To Succeed in Life (and Beyond), Master 4 Phases of Wealth

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The baby boomers are retiring and preparing to retire by the millions: According to the AARP, 8,000 people turn 65 every day in America. But even if boomers are ready to retire physically, psychologically and chronologically, many are not ready financially.

I'm not talking about the usual question of whether or not you have enough money to retire. This discussion is about the proper use of that money. I work with clients from all over the country to map out their own financial strategies, and the first step is educating them about four phases of wealth.


The accumulation phase usually begins about age 25 or when you begin your full-time profession. This is when you start putting money away in retirement vehicles, such as 401(k) plans, Individual Retirement Accounts and other alternatives.

During this phase, you can take losses more easily since you have time to recover. Dollar cost averaging is your friend. You can take reasonable risks and might consider more aggressive funds, stocks and bonds. You should also consider solid real estate investments. You can use a self-directed IRA to own real estate and other non-traditional assets inside your retirement accounts. This phase will last until 10 years before your desired retirement age.

Pre-Retirement (aka Retirement Danger Zone)

Pre-retirement is when you begin to reassess your risk tolerance and start to realize that any losses you take now might dramatically affect your ability to retire at your scheduled age. Its when you begin to shift the bulk of your retirement money to very safe, stable, low-risk assets. No more than 30 percent of your portfolio should be left in the market, and that should be in low-risk, blue chip stocks. You also might consider selling off your real estate holdings or paying off mortgages and loans, giving you great cash flow and removing most of your downside risk. If real estate values drop dramatically, it hurts much more if you are leveraged with big mortgages. When you own properties free and clear, they are still great cash-flow machines even if the values drop. You should also consider using a portion of your cash to purchase a solid, low-fee, fixed-indexed annuity.


Once you leave your profession -- and your paycheck -- risk and loss are your most dangerous enemy. At this point, most of your funds should be in guaranteed products. There is a myth that guarantees and low risk mean lousy rates of return. Seek out low- or no-risk alternatives to mutual funds. If you keep most of your money in mutual funds now, you are subject to the ravages of reverse dollar cost averaging, which that can gobble up retirement money in a hurry.

Retirement is all about hands-off income that you should be able to draw from several sources. These can include Social Security, pensions, 401(k)s, IRAs, cash value life insurance, free and clear real estate, fixed indexed annuities with lifetime income riders attached, certificates of deposit and standard savings. You could also be receiving payments from businesses or assets you sold when you retired. Creating income from these assets will make sure you can live in style for the next 30 years and beyond. During this time, you should also plan a long-term care or home health care strategy.


The legacy phase represents what you would like to leave behind for family, charities, foundations and other causes near and dear to your heart. Ask yourself this question: What do I want to accomplish after I am gone? Then set up a legacy plan with an estate attorney to make sure your wishes are carried out with your money.

People have widely varied opinions on this phase. Most want to leave a nice nest egg to their children and grandchildren to help with education and other expenses. But other people say they started with nothing and want to leave little to nothing behind after they are gone. One way to leave behind a fantastic legacy is to set up a properly designed life insurance policy while you're still relatively young. It will be a tax-free retirement asset during your lifetime and leave behind tax-free cash for your heirs.

If you master these four wealth stages, you will be assured a life of financial abundance.

John Jamieson is the best-selling author of "The Perpetual Wealth System." Check out this week's featured video.

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Glad to see you mentioning the need to plan for long term care, but it's important that people understand just how much of a risk it poses. Just one year of nursing home care costs an average of more than $87,000, and it's much higher if you happen to live in the Northeast or on the West coast! Long term care expenses can quickly eat up your retirement savings, which is why Long Term Care Insurance is such a good tool to include in your retirement portfolio.

That being said, do your research. At LTC Tree, we help consumers shop online, with NO sales meetings and no pushy sales tactics. We want our clients to make informed decisions about their specific needs so they are not underinsured or overinsured. It can be tempting to purchase the first policy you find, but do not make that mistake. Be sure you are purchasing a policy from a highly rated provider that has financial stability and longevity.

Long Term Care is becoming a reality for millions of Americans and it is time we as a nation stepped up and planned for our futures.

June 05 2014 at 6:39 PM Report abuse rate up rate down Reply

I love all these financial gurus. I don't think having no more than 30% of your assets in the market is sound advice, at all.. Also, there is no such thing as a totally safe investment. This is why diversification is always stressed by financial planners. You still have inflation to worry about (avg. 3% annually). Banks aren't paying any interest at all, and what they pay is all taxable. You also have to be careful with annuities. There are usually hidden fees, management costs (if variable annuities) and insurance costs to take into consideration and which can eat into your rate of return. Income producing real estate isn't a bad idea if you don't mind being a land lord in your retirement years. Bottom line I don't think you should have less than 50% of your money in the market at any age., There are plenty of good index funds and exchange traded funds (ETFs) that follow broad market indexes and have plenty of diversification. In many cases, it's because people have been too timid about investing and their money that they haven't accumulated enough for a comfortable retirement.

March 27 2014 at 9:24 PM Report abuse rate up rate down Reply

Just remember before you retire, it's not how much you make, it's how much you keep!

March 27 2014 at 6:18 PM Report abuse rate up rate down Reply

Its not hard to do if you use common sense and stay focused on what is important. I see so many folks living way outside of there means and that will catch up to.

March 27 2014 at 4:10 PM Report abuse +1 rate up rate down Reply

I did it all and made it. I didn't do it by making minimum wage which is what the libs would have us all make because "it is only fair" with their goal is income equality. Remember, socialism is when everyone is equally miserable.

March 27 2014 at 2:56 PM Report abuse rate up rate down Reply
1 reply to crimeslawyer's comment

Where's the wisdom in how you "did it all and made it" by simply telling us it wasn't through minimum wage or socialism? If you say through hard work that says nothing either as many people work hard not just you. A politcal jab as liberals doesn't show a strategy to financial security it only shows someone whining and finger pointing!

March 27 2014 at 4:43 PM Report abuse +1 rate up rate down Reply