What is Wealth Management?

Wealth Management (which is different than Retirement Wealth Management discussed later) is the organized investment and growth of money. Occasionally, individuals perform their own Wealth Management. But, more often, a Wealth Management firm performs it for individuals. Consequently, Wealth Management firms make money by charging fees for various services they provide to individuals. Typically, firms sell managed account services. To clarify, these are discretionary investment accounts that trade via a firm investment manager on behalf of an individual. A well-known example of such a firm is Charles Schwab.

When earmarked for retirement, the goal of Wealth Management is to invest retirement savings and maximize earnings. The further away from retirement, the higher the acceptable investment risk. A guideline for determining acceptable risk is the Rule of 100. To summarize, it says individuals should hold a percentage of higher risk investments (stocks, mutual funds, etc.) equal to 100 minus their age. Conversely, individuals should hold a percentage of lower risk investments (bonds, government debt, etc.) equal to their age.


Stock (also known as Equity) is a security that represents ownership of a fractional part of a corporation. Additionally, this ownership entitles the Stock holder to a portion of the corporation's assets and profits. The portion amount is proportionately equal to the amount of Stock held. Furthermore, "shares" are units of the Stock. Lastly, Stock Exchanges publicly trade Stock. But, individuals can also privately trade Stock.


Mutual Funds allow individuals to pool their money together to invest in a mix of securities grouped by an investment objective (fund). A fund manager trades the securities. As a result, the fund generates a return (or loss), which the individuals then share. Furthermore, the various different types of Mutual Funds include Equity Funds, Bond Funds, Money Market Funds, Balanced Funds, and Equity Index Funds.


A Bond is a security that represents the Bond holder has made a loan to a borrower. Typically, the borrower is a corporation or a government entity. Furthermore, Bonds capture details of the loan and the payback terms. Companies, municipalities, states and sovereign governments all use Bonds to finance projects and operations. Lastly, the holders of Bonds are the debtholders, or creditors, of the Bond issuer.

What is Retirement Wealth Management?


Retirement Wealth Management is the second phase of any Wealth Management earmarked for retirement. This second phase should start about 10 to 12 years before the planned age of retirement. It involves the transition of retirement savings into safer investments in preparation for retirement income.

Advantage One

For example, retirement savings could be transitioned into a Fixed Index Annuity (FIA). To clarify, an FIA is a deferred annuity that allows the principal investment to grow for many years until annuitization. During this growth period, the principle investment earns interest based on the performance of chosen market indexes (like the S&P 500). Most important, these indexed interest earnings are never less than zero, even during a severe market downturn. This protection against major loss isolates a planned retirement age from any delay due to a downturned market. So, Retirement Wealth Management allows a retiree to retire exactly when planned!

Graph showing stages of life

Advantage Two

Unlike every other stage of life, where each stage has a defined starting and ending age, the retirement stage of life has only a defined starting age. The ending age of the retirement stage is dependent upon the occurrence of death. Death can occur at any age. Consider the generic "Life Template" above. Assume a retirement age of 65 years (the U.S. average retirement age for a male). Then, assume death occurs at 73 years (the U.S. average life expectancy for a male). Correspondingly, the average retirement stage duration is 8 years. However, in an extreme case, death could occur at 100 years. Correspondingly, the retirement stage duration would be 35 years. How can a retiree fund a retirement that could vary from an average of 8 to a maximum of 35 years in duration?

As discussed, an FIA used in Retirement Wealth Management provides peace of mind that retirement can start when planned. Likewise, an FIA used in Retirement Wealth Management provides peace of mind that retirement can end whenever, regardless of how long whenever might be. The reason for this is that an FIA is a contract with an insurance company. The insurance company agrees to provide annuitized income payments for life. Consequently, it is the insurance company that takes the risk for a life that lasts longer than expected. The retiree does not have to worry about it!

Other Advantages

During the growth period (the period prior to annuitization), an FIA has some additional features. Firstly, the FIA provides a death benefit, whereby an elected beneficiary can receive the proceeds from the FIA. This protects the retiree should he or she die before annuitizing. Secondly, the FIA allows limited withdrawals to provide income payments without the need for annuitization. Lastly, in some cases, the FIA offers bonus incentives to continue in the growth period and forego annuitization.

Advanced Retirement Wealth Management


There is an alternate approach to Retirement Wealth Management that transitions only a portion of retirement savings into safer investments in preparation for retirement income. The remaining portion continues to participate in higher risk investments by means of Wealth Management. The amount of the portion transitioned into safer investments for Retirement Wealth Management depends upon a number of individual factors. However, the amount should be sufficient to provide at least the minimal income a retiree would need to live on, when combined with other income sources not provided by Wealth Management. For some situations, this amount may include all of the retirement savings. Consequently, this advanced Retirement Wealth Management approach may not be possible in some cases.

Hedge Protection

Implementing the above advanced Retirement Wealth Management approach provides a retirement Hedge (financial safeguard) for continued participation in the Wealth Management higher risk investments (with higher potential returns). In each retirement year, a retiree decides whether to take income payments from Retirement Wealth Management funds or Wealth Management funds (or a combination of both). During a year of a downturned market, all or most of the income payments should be taken from Retirement Wealth Management funds. During a year of an upturned market, all or most of the income payments should be taken from Wealth Management funds. The reason for this annual decision is that taking income payments from Wealth Management funds during a downturned market solidifies a market loss, and should be avoided.

In our example, Retirement Wealth Management has used the FIA vehicle to provide Hedge protection. In the above approach, the income payments taken from Retirement Wealth Management funds are FIA withdrawals. However, Retirement Wealth Management could also use a special life insurance called Indexed Universal Life (IUL) instead of, or in addition to, the FIA. When an IUL is used, the income payments taken from Retirement Wealth Management funds in the above approach are IUL loans. These loans can be taken and never paid back (the total amount associated with the loans is deducted from the life insurance death benefit at the time the retiree dies).


Whether by FIA or IUL, providing Hedge protection for continued higher risk Wealth Management investments during retirement allows for a combination of the best of both investment worlds. Determining which Hedge protection vehicle to use (FIA, IUL, or both) depends upon a number of individual factors. However, a retiree can take essentially tax-free income payments using IUL loans. Consequently, the IUL may have an advantage over the FIA, as it is recommended to have a proper balance of tax-deferred, tax-free, and tax-other retirement income.

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