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03/05/2010

Exit Ramps

MARCH 2010 INSIGHT

...from the desk of Brian Carden, Financial Advisor

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        On January 29th, when Nashville was getting ready for its big snow storm, I was in Atlanta at our annual year-end celebration and awards banquet. We had all gathered for a firm picture, with over 100 staff members, advisers, and partners in attendance. As soon as the picture was over, our Senior Partner said very clearly, “Everyone from Nashville! Hit the road & let’s get home ASAP!”

        Needless to say, it was a very, very long day. I drove & it took me 7.5 hours to get home, and the last 100 took probably 5 hours of that. We hit some serious snow on I-24…and an 18 car pileup to boot. My friend and associate Janet was my “co-pilot” and somewhere around Tullahoma she asked me if we could stop and take a break. So we decided to pick an exit, as we had choices. So we did, regrouped, filled up with gas, knocked the 50 pounds of ice off my car and headed home best we could. My “endgame” if you will, was to get to the most appropriate exit so that we could get back to our office here in Brentwood. That exit was Old Hickory Blvd. The key thought here is that I was able to create and implement my own “exit strategies”.

        Regardless of what you might think…everything has an exit strategy. Your career, your retirement accounts, your business, and yes, even your life. Traditional financial planning seems to forget this as people are still being led to believe that they can retire on their terms…using a fictitious rate of return on their assets that we haven’t seen in over a decade. (12% according to the “financial entertainers”). Somewhere, somehow…someone convinced Americans that they should contribute the absolute maximums to their 401(k) plans because they would retire in a lower tax bracket.  This one still dumbfounds me. I don’t know about you, but everything coming out of Washington these days says we’re going to get a lot of income tax increases over the remainder of our lives. Here’s a new concept for you: REVERSE TAX PLANNING. (Future article forthcoming)

        If you are gainfully employed by a company, the owners have an exit strategy for you…they just haven’t told you yet. If you own your own business, or are an entrepreneur, you’re probably wondering how to “retire from your business”. From my experience with my business owner clients, owning a business is like going into the House of Mirrors at the fair. Remember that? It was easy to get in…fun to be in there for a while…but when you wanted out, you wanted out…and you wanted out NOW!

        Stephen Covey said it best when he said “Begin with the end in mind.” Everyone knows this quote, but very few implement it. It’s easy to write a business plan and start a new business.  It’s easy to fund a 401(k) or IRA. It used to be easy to get a job in corporate America…but just like the House of Mirrors, how are you getting out...on your terms!!! Traditional financial planning and the “financial entertainers” say that you’ll be fine and that the market, inflation, taxes, and life events will not be that big of an issue. However, I totally disagree. Our firm views your life in four distinct stages.

  1. Accumulation. You will always be on this line…making contributions and growing assets…probably for your entire life.
  2. Preservation. If you’re in your late 40s or older, you’re probably thinking, “I can’t be this aggressive anymore”. Especially with this 10 year Bear Market that has no end in sight. Where’s that 12% average return these days?
  3. Distribution. Which would you prefer; telling the market that you are going to retire on your terms…or having the market telling you that you will retire on their terms? Shouldn’t you start planning this now and not 3 months before you declare “I’m retiring”?
  4. Legacy. So you’re going to retire on your terms, in a lower tax bracket, still get a strong return on your assets, while taking monies out, and you will never run out of money while you are alive…leaving a legacy of love (and hopefully assets) to those that mean the most to you. Let me know how that works for you.

        Last month I said that “You really don’t know what I do”…and I stand by that statement…with a Starbucks latte as a side bet. The bet still holds. If you’ve truly got it all figured out…show me. I’d love to see what your “exit ramps” look like.

Best,
Brian
Brian_Carden@PeachtreePlanning.com

Copyright 2010, Brian E. Carden

Posted by Brian Carden at 07:46:00 AM in Financial

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