement. It’s like packing for a long vacation. Imagine yourself there and start to figure out what you’ll need. Unfortunately, there aren’t Targets for retirement income strategies.

There are two variables we can use to weigh your retirement income style: your comfort with commitment and your comfort with the markets continuing to perform to provide for your retirement. In this article, I will cover the first.

Valuing Optionality 

Some people value flexibility in their planning. They don’t want to be overly committed to any particular strategy because they want the ability to change course over time.

The upside for high-optionality people is that they maintain a healthy amount of liquidity in their plan to give themselves more options over time. This makes them live a more fulfilled life because they feel more in control of their finances. They’re willing to give up higher income rates for more liquidity because they don’t like the feeling of being locked into something for long periods of time. These folks are comfortable making decisions over time as their goals or life stage changes.

They might be more likely to divide retirement into phases. Then, match the investment strategy to the timeframe of each phase.

Valuing Commitment

On the flip side of optionality is commitment. Some shudder at the thought of making decisions constantly over time. They find it stressful not to have a plan they feel is set and in motion.

They’re comfortable giving up access to some of their assets if in return, they receive contractually protected income. And they’re attracted to the idea of locking in certain aspects of their plan even if it means fewer options to alter it in the future.

Typically, they can be rewarded with higher benefits for doing this. But not everyone is willing to make the trade.

The “set it and forget it” cliché rings true with them.

In my next article, I’ll cover the second variable, comfort with the market providing retirement income.

Andrew Eppes, CFP®, RICP®

Andrew Eppes is a registered representative of and offers securities and investment advisory services through MML Investors Services, LLC. Member SIPC. Nexus Advisors, LLC is not a subsidiary or affiliate of MML Investors Services, LLC, or its affiliated companies. 14241 Dallas Parkway Suite 1200 Dallas, TX 75254 972-348-6300. CRN202608-4859604.

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