Retirement Income Strategies

An Educational Resource FromSolid Rock Wealth Management

By Christopher Nolt, LUTCF, Registered Principal, Investment Advisor Representative

Introduction

Investing wisely for wealth accumulation is one thing,converting those investments into a retirement incomestream you cannot outlive is another. While muchattention has been devoted to the accumulation phase ofinvesting, insufficient attention is often devoted to thedistribution phase.

As one enters retirement, their focus typically shifts frombuilding wealth to managing and preserving it. A ma-jor challenge is to make an investment portfolio provideinflation adjusted cash flow for the duration of life—andthrough different economic and market conditions. Satis-fying the desire for safety with your investments with theneed for growth requires careful planning.

There are many types of investments and multiple strate-gies for distributing income from investments. Develop-ing an efficient strategy for distributing income from yourinvestments can help ensure your money keeps up withinflation and lasts as long as you do.

Retirement Income Sources

Not all retirement income sources are the same. Somesources of retirement income are conservative and mayprovide safety of principal and stable, although lower,returns. Other investments are more aggressive but offerthe potential for higher amounts of income should invest-ment returns be positive. This doesn’t mean one source ofretirement income is better than another.

While many investors would like to invest only in conser-vative investments during retirement, most need growthinvestments to help them keep pace with inflation. Bal-ancing the desire for safety with the need for growth is adelicate act.

More conservative, even ”guaranteed”, investments canprovide a sense of security in knowing that in the event ofan economic downturn, your income and principal havea good chance of remaining stable. The problem withthese investments is they often have a low rate of returnand may not provide a lifetime income that keeps up withinflation.

Investments that offer more growth potential, and morerisk, may provide income that keeps pace with, or exceeds,inflation. One of the issues with these more aggressive in-vestments is they are more volatile – their values fluctuateto a much greater degree than more conservative invest-ments. In the event that investment values have dropped,but you still need to take a distribution for income pur-poses, you risk losing some of your principal

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Retirement Income Distribution Strategies

Retirement income distribution means converting yourinvestments into income for retirement. Below are twoincome distribution strategies.

1. The Time-Segmented Bucket Strategy:The Time Segmented Bucket Strategy is a strategy thatprovides secure retirement income though conservativeor guaranteed investments in the early years of retirementand segregates riskier investments for use years after retire-ment begins.

This strategy spreads a person’s investments across mul-tiple investments “buckets”, each designated to produceincome over a certain period of time. These “buckets”of money will hold different investments ranging fromconservative to aggressive. The more aggressive the invest-ment, the longer the time frame the investment is held.

Different numbers of “buckets” may be used with thisstrategy depending on how many investments you wantto use and how segregated you want them to be. Theamount of money allocated to each bucket is determinedby performing an in-depth analysis of a person’s goals, at-titudes about investing and risk tolerance. In this WealthGuide, we illustrate a strategy using two buckets. Theinvestments for each bucket are as follows:

How it Works:The first bucket is often funded with a conservative port-folio comprised mainly of less risky investments such asshort-term, high credit quality bond funds. This “con-servative bucket” will be the bucket that you make distri-butions from each month or quarter for living expenses.Bucket one will contain enough money to make distribu-tions for five years.

Bucket two is funded with a more aggressive portfoliocontaining a higher percentage of equities. Every five yearsor so, you will refill bucket one from bucket two.

The psychology behind this strategy is that it may causeless anxiety for the investor by having stable investmentsto derive your income from during the short term, whileallowing you to leave the more volatile assets (stock andreal estate funds) untouched for a longer period of time.If you can mentally divide your investments into differentbuckets, understanding that the riskier investment buck-ets won’t be used for many years, it can help combat theurge to sell the more volatile investments during negativeperforming years. Because the more volatile asset classesare segregated with the understanding that they will notbe used for a period of many years, it helps you to bemore mentally prepared for the volatility these invest-ments will incur.

2. The Systematic Withdrawal StrategyWith the Systematic Withdrawal Strategy, a person takespre-determined periodic withdrawals from a diversifiedportfolio of stock, bond and real estate funds. Distribu-tions are made each month or quarter from the portfolioand the portfolio is rebalanced regularly to the targetallocation. Unlike the Time Segmented Bucket Strategy,the Systematic Withdrawal Strategy does not segregate thedifferent types of investments into different categories tobe used at different times.

