by Dave Kutcher
While many celebrated Easter 2 weekends ago, this past weekend was Easter for almost all who follow Eastern Orthodox theology, which follows the Julian calendar rather than Gregorian calendar. Easter might be about chocolate bunnies and chocolate eggs for some, however, for most Orthodox religions, Easter is a celebration of the resurrection of Christ.
Nonetheless, no matter what religion you follow or perhaps you don’t follow any religion at all, this time of year conjures up images of multi-colored, egg-filled wicker baskets and Easter bunnies for all.
From what we have found, the term “Don’t put all of your eggs in one basket” comes from around 1710. I think we all have a pretty good understanding of the meaning of this term … it is best to spread your resources around into multiple things and not rely on any one thing as your sole financial resource. In the investment world, simply put, diversify your investments in case any one or more of them fail to perform.
As you might imagine, diversification is a common theme with folks that we meet and speak with about their respective retirement plans. The theory behind diversification is highly accepted and we find that most people we meet with do have their retirement portfolios invested in a multitude of different stock and bond markets. While diversification can and does help provide some stability and reduce volatility in a portfolio, what we don’t often see is people extending that same concept to different investment vehicles. In other words, diversification seems fairly limited to “asset allocation” within an investment portfolio, not that people have a multitude of various investment vehicles. The exception might be that we see many with both ROTH and non-ROTH retirement plans.
What gets lost on most people is that there are many, many different products that can be used to accumulate and then distribute money. Efficient and effective diversification must go beyond the conversation of how much money should be in stocks or bonds within a portfolio of retirement funds. Proper planning for retirement requires consideration of many other factors beyond investment return such as income taxes, inflation, longevity and the rising costs of custodial health care in our later years in life.
What we are alluding to here is that not only should you have many types of eggs in your basket, but you should also have more than one type of basket to put them in.
Proper planning should provide choices for you in how you distribute your money during retirement. If everything you have saved is in one type of basket, you will give up the flexibility you need to consider other important options as you face changing economic and financial conditions throughout retirement.
You have decisions to make in terms of when to start your social security benefits or when to begin drawing income from your pre-tax savings such as IRA and 401(k) plans. Real life brings very real challenges to the answers for these considerations.
If you would like some help figuring out which Easter baskets might be most helpful to you and your loved ones, we are here to help.
Happy Easter everyone…Christ is Risen! Христос воскресе! Christos Anesti!
I am Dave Kutcher, a retired Marine Corp Captain and founder and owner of Kutcher Financial Services in Eagle River. We are on the radio every Saturday morning, “Retirement in the Last Frontier”, 8:30-9:30 on AM 650, Keni Radio. Kutcher Financial Services, 10928 Eagle River Road; Eagle River, AK 99577, (907) 795-7452.
