John J., John S, and Traudy F. Grande, CFPs, are the editors of the Money Matters column. They are owners and principals of Grande Financial Services Inc., Oakhurst, NJ, (www.grandefs.com) and registered principals of Wells Fargo & Co., member of SIPC. The Grandes advise doctors across the country on a diverse range of investment and financial matters. Readers may submit their financial questions to them at john.s.grande@wfafinet.com or call 800/722-1258.

John S. Grande, CFP

	The day has finally arrived. You take a moment to reflect on the path leading up to the next stage in life. Dental school, starting a practice, saving towards retirement, putting the children through college, paying for a wedding or two. You have been hard working, diligent, and disciplined in your planning and preparation.

 into a deserved and anticipated retirement, which includes traveling, working on the golf game, helping the grandchildren with college and spending time with loved ones.

	The date is October 2000 and the beginning of the tech bubble. During the 

, the NASDAQ Composite lost 78 percent of its value.

 saw the S&P 500 decline 57.8 percent between October 2007 and March 2009.

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	You have spent 40-plus years in a profession that has helped countless patients and has provided you with the financial means to live a comfortable retirement. Now, due to forces out of your control, your retirement dreams and aspirations are in question.

	The timing of your retirement has the potential to dictate one’s retirement success as measured by the ability to sustain a desired quality of life without running out of money.

A recurring question over the years has been: “Do I have enough assets to retire or will I run out of money some day?”

	That is a simple question, but one that is complicated by the unknown - will you retire in the beginning of a bull market or a bear market? At what point in the financial cycle will you be forced to start drawing on your portfolio?

	The sequence of returns, as it is referred to, can produce starkly different answers to these questions.

	The good news is there are strategies that can mitigate those detrimental consequences of retiring at the wrong time. Here are six ways to protect yourself and your portfolio:

	The most important step is to know how much money you will need in retirement. We recommend that before retiring, take the time to determine a 

 budget, and do not underestimate your expenses.

	These expenses should be broken down into recurring essential expenses (e.g., food, utilities, mortgage, property taxes, etc.) and discretionary expenses (vacations, dining out, gifts, etc.). If the market declines for a year or two, you can use a predetermined formula to adjust discretionary expenses based on a percentage withdrawal of the portfolio balances.

	Knowing how much you should have in equity exposure is an important determination. There is no reason to have a higher percentage in the stock market than is needed for future growth to meet goals and objectives. If your retirement looks sound with an allocation of 50% in the stock market, then there is no reason to assume more risk.

	The benefits of the potential gains will not affect your lifestyle, but the consequence of the potential losses could be devastating. These are critical calculations to review in retirement preparation.

	Step 3: Hold asset classes that do not all correlate with one another

	Design a portfolio that is exposed to various asset classes, different management styles and different sectors. One should add investments that do not have a high degree of correlation with the stock market and alternative investments. This methodology can assist in reducing potential volatility while smoothing out future rates of return.

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	Always keep a cash reserve available that represents a minimum of six months of living expenses. These funds will be available for any unexpected expenses.

	Consider some of the hedging techniques that are available. You may be able to protect a portion of your equity portfolio from a certain percentage to the downside.

	Sometimes, this means giving up a little on the upside, but preservation of principal is important in a declining market, while still giving you upside potential. Some of these strategies are available through annuities.

	Over the years, the annuity market has received its share of bad press regarding high fees and lack of flexibility. Some new annuity products have improved over the years and they can provide a useful role in a portfolio.

	Part of a defensive strategy can be matching a guaranteed income stream from an annuity contract to a certain percentage of essential recurring expenses. This income is reliable, even in a down market, and can be guaranteed for life.

	A reduction in principal will not change this income and, even if the principal were to be depleted, the income will continue.

	Compare your actual spending to planned spending annually and make sure that you are not exceeding target withdrawals.

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	Forecasting the economic and financial climate when you retire is akin to a meteorologist forecasting the weather two, 10 or 20 years into the future. It is little more than an outright guess.