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Different methods exist for taking systematic distribu-tions. One method is to distribute equal amounts out ofeach investment fund based on its percentage allocationof the portfolio. For example, if you are taking $5,000per month from a portfolio containing 10 funds and eachfund represents 10% of the portfolio, you would distrib-ute 10% from each fund ($500) each month.

If you are using this method, it is important to work witha custodian and advisor that does not charge transactionfees for each trade you place, otherwise, the transactioncosts you incur each month will greatly erode your invest-ment return and negate the effectiveness of this method ofdistribution.

A second method requires you to deposit 6 to 18 monthsof desired income into a money market fund. Yourmonthly income is distributed from this money marketfund and the portfolio is periodically rebalance to main-tain the allocation to the money market fund.

Systematic Withdrawal MethodsThere are two different types of systematic withdrawalmethods; the Specified Dollar Amount and the Percent ofAnnual Portfolio Value.

The Specified Dollar Amount withdraws a fixed amounteach year and adjusts that amount each year for inflation.This method can provide a stable income stream and pre-serve your living standard over time. The portfolio mayonly survive, however, if future withdrawals represent asmall proportion of the portfolio’s value.

The Percent of Annual Portfolio Value method with-draws a fixed percentage of money based on annualportfolio values. This method makes it unlikely that youwill deplete retirement assets because a sudden drop inportfolio value would be accompanied by a proportion-al decrease in withdrawals. This method, however, canproduce wide swings in your living standard when invest-ment returns are volatile.

The 4% RuleThe “4% rule” is a common rule of thumb for providingsustainable retirement income. According to this rule, ifyou invest in a moderate portfolio containing approxi-mately 60% equities 40% fixed income, you can initiallywithdraw 4% from your portfolio (including dividendsand interest), increase your withdrawal amount each yearfor inflation, and still have a very high probability of notrunning out of money over a 30-year retirement. (1)

A concern with this strategy is severely depleting theaccount during sustained periods of negative returns suchas during 2008 and 2009. During these severe mar-ket downturns, it is advised you reduce distributions ifpossible and to take money for living expenses only fromthe bond funds in the portfolio or from a money marketaccount, giving the equities a chance to rebound. Oncethe equities have rebounded, regular distributions fromeach asset class may begin again.

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Investment Holding Periods

While growth investments such as stocks and real estatefunds can often have negative returns during short termperiods, the longer the time frame they are held, the high-er the chance these investments will have positive returns.

Although equity investments experience more volatilitythan safer investments, especially in the short term, thelonger equities are held, the higher the chances theseinvestments will experience positive returns. The graphbelow illustrates the reduction of risk over time of smallstocks, large stocks, government bonds and treasurybills. As the holding periods increase, the chance ofloss decreases.

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Below is a similar chart comparing U.S. equities to U.S.treasury bills. As you can see, over one year time frames,equities have only out-performed treasury bills 67% ofthe time. As you increase the holding periods to five andfifteen years, however, equities have outperformed trea-sury bills 78% to 100% of the time.

Comparison of U.S. Equity and U.S. Treasury Bill Returns

January 1928–December 2011

Rolling Time PeriodsNumber of Periods U.S. EquityOutperformed U.S. T-BillsNumber of Time Periods

1-Year

675997

3-Year

734973

5-Year

738949

10-Year

748889

20-Year

769769

Percent of Times U.S. Equity Outperformed U.S. Treasury Bills

100%

84%

75%68%

78%

1 Year 3 Year 5 Year 10 Year 20 Year

Data Source: DFA Returns April 2012Notes: Past performance is not indicative of future results. Periods roll on a monthly basis. U.S. Equity represented by the CRSP 1-10 Index. CRSP ranks all NYSE companies by marketcapitalization and divides them into ten equally-populated portfolios. AMEX and NASDAQ National Market stocks are then placed into deciles according to their respective capitalization,determined by the NYSE breakpoints. U.S. Treasury bills are one-month Treasury bills. Indexes are unmanaged baskets of securities that investors cannot directly invest in; they do not reflectthe payment of advisory fees or other expenses associated with specific investments. Portfolios were developed using an asset allocation strategy similar to the one currently being used.Performance results do not represent actual trading, but were achieved using backtesting with the benefit of hindsight; actual results may vary. Hypothetical portfolios may not reflect the impactmaterial economic and market factors might have had on Loring Ward’s decision making if Loring Ward was actually managing clients’ money at that time. Asset allocation models may not besuitable for all investors. Materials provided to approved advisors by LWI Financial Inc (“Loring Ward”). Securities offered through Loring Ward Securities Inc., member FINRA/SIPC. #02-041.

