If you don't have a plan to keep your gains, you won't

Three key reasons to plan, not just save, when it comes to retirement


Remember 2009? The Dow Jones Industrial Average (DJIA) lost 54%. The S&P 500 fell 57%. Banks stopped lending, consumers stopped buying and your portfolio likely suffered losses between 30 to 50 percent.

How can people prevent this from happening to them again? Karlan Tucker from Tucker Financial Solutions provides these key reasons why all investors need a firm plan in place to protect and preserve their investment capital.

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Reason No. 1: When the market begins to head down, things get emotional.
Bull markets happen slowly (the last nine years, for example), while bear markets happen fast. In 10 minutes on Sept. 29, 2008, the DJIA fell 400 points. In one day, it has lost 7 percent. That’s a $70,000 loss on a $1 million stock portfolio. Then, over 17 months, it lost a total of 54 percent, or $540,000 on that same portfolio.

Emotionally, it’s very hard to do the right thing in the heat of the battle. You don’t like losing 7 percent in one day, so you tell yourself maybe this is just a bad day and tomorrow it will be better. Then the losses continue to mount. You call your advisor and he tells you, don’t worry, it’s just a correction, it will come back. So you stay, perhaps losing up to 54 percent.

This emotional roller-coaster has happened before and it will happen again if you don’t have a plan. Remember 2000-2002, when the markets lost 49.5 percent in the S&P 500 and 77.9 percent in the Nasdaq tech-laden index? Remember Oct. 19, 1987? In just one trading day, the Dow fell 22.6 percent — that’s a loss of $226,000 on a $1 million portfolio.

FACT: By the time most Americans reach 65, they will have worked 90,000 hours. To lose 22 percent of that work in one day is the equivalent of nine-and-a-half years on the job, and that is devastating.

Reason No. 2: You may not have enough time to recover your losses.

If you ride the market to the bottom, you have a new problem. How long does it take to get back to where you once were? In the last recession, from October of 2007 when the market began falling, it would have taken you till 2013 to get back to your 2007 levels, assuming your portfolio made 15 percent annual returns for all six years. Tucker says he meets people today who are just now arriving at their previous highs from nine years ago.

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Reason No. 3: You’re closer to retirement today than you were yesterday.

Your next consideration is, do you need income from your portfolio? In the last recession, it’s possible you were still working, so you had new paychecks every month and were not dependent on your portfolio. What about now? Are you taking income from your portfolio to supplement Social Security?

Social Security was never intended to be our sole source of retirement income. You need additional income. According to Darren Petty, RICP and Denver retirement planner, “We all have guaranteed monthly expenses that require secured monthly income to pay these bills throughout retirement. The stock market was not designed to provide a paycheck monthly for the next 20-30 years without fail.”

FACT: Social Security was never intended to be our sole source of retirement income. In retirement, income is the outcome that matters most.
So, How Do We Get a Plan That Protects Our Investment Capital?

Your best strategy now may be to follow the lead of pension fund managers at corporations like Molson Coors Brewing Co , DowDuPont , CBS Corp , Kimberly Clark and numerous others that are transferring their gains from the past nine-year bull market into fixed annuities to then provide monthly income to their retirees for life.

These pension managers are taking into consideration the coming bear market and are securing their pension assets now. Perhaps you should consider the same.

For a complementary retirement income plan that provides secured monthly income, takes advantage of the rising market, regularly locks in your gains and may lower your fees, call the experts at Tucker Financial Solutions .