	By implementing the strategies above however, you can be better prepared to successfully navigate any financial storm that may come your way in retirement.

	Wells Fargo Advisors and its Financial Advisors provide non-fiduciary services only. They do not provide investment advice (as defined under the Employee Retirement Income Security Act of 1974 as amended [“ERISA”]), have any discretionary authority with respect to the plan, make any investment or other decisions on behalf of the plan, or otherwise take any action that would make them fiduciaries to the plan under ERISA.

	The views expressed by the authors are their own and do not necessarily reflect the opinion of 

, Wells Fargo Advisors Financial Network, or its affiliates.

	Wells Fargo Advisors does not provide legal or tax advice. Be sure to consult with your tax and legal advisors before taking any action that could have tax consequences.

	Variable annuities are long-term investments suitable for retirement funding and are subject to market fluctuations and investment risk.

	A Guaranteed Minimum Income Benefit (GMIB) feature is an optional rider on a variable annuity that is available for an additional annual charge against the income base. It generally may only be selected at the time of contract purchase and cannot be changed later. It can usually be exercised only after a waiting period. A GMIB feature is not a cash or account value. Please be advised that depending on the performance of the investment option selected, the contract value at the time of annuitization could be such that the investor would incur a higher expense with the GMIB option without receiving any additional benefit.

	Unlike variable annuities, equity indexed annuities (EIAs) are typically structured so that they are not securities registered with the SEC. Nor are the sales in EIAs regulated by the SEC or FINRA Regulation Inc.

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	Estate planning is not a financial concept for just high-income individuals. These concepts apply to everyone, regardless of age or net worth. These concepts can not only help individuals protect and care for themselves and their families at the time of death, but also during their lifetime.

	There are five key estate planning documents - four of which everyone should have. 

	As part of a basic estate plan, individuals should have a will, a durable power of attorney for financial matters, a health care power of attorney, and a living will. These documents will help you control your assets and health care decisions while you’re living and at death.

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	Some people may add a revocable living trust. The first four documents provide the foundation for any estate plan and help individuals stay in control.

	If you already have these documents, be sure to review them regularly. Life events, such as deaths, births, divorces, marriages, inheritances, or a change in state residency, lead to changes in one’s goals–so these documents should change accordingly.

	It is important to update estate planning documents when moving from one state to another because state laws vary. It is important to make sure that the documents are designed to work well in the state where you live. You also should review these basic documents as changes occur in federal or state estate tax laws.

A will accomplishes a number of objectives. First, it provides  direction for the distribution of assets to family and other beneï¬ciaries upon death. An attorney can customize its provisions to meet your needs. You appoint a personal representative (known as an “executor” or “executrix”) to account for your assets, liabilities, final expenses, any taxes due, and distribution of remaining assets.

	A will also is the only way to designate a guardian for minor children. Should something happen to you, a judge still must approve this appointment, but at least you have expressed your wishes through this document. If you have minor children, it is wise to include a trust to manage assets for them - at least until they reach age 18. 

	A will must be filed in probate court to be effective. Probate is a judicial process for managing your assets if you become incapacitated and for transferring your assets in an orderly fashion upon death.

	The court oversees payment of liabilities and the distribution of assets. Generally, your executor will need to employ an attorney. Since a will does not take effect until death, it cannot provide for management of your assets if you become incapacitated.

	This is the reason why you also want to have a durable power of attorney. This document lets you name another trusted person to manage your financial and business affairs during your lifetime, if you are unable. 

	A general durable power of attorney allows your agent to perform all duties you typically perform, whereas a limited durable power of attorney covers only specific events, such as selling property or investing assets.

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	Your agent should act in your best interest with financial and business affairs, maintain accurate records, keep your property separate from his or hers, and avoid conflicts of interest. This person will be able to sell, invest, and spend your assets. It becomes imperative to select someone you trust.

	You can give this power to that person immediately, or your attorney can write in a “trigger” that prompts that person to take over for you (such as being designated incapacitated by one or two physicians, as specified in the document).