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Diversification and Rebalancing

A properly diversified portfolio is constructed using mul-tiple asset classes. By using multiple asset classes that don’tmove in tandem with each other, you help to smooth outthe volatility of a portfolio. The asset classes in your port-folio will not move in tandem. Therefore, the amountof money you have in each asset category will change asmarkets fluctuate. In other words, your portfolio alloca-tion will drift, much like a sailboat without a rudder. Tokeep your portfolio on track, we recommended that youperiodically rebalance the funds in your portfolio to yourtarget allocation percentages. This helps to maintain yourchosen level of risk, and take advantage of price changesby automatically buying low and selling high.

Rebalancing is a simple concept, but realizing the benefitsof it is a challenge for most investors because it often in-volves selling investments that have recently done well andbuying investments that have recently done poorly. It isemotionally difficult to sell winners and buy losers. Over

long periods of time, asset class performance tends to bemean reversionary which means that periods of above-av-erage returns are often followed by periods of below-av-erage returns and eventually revert back to a historicalaverage return. Rebalancing helps you to take advantageof these cycles and, most important, it keeps you at yourchosen level of risk. Proper rebalancing forces you to sellinvestments when they are up and buy them when theyare down. This is counterintuitive and requires a strongsense of discipline and emotional detachment. Manyindividual investors do the opposite of what they shoulddo which can cost them dearly.

Below is an Asset Class Index Performance chart illustrat-ing the performance of multiple asset classes from 1997-2011. Each column contains nine different asset classesplus the Consumer Price Index (CPI). The asset classes areranked each year by performance in each column with thebest performing asset class on top and the worst perform-ing asset classes on bottom. As you can see, every assetclass randomly moves up and down over time.

The Need for Diversification

1998

LargeGrowth

36.65%

S&P 500Index

28.58%

EAFE

20.00%

LargeValue

1999

EmergingMarkets

66.49%

SmallGrowth

54.06%

LargeGrowth

30.16%

EAFE

S&P 500Index

21.04%

LargeValue

6.99%

SmallValue

26.96%

2000

REITs

26.37%

5 YearGov't

12.60%

Inflation(CPI)

3.39%

SmallValue

2001

SmallValue

40.59%

REITs

13.93%

5 YearGov't

Inflation(CPI)

EmergingMarkets

-2.62%

LargeValue

SmallGrowth

-2.71%

1.55%

7.61%

2002

5 YearGov't

12.95%

REITs

3.82%

Inflation(CPI)

EmergingMarkets

-6.17%

SmallValue

-11.72%

EAFE

-15.94%

LargeGrowth

2.38%

Asset Class Index Performance 1998-20122003

SmallValue

74.48%

EmergingMarkets

55.82%

SmallGrowth

54.72%

EAFE

38.59%

REITs

37.13%

LargeValue

S&P 500Index

28.68%

LargeGrowth

17.77%

5 YearGov't

2.40%

Inflation(CPI)

1.88%

36.43%

2004

REITs

31.58%

SmallValue

27.33%

EmergingMarkets

25.55%

EAFE

20.25%

LargeValue

17.74%

SmallGrowth

S&P 500Index

10.88%

LargeGrowth

5.27%

Inflation(CPI)

3.26%

5 YearGov't

2.26%

11.16%

2005

EmergingMarkets

34.00%

EAFE

13.54%

REITs

12.16%

LargeValue

2006

REITs

35.06%

EmergingMarkets

32.14%

EAFE

26.34%

LargeValue

2007

EmergingMarkets

39.42%

LargeGrowth

15.70%

EAFE

11.17%

5 YearGov't

2008

5 YearGov't

13.11%

Inflation(CPI)

