Let’s Talk... Risk Reduction

Traditionally, the risk that has concerned most people is losing money in their investments.  Consider five other risks that are serious enough to threaten your financial future.

1. Unintended events happen.  Here’s a quick example…Imagine, on one hand that your daughter plans her wedding in two years. (an intended event) You acquire a bond maturing at that time – no unexpected cost.  Conversely, if your son surprisingly asks for help in starting a business (unintended event), this happy but unplanned request may be costly.  It changes the intended use of investments in place, interrupts your planning timeline, adds brokerage expense and probably taxes.  It also creates the new risk of selling low.

2. Bear markets are not rare events.  They are embedded in the investment cycle driven by the behavioral pattern of consumers, businesses and investors.  Plan on bear markets.  They can inflict hurricane-like damage on you, especially after retirement when you may have to spend depreciated assets.

3. Inflation still exists even though it is taking a breather.  Even at an inflation rate of just over 3% (long-term average), the purchasing power of a dollar shrinks to an astonishingly low 50 cents in only twenty years.  Inflation corrodes your future.

4. Taxes are as much an expense as rent…and heading higher as federal, state and local governments close their budget deficits with your money.  Taxes reduce your buying power.  Here’s a conversation I had recently.  A client said, “Mike, I have an emergency and need $10,000 from my IRA account.”  I replied, “Sure, but I’ll have to withdraw $13,000 -- $10,000 for your emergency and $3,000 for Uncle Sam and his relatives in Hartford.”

5. Uncovered health care costs.  Our health insurance system was designed to provide acute care, leaving chronic and custodial costs inadequately covered. Imagine yourself married and your spouse requires ongoing home care, assisted living or skilled nursing services.  If this happens, your expenses may double without an increase in income from your social security or pension.  The burden of “two residences” must be borne by your investments, which often leads to an early and ugly dissipation of funds.

To reduce risk, you need a process.  We call our threat assessment, investment and risk transfer process DYNAMIC MAPPING™ .  It illustrates where you are, where you’re headed and the investments needed to respond to the threats and opportunities you face.  Let’s talk…I would be glad to discuss how our principles and experience allow you to see your financial situation, help you manage risk, invest and save time and money.  Contact Us for a free 10-15 minute confidential phone conversation with Mike Helgesen*, Founder and President, Sound Financial Services, Inc.

* Mike Helgesen is a Certified Financial Planner® with 30 years of experience helping individuals and small businesses.  He has spoken and written extensively about the proprietary techniques he uses to mitigate risk.