	Which is better? There’s no right or wrong answer. Discuss with your family and your attorney what might be suitable for your situation. 

	If possible, it is wise to name both a primary and a back-up (a contingent) agent. This will be helpful if the primary agent predeceases you.

	A power of attorney for healthcare is similar to a durable power of attorney for financial matters, but this document gives someone the power to make medical and healthcare decisions for you if you are not able. This document avoids court intervention and allows you to empower a person you trust to make decisions on your behalf if you are unable to communicate those wishes.

	You need to have a frank conversation with the person handling your affairs about how you want your medical care handled, especially in the event of a terminal illness.

	Unlike a healthcare power of attorney, a living will establish your wishes for life-prolonging medical care should you become incapacitated. These are called advanced directives, or health care directives.  A key advantage of this document is that it states what you want relating to end of life care.

	The previous four documents are essential as a starting point. This fifth document–a revocable living trust–is one that you may want to discuss with an attorney. It may be suitable for your situation, but in some cases, the attorney may suggest that it is not necessary. 

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	If your attorney suggests creating such a trust, you can be your own trustee. You receive all of the income from the trust assets, and you have full access to the trust principal.

	A revocable living trust can be altered at any point during your lifetime. You can change beneficiaries or discontinue the trust at your discretion.

	At your death, this trust becomes irrevocable. The person you name as successor trustee will follow the instructions in the trust to manage the assets and liabilities and to distribute the assets in trust.

	You should know that ongoing management affects only assets that you have retitled in the name of the trust. If your attorney suggests a revocable living trust, you will want to follow his or her instructions regarding retitling assets and accounts.  

	You still need a “pour-over” will to govern assets that are not titled in the name of the trust, and also to appoint guardians for minors.

	Other advantages of a living trust are the successor trustee can manage the assets on your behalf if you become disabled or incapacitated during your lifetime. Assets in the trust then avoid the probate process upon death.

	Since you maintain control of the assets within the trust, they remain part of your taxable estate. However, a revocable living trust can also include provisions to help reduce estate taxes after your death.

Editor’s Note: This article is the first part of a two-part series on the basics of estate planning. This article will introduce and explain the basic estate planning concepts. The second article will address the roles and responsibilities of persons involved in estate planning and the types of assets associated with beneficiary designations. Part two of the series was published in the Dec. 1 issue of 

Estate planning can help you protect and care for yourself, your family and your practice.

How basic estate planning protects individuals and legacy: Part 1

	Once the key estate planning documents are established, it is important to outline the roles and responsibilities of the individuals named to serve in those documents.

	This second part of this series on the basics of estate planning will cover those roles and responsibilities associated with the documents, which include a will, a power of attorney, a healthcare power of attorney, and a living will. The article also will look at how an account or an asset is titled, what types of assets have beneficiary designations, and why it is important to ensure that those you name on those designations are consistent with the overall estate strategy.

	Each estate planning document requires that you name someone to help you either during your lifetime or at death. The key people to name include:

Read more: How basic estate planning protects individual and legacy: Part 1

One of the most important decisions in estate planning is picking the person, or people, who will be in charge of your assets and legally obligated to act in your interest. The task of each of these individuals is slightly different. It is recommended to name more than one alternate for each role, but you may also name two persons to act together, such as co-trustees or co-executors.

	An executor is someone who carries out the directions in the will. The executor is sometimes referred to as “personal representative” for this role. If you leave no will and your estate is managed by the probate court, this role is sometimes referred to as “administrator.”

	This person is responsible for collecting the assets of the estate, protecting estate property, preparing an inventory of the property, paying valid claims against the estate (including taxes), representing the estate in claims against others, and distributing the estate property to the beneficiaries. It is important to know that the executor only controls property or assets that are subject to probate.

	If a minor child is involved, a guardian needs to be appointed to raise the child in the event both parents die before the child becomes an adult. While the likelihood of this happening is slim, the consequences of not naming a guardian are great. If a guardian is not named, a judge will decide who will raise the child.