0.09%

S&P 500Index

-37.00%

REITs

-37.73%

LargeGrowth

-39.12%

EAFE

-43.38%

SmallGrowth

SmallValue

-44.50%

LargeValue

-53.14%

EmergingMarkets

-53.33%

2009

EmergingMarkets

78.51%

SmallValue

70.19%

LargeGrowth

38.09%

SmallGrowth

LargeValue

37.51%

EAFE

31.78%

REITs

27.99%

S&P 500Index

26.46%

Inflation(CPI)

2.72%

5 YearGov't

-2.40%

2010

SmallValue

34.59%

SmallGrowth

31.83%

REITs

27.96%

LargeValue

2011

5 YearGov't

9.46%

REITs

8.29%

LargeGrowth

Inflation(CPI)

2.96%

S&P 500Index

2.11%

SmallGrowth

-4.43%

SmallValue

6.42%

2012

LargeValue

28.03%

SmallValue

20.32%

EmergingMarkets

18.22%

REITs

18.06%

EAFE

17.32%

LargeGrowth

S&P 500Index

16.00%

SmallGrowth

12.59%

Inflation(CPI)

1.74%

5 YearGov't

0.64%

17.22%

AnnualizedReturns

EmergingMarkets

8.96%

SmallValue

8.82%

REITs

8.78%

5 YearGov't

5.79%

S&P 500Index

4.47%

EAFE

LargeGrowth

4.08%

SmallGrowth

3.84%

Inflation(CPI)

2.38%

LargeValue

0.87%

4.38%

HighestReturn

11.95%

5 YearGov't

-3.08%

LargeValue

9.70%

SmallGrowth

6.02%

S&P 500Index

4.91%

SmallValue

21.87%

SmallValue

21.70%

S&P 500Index

15.79%

SmallGrowth

9.26%

LargeGrowth

5.97%

5 YearGov't

3.15%

Inflation(CPI)

2.54%

10.05%

S&P 500Index

5.49%

SmallGrowth

Inflation(CPI)

4.08%

LargeValue

-12.24%

REITs

-15.69%

SmallValue

-18.38%

4.99%

38.09% 20.17%

EmergingMarkets

18.88%

LargeGrowth

S&P 500Index

15.06%

EAFE

7.75%

5 YearGov't

7.12%

Inflation(CPI)

1.50%

17.64%

10.22%

SmallGrowth

Inflation(CPI)

1.61%

SmallValue

-10.04%

REITs

-17.50%

EmergingMarkets

-25.34%

4.08%

-6.41%

S&P 500Index

-9.10%

EAFE

-14.17%

LargeGrowth

-14.33%

SmallGrowth

-24.50%

EmergingMarkets

-30.83%

4.37%

Inflation(CPI)

2.68%

5 YearGov't

-1.76%

REITs

-4.62%

-4.13%

S&P 500Index

-11.89%

LargeGrowth

-21.05%

EAFE

-21.44%

-21.93%

S&P 500Index

-22.10%

LargeValue

-30.28%

SmallGrowth

-34.63%

4.46%

Inflation(CPI)

3.42%

LargeGrowth

3.39%

5 YearGov't

1.35%

-43.41% -10.78%

EAFE

-12.14%

EmergingMarkets

-18.42%

LargeValue

-19.90%

LowestReturn

Diversification does not guarantee a profit or protect against a loss.Data Sources: Center for Research in Security Prices (CRSP), BARRA Inc. and Morgan Stanley Capital International, January 2013. All investments involve risk. Foreign securities involve additional risks, including foreign currency changes, political risks, foreign taxes,

and different methods of accounting and financial reporting. Past performance is not indicative of future performance. Treasury bills are guaranteed as to repayment of principal and interest by the U.S. government. This information does not constitute a solicitation for

sale of any securities. CRSP ranks all NYSE companies by market capitalization and divides them into 10 equally-populated portfolios. AMEX and NASDAQ National Market stocks are then placed into deciles according to their respective capitalizations, determined by

the NYSE breakpoints. CRSP Portfolios 1-5 represent large-cap stocks; Portfolios 6-10 represent small caps; Value is represented by companies with a book-to-market ratio in the top 30% of all companies. Growth is represented by companies with a book-to-market

