In Perspectives

I read an article this morning in The Fiscal Times that said 59% of Americans surveyed by Gallup were worried about the sufficiency of their retirement savings.  Disappearing pension plans and concerns for Social Security have forced a reliance on 401(k)’s, IRA’s and personal savings for retirement security.  This thrusts the investment risk on to the retiree and leaves their nest egg exposed to market downturns during the critical “portfolio decumulation” period, a time when retirement savings must be turned in to an income source.   However, a portfolio designed around the following three coordinated slices will often provide the protection that retirees crave for their investments.

Current Cash Flow ―Every retirement portfolio should have near cash assets sufficient to cover 12 to 24 months of anticipated lifestyle expenses.  Knowing where your near-term cash flow will come from will provide piece of mind during temporary market downturns.  It will also guard against the forced sale of assets when markets are depressed to cover lifestyle needs.  The appropriate number of months reserved will depend on each retiree’s circumstances.

Near Term Cash Flow Needs (Years two through five) – These investments are structured to cover the next two to four years of cash needs.  They typically include a bond ladder with maturities to match each year’s expenses.  In certain circumstances, a high quality short to intermediate term bond mutual fund may be a viable substitute.  The goal is to provide guaranteed cash flow and recovery time should a protracted market decline occur.  Care must be taken not to allocate too much to this slice of the portfolio, as this will impact your ability to grow the portfolio over time.

Long Term Growth and Inflation Protection – This slice of the portfolio is intended to provide increased long term purchasing power through growth in portfolio value.  At Legacy Trust, these assets will typically consist of domestic and international stocks, real assets, MLP’s, long term and high yield bonds and other growth assets.  Since this growth will come with volatility, it would be inappropriate to rely on these assets for near-term cash flow purposes.  However, periodic rebalancing will create cash to replenish the cash flow slices discussed above.  The percentage of the portfolio devoted to growth assets will be a function of cash needs and the investor’s personal risk tolerance.

As you can see, the “portfolio decumulation” stage of investing must come with a change in how you think about your investment resources.  The single purpose asset allocation used during the accumulation phase is no longer appropriate.  Rather, a well-constructed retirement portfolio will be structured to ensure required cash flows, while providing the growth necessary to protect you from inflation.  This structure will provide piece of mind, while you confidently enjoy what you have worked so hard to accumulate.  Legacy Trust would be happy to discuss how the above strategy could be applied to your personal needs.

Legacy Trust and Your Right to Financial Privacy

At Legacy Trust we have established policies and practices that respect the financial privacy of all individuals who use our trust company. We believe it is critical to comply with the laws and regulations designed to secure your financial privacy. Your relationship with us as our client is very important to us, and we want you to understand our policies and practices about handling your information.

This Policy applies to you – This Policy applies to our relationships with individual clients who inquire about or obtain products or services from us for personal, family and household purposes.

Strict security measures – We take the security of information very seriously. We have established security standards and procedures to prevent access to client information. We maintain physical, electronic and procedural safeguards to guard client information.

Limited employee access – We have established procedures to limit employee access to information to only those employees with a business reason for accessing such information. We educate our employees about the importance of confidentiality and client privacy. We take appropriate disciplinary measures to enforce employee responsibilities regarding client information.

Why we collect information – We collect information about you to:

  • accurately identify you;
  • protect and administer your records, accounts and funds;
  • help us design or improve our products and services;
  • understand your financial needs;
  • save you time when you apply for new products and services; offer you quality products and services; and comply with certain laws and regulations;

We collect information – We collect and maintain your personal information so that we can provide investment management and other services to you. The types and categories of information that we collect and maintain about you include:

  • Information we receive from you to open an account or provide investment advice or other services to you (such as your home address, social security number, telephone, financial information and investment objectives).
  • Information that we generate to service your account or from our transactions with you (such as account statements and other financial information).
  • Information on your transactions with nonaffiliated third parties.

We have established procedures so that the financial information we collect is accurate, current and complete. We are committed to work with you to promptly correct any inaccurate information.

Our selective sharing of information – In order for us to provide investment management and other services to you, we do disclose your personal information in very limited instances, which include:

  • Disclosures to nonaffiliated companies as permitted by law, including those who help us service your account (such as providing account information to brokers and custodians).
  • Other limited disclosures as permitted by law, for example, required reports to government entities.

We do not share your information with third parties for marketing purposes. We do not sell your information.

Former clients – If you end your relationship with us, we will continue to adhere to the privacy policies and practices described in this notice.

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USA PATRIOT Act

Important Information About Procedures For Opening A New Account

To help the government fight the funding of terrorism and money laundering activities, Federal law requires all financial institutions to obtain, verify and record information that identifies each person who opens an account.

What this means for you: When you open an account, we will ask for your name, address, date of birth and other information that will allow us to identify you. We may also ask to see your driver’s license or other identifying documents.

We apologize for any inconvenience this may cause; however, federal law prohibits us from waiving these requirements.

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