	This is an important role to revisit over time. For example, early in the child’s life you might name a parent or grandparent as guardian. As the toddler becomes a teenager, it may be wiser to name a sibling (who is closer in age to you) rather than an aging parent or grandparent.

	In a power of attorney, you give authorization to a certain person, or people, to make decisions on your behalf when you are not physically or mentally capable. This person is known as an Agent. Realize that this document and person have control only during one’s lifetime. The power terminates at death, when the will or trust instructions become effective.

	This is an important document to avoid court intervention at a stressful time. Imagine that you don’t have this document and are severely injured. On top of the health concerns, your family may need to deal with court appearances to manage your finances or make certain financial decisions on your behalf.

	Deciding who will be named as your healthcare agent is one of the more difficult and important decisions in estate planning. The healthcare agent receives a durable power of attorney for healthcare from you, which gives your agent the power to make medical decisions if you are incapacitated or unable to make medical decisions.

	The healthcare agent cannot override any health care preferences you set out in a living will, but will have complete authority to make any other medical decisions. If you have strong feelings about your health care, this is the place to specifically express them.

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	If you create a revocable living trust, you will name a trustee, or co-trustees, to manage your assets.  Realize that the trustee will control those assets that are in the trust. He or she will manage that property as directed in the trust.

	If your trust directs that the trustee ensure all bills are paid, all debts owed to you are collected, and all assets are distributed in a timely fashion, the trust will end fairly soon after your death.

	On the other hand, you may want your trust to endure for years or decades. This allows you to control how assets are managed and distributed over time. Perhaps you have a spend-thrift or minor child who you want to provide income over time. In this case, the trustee will serve for the time period you direct in your trust.

Earlier the importance of retiling assets was discussed, especially if you establish a trust.  Let’s take a closer look at account titling and beneficiary designations. You can liken these topics to off ramps on an interstate highway. Depending on how assets are titled or beneficiaries designated, assets can go different directions at your death.

	For example, assets titled in your name alone are governed by your will and go through probate.  Assets in a trust or held in joint tenancy will bypass probate. Neither direction is right or wrong, but one or another may be more suitable for you. You should discuss these possibilities with your attorney.

	Let’s take a closer look at how titling matters, starting with assets in one’s individual name. The executor will control these assets, and he or she will follow the directions in the will. The assets will be distributed at the conclusion of the probate process. 

	Assets in a revocable trust are controlled by the trustee or successor trustee. The trust document provides instructions, and they will be distributed or managed according to the terms in the trust. 

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	A beneficiary designation acts differently. This is a contract between an individual and the financial institution, and the terms of that contract “trump” everything else - even what the will or trust instructs. The beneficiary will file a claim, and the financial institution will distribute the asset. No probate. No governance by a will or trust instructions. 

	Finally, when an account jointly is titled with someone, such as a son or daughter, the son or daughter owns that asset at your death. That outcome may be a mistake.

	If your intent was that the son or daughter would divide the value of that asset among siblings, that may or may not happen. Even if it does, it could have gift tax consequences for that child.

	Or perhaps, you become incapacitated and the other owner wants or needs to move the account.  The financial institution may require the signatures of both owners to do so. Discuss these implications with your attorney before deciding whether joint tenancy is the best way to achieve your goals. 

	Assets with beneficiary designation are life insurance policies, annuities, IRAs, other retirement plans, and Transfer on Death accounts. Other benefit plans that have a beneficiary include work benefits, stock options, or stock purchase plans. Remember, review beneficiary designations as the family situation changes, and be sure to update them every three to five years, or whenever your circumstances change.

Editor’s Note: This article is the second part of a two-part series on the basics of estate planning. This article addressed the roles and responsibilities of individuals involved in estate planning and the types of assets associated with beneficiary designations. To review the first part of this two-part series, see “Basic estate planning protects individual, legacy;” page 44, Nov. 15 issue of Ophthalmology Times, or 