ratio in the bottom 30% of all companies. S&P 500 Index is the Standard & Poor’s 500 Index. The S&P 500 Index measures the performance of large-capitalization U.S. stocks. The S&P 500 is an unmanaged market value-weighted index of 500 stocks that are traded

on the NYSE, AMEX and NASDAQ. The weightings make each company’s influence on the index performance directly proportional to that company’s market value. The MSCI EAFE Index (Morgan Stanley Capital International Europe, Australasia, Far East Index) is

comprised of over 1,000 companies representing the stock markets of Europe, Australia, New Zealand and the Far East, and is an unmanaged index. EAFE represents non-U.S. large stocks. Foreign securities involve additional risks, including foreign currency

changes, political risks, foreign taxes and different methods of accounting and financial reporting. Consumer Price Index (CPI) is a measure of inflation. REITs, represented by the NAREIT Equity REIT Index, is an unmanaged market cap-weighted index comprised of

151 equity REITS. Emerging Markets index represents securities in countries with developing economies and provide potentially high returns. Many Latin American, Eastern European and Asian countries are considered emerging markets. Indexes are unmanaged

baskets of securities without the fees and expenses associated with mutual funds and other investments. Investors cannot directly invest in an index.

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By systematically withdrawing a stated percentage from adiversified portfolio each year and rebalancing the portfo-lio back to its target allocation each year, you benefit fromthe performance of each asset class and keep your portfo-lio in line with your tolerance for risk.

In addition to rebalancing a portfolio on a regular basis, itis also advised that the equity allocation of your portfoliobe decreased as you age. As you approach your life expec-tancy, you don’t have as much time to recover from downmarkets which is why you should have a smaller allocationto the more volatile equity investments.

Fixed Income Investment Factors

The performance in fixed income is largely driven by twofactors: bond maturity and credit quality. Bonds that ma-ture farther in the future are subject to the risk of unex-pected changes in interest rates. Bonds with lower creditquality are subject to the risk of default. Extending bondmaturities and reducing credit quality increases potentialreturns.

An effective way to diversify a stock portfolio with bondsis to allocate a percentage of your portfolio to high-qual-ity, short-term bond funds. As seen in the charts below,research show that bonds with longer maturities and oflower credit quality have more risk than short-term bondswith high credit quality. Bonds that have longer matur-ities are affected more by unexpected increases in interestrates, while bonds with lower credit quality have a higherrisk of default.

What about using bonds for income?

Investors often use bonds alone to provide income inretirement. While bonds pay steady income, using bondssolely for income can present some risks. Investing inbonds to provide a sufficient cash flow for retirement of-ten means purchasing some bonds with longer maturitiesand lower credit quality. Purchasing bonds with longermaturities and lower credit quality increases the yield ofthe bonds but it also increases risk. Historically, lon-ger-term bonds have been more volatile (as measured bystandard deviation) than shorter-term bonds, and withoutmuch added return to show for it. A long-term bond canbe a poor way to hedge inflation because when inflationrises, the purchasing power of the bond decreases. For thisreason, it might be better to use a diversified portfolio ofshort-term, high-credit quality bonds combined with adiversified portfolio of stock and real estate funds.

Using bonds to meet future cash needs or generate in-come differs from an approach that focuses on assetallocation among multiple asset classes and using bonds toprovide further diversification and reduce the overall riskof a portfolio.

Fixed-income securities (bonds) form an important partof a comprehensive portfolio because they provide stabili-ty to counter balance the high volatility of stocks and realestate. Bond prices are much less volatile than stock pric-es and they often move in the opposite direction of stocks,making them an excellent source of diversification helpingto reduce risk when the stock market declines.

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What About Annuities?

Annuities are investments offered through insurancecompanies that can be used to accumulate money and/orprovide a contractually guaranteed income for retirement.The guarantees are subject to the claims paying ability ofthe insurance company issuing the annuity policy.

There are two basic types of annuities, immediate annuitiesand deferred annuities. Immediate annuities are purchasedsolely for generating income. When you purchase an im-mediate annuity, you select a specified period of time youwould like to receive income. This can be a period of yearsor for your lifetime. The immediate annuity then pays you aguaranteed amount of income for the period you select.

