The Retirement Hack You Didn’t Know You Needed

Imagine a guide or a roadmap designed specifically for your investments, detailing your goals, strategies, and contingency plans. This document, known as an Investment Policy Statement (IPS), does all that and more. So, what exactly is an IPS and why should you consider having one?

Here’s why an Investment Policy Statement matters:

1. Clarify Your Goals and Strategies: An IPS helps define your investment objectives, chart a course to achieve them, and establish a framework for managing changes along the way.
2. Why You Need an IPS:
   • By the Numbers: Studies suggest that individuals with a written investment plan amass significantly more wealth in retirement compared to those without a plan.
   • Staying Focused: A clear plan helps you stay on track and avoid being swayed by market volatility or fleeting investment trends.
   • Reduced Stress: With a roadmap in place, you can navigate financial uncertainties with confidence and clarity, reducing anxiety and decision-making fatigue.
   • Accountability: An IPS ensures that you are actively working towards your financial goals and provides a yardstick to measure your progress.
3. Building Your Investment Policy Statement:
   • Do It Yourself: For self-directed investors, creating your own IPS can provide structure and direction to your investment strategies.
   • With an Advisor: Working with a financial advisor offers personalized guidance on defining and executing your investment plan, whether through a flat fee or asset-based fee structure.
4. Steps to Crafting Your IPS:
   • Identify Your Resources and Goals: Start by assessing your financial resources, retirement needs, and investment objectives.
   • Determine Your Risk Tolerance: Understanding your comfort level with risk and your investment time horizon is crucial in setting the right course.
   • Establish Asset Allocation: Determine the mix of investments that align with your goals, risk tolerance, and values.
   • Set Monitoring Procedures: Outline how you will review and evaluate your investments regularly.
   • Define Triggers for Re-balancing: Identify scenarios that warrant adjustments to your investment portfolio to stay aligned with your IPS.

Incorporating an Investment Policy Statement into your retirement planning can provide a roadmap to navigate the complexities of post-retirement investing. By taking the time to set up a well-defined IPS, you can ensure a smoother financial journey in your retirement years.