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Patton's Mission: to dramatically improve the financial lives of every investor we encounter.

Busy Professional (Lawyer)

Tom is a partner at a large and successful law firm. He has been practicing law for more than 25 years, is single, recently turned 50, and has a substantial income. He has set aside money for his two kids’ education and has been giving serious consideration to his retirement.

Tom very much enjoys travel and adventures. As he considers his retirement, he wants to be able to continue his traveling. In addition to travel, he would also like to maintain a residence in his hometown and have a second property in an area that will allow him to regularly enjoy both golf and world-class fly fishing.

Most of Tom’s retirement savings is in both his 401(k) plan and deferred compensation plan at the law firm. These savings are substantial and clearly had him on a path to a comfortable retirement at age 65. That said, he would prefer retirement at an earlier age (or at least know that he would have the option to) assuming he can accumulate enough savings to have the desired lifestyle.

Tom and I met at a wine tasting event while we were both enjoying our passion for great red wines. Our conversation eventually got around to our careers which led to Tom sharing with me his recent thoughts and planning for his retirement. We enjoyed a good conversation and decided to reconnect later to talk more seriously about the topic.

Over the next few weeks Tom and I had a great deal of conversation. In particular, we spent a lot of time discussing the fact that retirement planning is not an exact science. This is due to the number of assumptions that have to be made. In particular, we cannot predict future returns which dramatically impact retirement planning results. Tom would rather work an extra few years if necessary to accumulate adequate resources to enjoy his desired lifestyle. Therefore, the primary goal became to determine an estimate of when he may be able to retire even if the market produced below average returns during his remaining working years.

His existing retirement savings was allocated entirely to traditional asset classes of stocks and bonds. Unfortunately, many employer retirement plans do not offer diversification opportunities beyond these traditional asset classes and Tom’s was no different. We did extensive analysis on Tom’s investment options in his retirement plans to get those assets invested as best possible to meet his goals.

Next we created a strategy for Tom to save money outside his retirement plans and to invest this money in non-traditional asset classes such as real estate, commodities, gold, and our hedging strategy. The combination of his retirement savings and the investment strategy we designed for him will give him a Super-Diversified portfolio with a meaningfully better expected return and comparable risk.

Due to the diversification we added to Tom’s portfolio, resulting in higher expected returns, we estimate that he will be able to retire in 8-10 years as compared to the original estimate (prior to implementing the added diversification) of 12-15 years. The range of years is based on different returns using history as a barometer for the two different portfolios. For example, if the diversified portfolio produces a return during the next several years that is compared to its long-term average, Tom can retire in 8 years. On the other hand, if returns are nearer to the low end of historical results, Tom will need to wait 10 years to retire if he wants to enjoy his desired lifestyle.

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