(ARA) - In his new book, “The Grangaard Strategy
-- Invest Right During Retirement,” author and teacher Paul Grangaard
uses the Twelve Principles of 21st-Century Retirement Investing to offer
readers an important new way to look at their financial affairs after
they stop working.
The first three principles address some of the
new realities faced by today’s retirees. Principle #1 is “Expect to
Outlive the Averages.” Since almost half of the people reaching age
65 today will live beyond an average life expectancy, it’s very dangerous
to use averages in your own individual planning. Principle #2 is “Adjust
for Changing Income Needs.” Because people are living longer today,
it’s more important than ever to account for inflation and the possibility
of fluctuating lifestyle expenses. It’s simply not good enough any more
to plan for a fixed amount of income throughout retirement. Principle
#3 is “Create Dependable Income for the Rest of Your Life,” and it’s
one of the most important concepts in the book. As Grangaard says early
on, “When you get to retirement, you have to be prepared to replace
your paycheck as soon as you stop working.”
The next four principles address some of the
most important overall financial concepts. Principle #4 is “Count on
Compounding During Retirement.” Of course, compounding is key to accumulating
assets for retirement, too -- but when you’re living longer during retirement,
it’s just as important over the last 20 or 30 years of your life. Principle
#5 is “Invest in the Right Stuff.” You need to have the right amount
of money set aside in lower-risk assets to replace your paycheck, but
you also need to have enough invested in growth-oriented investments
to take care of your income later on. As Grangaard puts it, “you have
to know how to thread the financial needle.” Principle #6 is “Be a Long-Term
Investor During Retirement.” If you decide to invest some of your assets
to go after higher rates of return, you’ll need to be able to manage
the risk of taking a more aggressive investment posture -- and having
a long-term planning horizon can really help. Principle #7 is “Know
When to Sell.” During retirement, most people will be overall sellers
of stock market investments, since they’ll have to use the proceeds
to generate the income they need to live on. In fact, the real value
of being a long-term investor in retirement is that you’ll have more
time to figure out when it’s a good time to sell.
Principles #8, #9 and #10 address some of the
other key issues important to all retirement investors. Principle #8
is “Don’t Let Dollar-Price-Erosion Catch You Off-Guard.” Dollar cost
averaging into the stock market is great advice for younger investors,
but dollar cost averaging out of the stock market can get you into a
lot of trouble in retirement. Principle #9 is “Diversify.” Diversification
is important at every stage of life, and even more so in retirement.
Since you will be selling stocks periodically to get more income to
live on, having a well-diversified portfolio will make it more likely
that you will always have something in a good position to sell whenever
you need to. Principle #10 is “Keep It Tax-Deferred.” Reducing income
taxes is an important part of any investment strategy, and it’s particularly
important during retirement. You can’t afford to pay taxes too soon,
because you’ll be giving up too much future growth -- and therefore,
too much future income as well.
The last two principles focus primarily on taking
action. Principle #11 is “Have a Plan.” In fact, “the goal of effective
retirement planning,” says Grangaard, “is to live better during the
day while sleeping better at night. Having a plan,” he says, “is the
key to being able to do that.” And finally, Principle #12 is “Take Action
Now.” While Grangaard offers a lot of information, theories and strategies,
there is also a practical sense of urgency and a plea for action throughout
the book. “It’s never too early and it’s never too late to do your retirement
planning,” he says, and then wraps it all up by suggesting that “most
people don’t plan to fail, they simply fail to plan.”
“The Grangaard Strategy” (Penguin Putnam/Perigee,
$15.95) is available online and in bookstores everywhere. Readers can
find a list of advisors trained by Grangaard on his Web site at www.thegrangaardstrategy.com.
Courtesy of ARA Content
