Parting Shot continued from page 60
plans and determine what they will cost .
Preparing for the “ go-go years ” will generally involve developing a plan flexible enough to accommodate that early spending . It ’ s also important to ensure that the adequate funds are liquid immediately following the person ’ s retirement . The overall goal should be helping clients understand the steps they will need to follow to have fun early on without running out of money later .
Don ’ t Ignore Inflation
When rebalancing , it ’ s also important to keep inflation in mind , since it can affect a retiree ’ s spending power . Ideally , retirees will be able to draw an income from their retirement that keeps up with the inflation rate . If costs increase beyond what ’ s anticipated , however , retirees risk running out of funds too early .
Many voters expect the re-election of former U . S . President Donald Trump to drive down inflation , but the actual impact remains to be seen . Some experts even suggest prices will climb , despite Trump ’ s promises , given his new policies on taxes , trade , tariffs and immigration . Advisors can give clients insight , here , on the ways inflation is trending , and help retirees adjust their strategies in beneficial ways .
Lifestyle Changes To Avoid Pitfalls To avoid pitfalls , retirees might have to make significant adjustments . Sometimes , that means lifestyle changes — they might have to downsize or reduce spending in other ways to pay down debt .
As advisors guide clients through this process , they might recommend retirement coaches who can map out a new lifestyle plan . Retirement coaching goes beyond addressing the financial side of retirement and also helps people with the emotional and psychological preparation they ’ ll need . Such coaches can prompt clients to make tough decisions in the preretirement years , choices that will allow them to better prepare financially .
But orchestrating a dream retirement requires clients to address several issues , with savings being just the start . By encouraging clients to consider debt , inflation and the expectations of the “ go-go years ,” financial advisors can help them avoid the mistakes that might ultimately derail their plans .
AARON CIRKSENA is founder and CEO of MDRN Capital .
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agement , thinks healthcare looks promising and is eyeing the iShares U . S . Healthcare ETF ( IYH ). The fund is up 17 % over the past year , trailing the S & P ’ s 37 % gain .
“ The healthcare sector has had a nice run up after a long period of consolidation ,” Howard says . “ While it has shown some weakness in the short term , we see potential for a continued uptrend into 2025 .”
Another sector poised to perform well in coming months is REITs . The resilient sector is rallying amid easing interest rates and improving earnings .
The biggest REIT ETF in terms of assets is the $ 69 billion Vanguard Real Estate Index Fund ETF ( VNQ ), which was up 10 % as of November 7 . Three other funds were among the leading performers this year : the iShares Residential and Multisector Real Estate ETF ( REZ ), the Residential REIT ETF ( HAUS ) and the Invesco
S & P 500 Equal Weight Real Estate ETF ( RSPR ), each of which has returned more than 14 %, according to Yahoo Finance .
State Street Global Advisors , noting such drivers as the growth in active ETFs and the younger generation ’ s participation , sees the global ETF market hitting more than $ 43 trillion in 10 years , eclipsing mutual funds . If that happens , ETFs might indeed deserve a title it hoped to when it was invented three decades ago : “ investment vehicle of the future .”
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If clients can ’ t afford their current home any longer , he will illustrate the trajectory of their finances going forward and what will happen if they make no changes . He always offers possible solutions , he says , but it ’ s ultimately up to the clients to decide what they do .
Whatever the decisions , it ’ s incumbent upon advisors to help make sure the clients are informed about them , says Jeremy Shipp , founder of Retirement Capital Planners in Richmond , Va . “ Run projections about how the move [ to a smaller home ] will impact their finances ,” he says .
Sometimes , he adds , it ’ s best for your clients to consider renting an apartment in the new location before committing to a home purchase . This will give them a chance to test the waters .
Whatever the situation , Shipp says , the clients should choose the option that suits their idea of a successful retirement — as long as it “ fits within their financial circumstances .”
Sometimes , keeping the old home hinders the client ’ s ability to build other assets . Selling it may yield free cash that they can use to augment an investment portfolio .
“ I often refer to home equity as a ‘ dead asset ,’ because homeowners with significant equity can ’ t tap into it unless they take out a loan ,” says Whitesell . “ Personally , I prefer to invest in other financial assets that generate dividends and appreciate over time , rather than being tied down by my residence .”
The Emotional Side
But the reality is that housing decisions often have less to do with dollars and cents and more to do with pleasure , sentiment or desire . Whitesell himself says he decamped to a smaller home after his kids moved out , and he was pleasant-
58 | FINANCIAL ADVISOR MAGAZINE | DECEMBER 2024 WWW . FA-MAG . COM