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Understanding the Asset Cycle Portfolio System®

Have you ever asked yourself the question, "Why do I save and invest my money?” At first the question may seem fairly obvious, but when I ask the question to new clients they give me a blank look, and can’t seem to be able to offer a clear cut answer.

I hear vague responses like:

  • "Because I’ll need money for retirement” or
  • “So I’ll have money when I get old”, or
  • “So I’ll be able to pay my bills when I’m not working”.

Investing for retirement needs a precise purpose; it needs a game plan. In order to give our clients a precise answer to the question; we use a portfolio management method called the Asset Cycle Portfolio System® (ACPS) The underlying goal behind the system is to create a financial plan that is:

  • Simple
  • Easy to understand
  • Will provide a "targeted approach” to investing.

Two of the greatest challenges that many retirees (or soon to be retirees) face is not understanding their plan or not even having a plan, and as a result, outliving their income. The Asset Cycle Portfolio System® is a planning tool that strives to reduce those concerns through the creation and monitoring of earmarked accounts for both income and growth.

The Asset Cycle is designed to provide more reliable income in the early years through the use of safer instruments such as annuities*, affording retirees the ability to shift riskier investments to a longer term portfolio. For example; imagine having four account buckets:

The first account bucket, is for “Short Term Income" (years 1 thru 5). It is focused on guaranteed income; and utilizes financial vehicles that have a much higher level of safety.

The second account bucket is for “Mid Term Income” (years 6 thru 10). While the protection of your principal may still be a focus of this account, there is usually a little longer time frame that may allow for a slightly higher growth rate vehicle.

The third account bucket of the Asset Cycle Portfolio System® is “Long Term Income” (years 11 thru 15). Since this account bucket isn’t intended for use until after the first 10 years, it affords people the ability to invest for a little higher rate of return depending upon their risk tolerance. (Note: Since it is earmarked for income down the road, one may also consider using financial vehicles that carry lower risk.)

The fourth account bucket is referred to as the “Growth” component. By addressing 10-20 years of income up front, one may feel more comfortable with assuming more risk for this period of their life, in an effort to achieve higher growth and to replenish the portfolio.

Our planning system is referred to as The Asset Cycle Portfolio System® because of its cyclical pattern; it is a laddered approach.

  • When the Short Term Income Account is consumed,
  • The Mid Term Income Account will replace it.
  • From there, the Long Term Income Account will shift over and become the Mid Term Account.
  • As the Growth Account accumulates, assets will slowly shift over to replenish the depleting accounts and continue the cycle.

The other two components of the Asset Cycle Portfolio System® are known as the:

  • “Protection Umbrella” - The protection umbrella, is where one might address any Long Term Care insurance needs in order to protect the portfolio from this risk.
  • “Legacy Transfer Bucket.” - The legacy transfer bucket is where one may look at instruments and strategies to most efficiently transfer their assets and legacy to the beneficiaries of their choice.

It is important to note that each client’s situation is different and that each Asset Cycle Portfolio is tailored in an effort to meet the unique needs of each client. The concept strives to reduce risk through the earmarking and allocating of assets for certain purposes and phases in life. We look forward to sharing more about this concept with you and exploring how a customized Asset Cycle Portfolio may enhance your retirement.

*Annuities are best suited for long term investors. Withdrawals from an annuity prior to age 59 1/2 are subject to 10% tax penalties and additional surrender charges from the underlying insurance company may apply. Investing carries an inherent element of risk. No strategy can guarantee a profit or prevent a loss. Ron Haller and Haller Financial Group do not provide tax or legal services. Be sure to consult with a qualified tax advisor and/or tax or estate planning attorney.

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