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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. Five lessons learned from a financial planner.

PORTLAND, Maine – Many people remember the 2008 economic crash, 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 the Abrahamsen Financial Group. He says people need contingency plans in place for big hits like a pandemic. Abrahamsen offers five financial tips:

1. Maintain liquidity. Have the money accessible in a bank savings account or mature limited-pay whole life insurance policy. Don’t always focus on a rate of return.

2. Protects against inflation. The low interest rate environment we live in is difficult for retirees. Bank savings accounts, CDs and fixed annuities cannot cope with inflationary pressure. Remember that bonds, variable annuities, mutual funds, and stocks are risk-based investments and can all fall in value.

3. Spread the tax bomb and protect yourself against tax increases, both state and federal. Use after and before tax strategies to reduce the tax burden. It requires macroeconomic thinking. It’s important to have an RMD (Minimum Distribution Required) strategy in place, especially if you don’t need the cash. It is important to learn about RMD compatible products.

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4. Protect yourself against market risk. Using a covered income strategy or a 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 plan only, a retirement income plan is a distribution plan PLUS an accumulation plan. It is not an either / or.

People need to develop financial strategies so as not to lose money. They need to grow their money without losing it. Sometimes people think that planning is about an asset allocation or the pursuit of a rate of return; it is more about preserving capital by minimizing risk.

This is not what you are doing; that’s what you keep.

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

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