The Cash Flow Clock: For Retirees - Book - Page 7
The Cash Flow Clock
afford to take risk with assets we don’t need for at least 10 years. In fact, for
many of us, we must take risk in order to significantly grow the value of our
assets so that they can provide enough income for us in the future.
Risky Money’s sole purpose is long-term growth.
Unfortunately, Risky Money brings not only the hope and possibility of
growth but also the fear and probability of loss.
Risky Money will lose value at some point, it is a matter of when, not if.
These losses are devastating if we are using Risky assets for income. If the
market is down 20% and we need to use Risky Money for cash flow, we are
pulling out a higher percentage of our assets (because they have lost). We
also have less money invested to rebound with the market. The value of
Risky Money deteriorates at a much higher rate when we are forced to
liquidate in down markets to meet our cash flow needs.
Lazy and Safe Money investments buy us time. We should always have
enough liquid assets protected from market loss to use for income. This
allows Risky Money to rebound efficiently from market losses. This is our
best chance to provide the cash flow that we will need throughout our lives.
The Cash Flow Clock provides a specific timeline, expectation, and job
description for different sections of our portfolio. It calculates the amount of
risk we can and should take. It helps us determine the exact best investment
for each portion of our portfolio, based on our unique financial needs. It
adapts to changes in our circumstances and continually offers the
opportunity to create and maintain the most efficient financial plan for our
needs.
3
