It is amazing what happened in the markets in 2020. People wonder how our country is going to deal with all of this. They wonder how many times Americans will be okay losing 30, 50 or even 70 percent of what they’ve made to Wall Street before they finally say enough is enough. And, this is not unique to 2020. It seems to happen about every six to eight years.
People need to build financial strategies, so they don’t lose money. They need to grow money without losing it. Sometimes people think planning is about an asset allocation or chasing a rate of return; it’s more about capital preservation minimizing risk.
It’s not what you make; it’s what you keep.
Prior to the Coronavirus pandemic everything was okay, the economy was stable, the stock market was strong, and real estate was holding up. The problem isn’t that stuff happens. The problem is that stuff happens, and people aren’t ready for it.
The pandemic crisis happened, and people want to look at the past to solve the problems of the future. People need to have contingent plans in place so when something like this happens, they are prepared.
Congress and the federal government created a $8.9 trillion dollars of “fiscal” and “monetary” stimulus. This is over 40% of all the money in the USA. People need to think about where they position assets from a tax efficiency standpoint, pretax, post tax, and liquidity.
Here are 5 important lessons learned from the financial ghosts of the past:
• Maintain liquidity. Have money accessible in a bank savings account or a mature limited pay whole life insurance policy. Don’t only focus on a rate of return.
• Protect against inflation. The low interest rate environment we are living in is challenging for retirees. Bank savings accounts, CD’s, and fixed annuities cannot keep up with inflationary pressure. Remember that bonds, variable annuities, mutual funds, and stocks are risk-based investments which can all lose value.
• Diffusing the Tax Bomb and protecting against increases in taxes, both state and federal. Utilize post-tax and pre-tax strategies to reduce the tax bit. This requires macro-economic thinking. It is important to have a sound RMD strategy, in place especially if you do not need money. It is important to learn about RMD friendly products. Solve the forced income and forced tax dilemma.
• Protect against market risk. Utilizing a covered income strategy or buffer strategy will allow a retiree to use a higher withdrawal rates to create the desired retirement income plan. These strategies will reduce the risk of running out of money.
• Investment Plan vs. Retirement Income Plan. Most people have an investment plan, but not a retirement income plan. An investment plan is an accumulation only plan, a retirement income plan is a distribution plan PLUS an accumulation plan. It is not an either or.
Harry Abrahamsen is one of the leading financial strategists in personal financial economics. He understands the necessity of crafting a personalized financial strategy for each client. After September 11, 2001, Harry realized how important it is to properly protect yourself from unexpected life events and control his own destiny. Today, he helps his clients do the same. He pulls from his own experiences and life stories to relate to his clients to help them navigate through financial challenges they may face.
Harry describes his business career as a process of reinventing himself. He received his Bachelor of Science in Marketing with a minor in Finance from the University of Tampa, Tampa, FL. Post-graduation, Harry helped build a family business from the ground up. After 10 successful years, Harry sought a more challenging career path, and started Abrahamsen Financial Group. As a result, he was accepted into a three-year executive entrepreneurial leadership program, The Birthing of Giants, at Massachusetts Institute of Technology, Cambridge, Massachusetts, with 60 other top entrepreneurs from around the world. During this time, he also served on the Board of Directors of the Young Entrepreneur’s Organization of New York and was the Bill Trimble Award recipient for the Entrepreneurs’ Organization New York Chapter for Worldwide Growth.
Harry has received several industry honors, as well as being named a perennial Million Dollar Round Table, Court of the Table and Top of the Table qualifier. He was recognized as one of the 10 most dependable Wealth Managers in the Mid-Atlantic, published in Forbes Magazine.
The financial crisis of 2008 opened many eyes to the huge disconnect between clients and the large institutions that represented them. These companies had leveraged their client’s dollar for their own financial gain and now had to do everything possible to protect themselves from the impacts of the crisis. Abrahamsen’s team realized it was very important for them to create a firm to become their client’s advocate. The success of his firm has been built on the core beliefs of educating his clients and working with them side by side through both the easier and more difficult times in their lives.
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