Deferred annuities accumulate money on a tax-deferredbasis. Deferred annuities can usually be annuitized at anytime to generate a guaranteed income stream like an im-mediate annuity. When a deferred annuity is annuitized,the annuitant turns over control of the asset to an insurancecompany in exchange for the guaranteed income stream.

Some deferred annuities also offer optional riders calledGuaranteed Minimum Income Benefits or GuaranteedMinimum Withdrawal Benefits. These optional riders“guarantee” a stream of income no matter what the under-lying investment returns. Guarantees almost always comeat a cost and in this case, the cost for these riders is oftenvery high. These types of policies can also be very complexand confusing.

While annuities have some attractive features and mayserve a role in retirement planning, a better solution in myopinion, is to use a diversified mutual fund portfolio forretirement income as described earlier in this wealth guide.

There are two key lessons here. One is that short-term,high-quality fixed income investments should do a muchbetter job at reducing the volatility of an overall port-folio than other types of bonds because their prices aremore stable. The stability can help to reduce a portfolio’samount of price fluctuation. The other lesson is that itmay not be wise to generate higher returns by owninglong-term, low-quality bonds that require you to take onsignificant risk for not much reward.

Using Dividends for Income

Some people promote investing mainly in individualstocks that pay dividends for generating income. Thereare several problems with this approach. First, there ismore risk in owning stocks than owning a combinationof stocks and bonds. Second, there is more risk in own-ing a small number of individual stocks versus owninghundreds or thousands of stocks in a mutual fund orexchange traded fund. Third, by owning mainly dividendpaying stocks, you lack diversification among other assetclasses. All asset classes go through up and down cycles,including large company value stocks, which are typicallyhigher dividend paying stocks. Modern Portfolio Theoryand other academic research have shown that combiningmultiple asset classes in a portfolio is the most prudentstrategy for minimizing risk while enhancing return.

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Tax Efficiency

Tax planning is an important part of helping to ensurelifelong retirement income that keeps pace with inflation.

Investments and accounts are treated differently fortax purposes. When deciding which investments andaccounts to distribute income from, it is important toconsider the taxation of each. One way to do this is tocategorize your assets into three distinct buckets.

The first bucket, which includes investments outside ofa retirement fund, is your taxable bucket. It is typicallyrecommended that you tap these investments first becausethe capital gains tax rate may be more favorable than theordinary income tax rate you will pay when withdrawingfrom tax-deferred accounts such as an IRA or 401(k).

Another reason for taking distributions from taxableaccounts first, especially for younger people, is taxable ac-counts typically don’t have penalties for early withdrawals.Qualified retirement plans such as IRAs and 401(k)s havea 10% penalty for withdrawals made prior to age 59 ½.

The second bucket includes your tax-favored accounts,such as a traditional IRA and 401(k). For many investors,it’s best to leave these funds untouched until their taxableinvestments are depleted, allowing these accounts to accu-mulate tax-deferred as long as possible.

Required Minimum Distributions are required to betaken from traditional IRA and 401(k) accounts by April1 of the year after you reach age 70½.

The third bucket includes your tax-free accounts, such as aRoth IRA. This is funded with after-tax dollars so earningsare tax-free once you reach retirement age. It’s generallyrecommended that you take distributions from Roth IRAslast since there are no minimum withdrawal rules for aRoth and your earnings will continue to grow tax-free.

The other benefit to leaving your Roth for last is that yourheirs will not owe taxes on an inherited Roth IRA andthey’re able to spread their withdrawals over their lifetimes,allowing the account to continue its tax-free growth.

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Summary

Different investments serve different purposes in a portfolio.Some provide growth others provide stability and income.Combining a portfolio with both growth and income invest-ments is often necessary to provide inflation adjusted incomethat will last one’s life expectancy.

Different strategies exist for distributing income from invest-ments. The Time-Segmented Bucket Strategy is a methodof dividing investments into multiple buckets based on theirrisk and return characteristics. A goal of this strategy is tohelp combat the urge to sell volatile asset classes during adown market. By segregating the more volatile asset classeswith the understanding that these asset classes won’t be usedfor income for an extended period of time, one may be morewilling to endure the volatility these investments experience.

