November 4, 2015
Suze Hollywood or Grandma Suze?
Despite the Hollywood-esque appearance, the Emmy award-winning financial advisor, Suze Orman, seems more like your depression era grandma after reading her advice on retirement planning. Invest safely, project conservatively, plan for longevity and don’t invade the principal… that’s just the way we like to plan for retirement too!
A Conservative Approach
Suze’s website bolsters this opinion with the following quotes:
“…calculate your future income based on interest from very safe investments and also be sure to project a level of interest that’s realistic… I would not project above 6% a year.”
“…retirement might mean 30-35 years.”
Planning for 30+ years in retirement and 6% max returns are good conservative targets. These targets should be standard for retirement planning in our opinion. Unfortunately, this is not the case and advisors commonly project returns that are near double digits.
Live on the Goose or the Golden Eggs?
“Please also be sure that you won’t invade your principal.”
This might be our favorite quote from Suze’s article. It highlights a key difference in retirement planning strategies. There are two ways to approach retirement planning with your investment account: You can roast the goose and have one nice dinner, or you can live on the eggs the goose produces and have a lifetime supply of food. Our approach (and Suze’s) is the conservative approach of living on eggs.
Our Approach
The way this works for our clients is we invest in a balanced and diversified portfolio of stocks and bonds and they live off the interest and dividends the account produces. Currently the income of the portfolios produce between 4-6% (depending on risk) and this corresponds with the returns we think a retiree should project in retirement.