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Financial lessons from the past that can help us now

As the economy fluctuates, we can learn financial lessons from booms and crashes. Here are five lessons from a financial planner.

PORTLAND, Maine — Many people remember the economic crash of 2008, and as we continue to navigate a pandemic, there are financial lessons that can be learned from the past and present.

Harry Abrahamsen is the founder of Abrahamsen Financial Group. He says that people need contingency plans in place for big hits like a pandemic. Abrahamsen offers up five financial pieces of advice:

  1. Maintain liquidity. Have money accessible in a bank savings account or a mature limited pay whole life insurance policy. Don’t always focus on a rate of return.
  2. Protect against inflation. The low-interest-rate environment we are living in is challenging for retirees. Bank savings accounts, CDs, and fixed annuities cannot keep up with inflationary pressure. Remember that bonds, variable annuities, mutual funds, and stocks are risk-based investments that can all lose value.
  3. Diffuse the tax bomb and protect against increases in taxes, both state and federal. Utilize post- and pre-tax strategies to reduce the tax bite. This requires macroeconomic thinking. It is important to have an RMD (required minimum distribution) strategy, in place, especially if you do not need money. It is important to learn about RMD friendly products.

    RELATED: Tips from a Maine financial counselor to protect seniors and their money

  4. Protect against market risk. Utilizing a covered income strategy or buffer strategy will allow a retiree to use a higher withdrawal rate to create the desired retirement income plan. These strategies will reduce the risk of running out of money.
  5. Investment plan vs. Retirement income plan. Most people have an investment plan, but no one has a retirement income plan. An investment plan is an accumulation-only plan, a retirement income plan is a distribution plan PLUS an accumulation plan. It is not an either/or.

People need to build financial strategies, so they don’t lose money. They need to grow money without losing it. Sometimes people think planning is about an asset allocation or chasing a rate of return; it’s more about capital preservation minimizing risk.

It’s not what you make; it’s what you keep.

To learn more from Harry Abrahamsen, or about his financial group, click here. 

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