At Chamberlin, we use what’s called the “Wells of Wealth” system to plan for retirement and legacy. This system time-segments your assets, placing money in accounts with specific time horizons and risk tolerance based on when you’ll need them for income.
The first Well is the Liquid Well. Your Liquid Well is money that is safe and accessible. This is typically the money that you're going to have in the bank for the short term to cover your planned monthly expenses and a little extra in case there's an emergency.
We advise our clients that you're going to have somewhere between six and twelve months worth of income in this well. It’s important to make sure you have that set aside. Most people actually have this well already set up ahead of time when we meet them.
We’ll skip to the third Well next, because most people have this Well too. That’s the Growth Well.
The Growth Well is for long-term cultivation, and you're going to have money in there that you won’t need for 10 years or longer. You still want to have this growth element because it will potentially outpace inflation faster than some of your other assets.
What we usually see is that in the accumulation phase, when you’re working, you have some money in the bank — your Liquid Well — and then everything else in 401ks and other investments — your Growth Well.
While they might not use the “liquid” and “growth well” terminology, most people have sets of assets that fit those needs. What we see with most clients who come to us is that they've never thought about having a Conservative Well.
The Conservative Well is for preserving and supporting your assets, maintaining income generation in retirement.
It needs to be relatively safe, so it has a lower risk tolerance than the growth well.
This Conservative Well is where we're going to put enough income for the first 10 years of your retirement. If the market becomes volatile during those 10 years, you can pull income from your conservative well while your Growth Well recovers from the downturn. That makes it less likely that market swings will affect your lifestyle in either the short or long term.
We have more resources about how this works in our main Learning Center. But where does Legacy fit in?
We look at Legacy Well as the fourth well that catches whatever is leftover in the other three when you pass away. The Legacy Well is about the story you want to leave behind. What do you want to do for your loved ones when you’re gone? What kind of charities and causes do you want to help with the wealth you leave behind? How do you want future generations of family members to view your life’s work?
In addition to any remaining value from the other three wells, your Legacy Well can include things like life insurance, real estate and other long-term investments and trusts. A Holistic Retirement Planner can help you set up the first three wells to give you peace of mind during your own golden years, and then the Legacy Well to ensure that your loved ones are taken care of and your values and wishes are respected when you’re gone.
The Wells of Wealth give a lot of people a feeling of security for their retirement. It’s easy to visualize and to get a basic understanding of the mechanics, and what we find is that it helps people develop confidence about their plan, no matter how financially literate they feel. People that are more technical with investing can get really into it. They can move the numbers around and we can help them optimize it in each Well.
Ready to start looking at your legacy plan, and how it fits into a holistic plan for your retirement years? We’re here to help. Set up a free, no-obligation, 20-minute strategy session with one of our trained and certified Retirement Educators today, and they’ll answer any questions you have and help you take stock of your wants, worries, needs and goals. You’ll even get a free copy of our new book, “The Wells of Wealth System,” which describes our holistic approach to planning in a more in depth and entertaining way. Schedule your call with Chamberlin Legacy today.