The Systematic Withdrawal Strategy takes pre-determinedperiodic withdrawals from a diversified portfolio of equityand fixed income investments. Distributions are made eachmonth or quarter from the portfolio and the portfolio isrebalanced regularly to the target allocation.

Using bonds solely for providing income may not be the bestapproach because this strategy may involve purchasing bondswith lower credit quality and longer maturities in an attemptto increase yield. Bonds with lower credit quality and longermaturities have historically not provided returns commen-surate with the added risk they incur. Using short-term,high credit quality bonds along with equities may be a moreeffective strategy for balancing the need for growth with theneed for safety and providing an income that keeps pace withinflation.

Using dividends from individual stocks or annuities are twopopular retirement income sources. Although these offersome advantages, a diversified portfolio of mutual fundscontaining multiple asset classes can be a more prudent strat-egy for balancing risk and return and for providing inflationadjusted income.

The tax efficiency of your investment and portfolio distribu-tion strategy plays an important part in accumulating anddistributing income for retirement. Because different invest-ments and accounts are treated differently for tax purposes,how and when you distribute income from the various typesof accounts and investments can have a big impact on howlong your money will last.

There are many factors to consider when planning for aretirement that could last 20 years or longer. You need acomprehensive and cohesive plan that addresses investmentchoices, portfolio distribution strategies, emotions, inflation,taxes and other factors. Without a solid plan, you run therisk of running out of money or facing an ever-decreasingstandard of living.

For more information on investing and retirement plan-ning, call Chris Nolt at 406-582-1264 or visitwww.solidrockwealth.com

Sources:1. Cooley, Hubbard, and Walz, Retirement Savings:Choosing a Withdrawal Rate That Is Sustainable,” 16–21.

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Chris Nolt is the owner of Solid Rock Wealth Manage-ment and Solid Rock Realty Advisors, LLC, located inBozeman, Montana. Solid Rock Wealth Management isan independent, fee-based wealth management firm thatprovides investment consulting plus other wealth man-agement services. Solid Rock Wealth Management uses acomprehensive planning approach with a team of finan-cial professionals which addresses retirement planning,investment planning, estate planning, tax planning, riskmanagement, wealth preservation and other components.

Solid Rock Realty Advisors, LLC assists investors whoare seeking secure income producing real estate invest-ments. We specialize in office buildings leased to the U.S.Federal Government and primarily work with investorswho are purchasing properties through a1031 tax-deferredexchange.

Chris Nolt, LUTCFChris grew up in Lewistown, Montana and received aBachelors degree in business from Montana State Univer-sity in 1987. Chris entered the financial services industryin 1989 and for the last 24 years has been helping peoplewith their investment, retirement and estate planningneeds. Chris is passionate about helping people grow andpreserve their wealth and he has built many long lastingrelationships over the years with his sincere educationalapproach. He has earned the designations of CertifiedRetirement Financial Advisor, Certified Senior Advisorand Life Underwriter Training Council Fellow. He holdsseries 7, 66 and 24 securities licenses, as well as a Mon-tana insurance license and a Montana real estate license.An avid outdoorsman, father of two children and devotedChristian, Chris lives in Bozeman.

For more information or to request other Wealth Guides, call406-582-1264 or send an email to: chris@solidrockwealth.com

Solid Rock Wealth Management and Solid Rock Realty Advisors, LLC2020 Charlotte Street Bozeman, MT 59718

www.solidrockwealth.com www.solidrockproperty.com

Securities and advisory services offered through Independent Financial Group, LLC, a registered broker-dealer and investment advisor. Member FINRA/SIPC.Solid Rock Wealth Management and Solid Rock Realty Advisors, LLC are not affiliated entities of Independent Financial Group, LLC. Past performance is notindicative of future results. Diversification does not guarantee a profit or protect against loss. This material was created to provide accurate and reliable infor-

mation on the subjects covered. It is not however, intended to provide specific legal, tax or other professional advice. This material does not constitute an offerto sell nor a solicitation of an offer to buy any security. Because individuals’ situations and objectives vary, this information is not intended to indicate suitability

for any particular individual. The services of an appropriate tax or legal professional should be sought regarding your individual situation.The terms Wealth Guide and Plan, Grow, Preserve are registered trademarks with the Montana Secretary of State.

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