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Investing Isn’t Always About Retirement Planning

Posted by Seton McAndrews | CFP®, Vice President Investments
September 5, 2018

Including Your Present in Your Investment PlanWhen we talk about saving and investing for the future, the conversation usually steers quickly towards retirement planning – IRAs, 401(k)s, pensions, Roth IRAs, and so on. After all, retirement is when all of your careful saving, well-intentioned investing, and hard work pays off. It’s when you’re finally supposed to be able to live the good life.

But investing isn’t always about retirement planning. Nor should it be. While it’s true that many people share the same goal of retiring with financial security, there are myriad of other life goals that require careful saving, planning, and investment returns.

J.P. Morgan Asset Management created a graphic that effectively illustrates this point:

Structuring a Portfolio to Match Investor Goals in Retirement - JP Morgan

As you can see in the chart above, an investor’s needs, wants, and legacy all require different types of investments and different types of strategies.

Retirement income could be classified as a “need” that requires income-generating securities (like bonds and dividend stocks), whereas a goal like ‘saving for retirement’ could indicate a longer time horizon and the need for more growth (which could mean owning riskier assets, like international, growth, and small-cap stocks).

Learn more about how you can differentiate between your retirement wants and needs.

But as we mentioned at the outset of this article, investors tend to think less in terms of needs/wants/legacy and more in terms of retirement and estate planning – even though doing thinking about needs/wants/legacy could mean a completely altered investment approach. Below, we take a look at a few non-retirement goals that arguably warrant a different approach to investing than traditional retirement planning.

4 Examples of Non-Retirement Goals that Require Unique Saving and Investment Plans

The four examples below represent just a few of many possible life goals that an investor may have. As you read through these possibilities below, think about what your non-retirement goals are, and how you might need to create a custom investment plan to address them.

  1. Buying a New Home – one possible investment approach could be saving money in a brokerage account and investing it according to your available time horizon. For instance, if you plan on buying a house in 20 years, the longer time horizon could afford you a little more leeway to invest in risk assets. If you want to buy the house in under 10 years, it could potentially mean reducing your equity exposure and building a more balanced strategy.
  2. Saving for Grandchildren’s College Education – for most investors, saving for a grandchild’s college education means having a fairly lengthy time horizon. A diversified equity approach could be considered in a tax-advantaged vehicle, like a 529 plan.
  3. A Trip Around the World – the total amount you’d need to save for a trip around the world would probably be considerably less than the cost of a second home or college education. One idea would be to set aside the desired amount, and consider a fixed income or low risk approach to earn some interest while preserving your saved capital.
  4. Charitable Donations – every situation is different, but oftentimes a charitable donation can be invested for long-term growth, which means it could be a candidate for risk assets like stocks and real estate. There are also different account types, like Charitable Remainder Trusts, that one might consider opening as the tax-advantaged vehicle for the assets.

For more ideas on how to define the pre-retirement investment goals that matter to you, here are 12 Ways to Define the Investment Goals that Matter to You.

What are Your Non-Retirement Goals, and What’s Your Plan for Them?

We would encourage all investors to make a list of their non-retirement goals and to think about what strategy or strategies might be used to address them. As you could see from J.P. Morgan’s graphic and the list of non-retirement goals above, the strategies and types of investments used to address each goal can be different, and sometimes significantly so. There’s rarely – if ever – a one-size-fits-all approach. For help defining your non-retirement goals and how to address them with a savings and investment strategy, contact one of our Wealth Managers at 1-800-541-7774 or start a conversation with us over email at wealth@wrapmanager.com.


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