Step 2 – Define your Life Cycle Phase

Experience tells us that many people find they go through these financial Life Cycles:

Accumulation Phase

  • Investments focused on high return, high risk, growth-oriented investments.
  • Early career situation.
  • Long time horizon; a long time to meet goals.
  • Net worth small relative to liabilities.
  • Priorities and considerations often include.
    • Children’s education.
    • Liquidity
    • Larger home
    • Few investments.

Consolidation Phase

  • Investments focused on high-return, high-risk, growth oriented investments, however, a shift to lower risk assets should begin as horizon shortens (typically within the last five years of the phase).
  • Mid-to-late career stage (age).
  • Income may exceed expenses.
  • Time horizon is still relatively long (state time horizon).

 Spending Phase

  • Income generating, low risk assets are given emphasis under ordinary circumstances.
  • If the client can cover their income needs adequately, a larger portion of their assets can remain in capital gain oriented investments. Regardless of the circumstances, a portion of assets should remain in capital gain oriented investments to protect against inflation.
  • Expenses exceed income and excess is derived from investment income.
  • Horizon may still be relatively long (state time horizon, age)

Gifting Phase

  • Client possesses more assets than will be required for life.
  • Begin to gift wealth to others in order to avoid high estate taxes.

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