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July 4, 2016 | Reverse Engineering Retirement

Adrian Mastracci

Adrian Mastracci, Discretionary Portfolio Manager, B.E.E., MBA. My expertise in the investment and financial advisory profession began in 1972. I graduated with the Bachelor of Electrical Engineering from General Motors Institute in 1971. I then attended the University of British Columbia, graduating with the MBA in 1972. I have attained the “Discretionary Portfolio Manager” professional designation. I am committed to offering clients the highest standard of personal service by providing prompt, courteous and professional attention. My advice is objective, unbiased and without conflicts of interest. I’m part of a team that delivers comprehensive services and best value in managing client wealth.

I was happily pursuing engineering studies during my university days.
Then, in my third year, I discovered my new passion and began moving to finance and business.

It turns out that engineering has allowed me to assist clients manage their nest eggs.
Mixing engineering with wealth strategies pays dividends so, let’s dig deeper.

What is reverse engineering

Reverse engineering involves taking an object apart and analyzing it in detail.
Something that engineers are skilled at.

I specifically refer to reverse engineering of retirement goals.
Working backwards from the desired end results to design a prudent plan for each family.

Reverse engineering retirement consists of two main components:

1.. Estimate the size of nest egg that represents the retirement goal.
2.. Ballpark the investment rate of return to achieve or maintain that goal.

Let’s consider this situation:

Assume that the nest egg to be accumulated is $1,500,000.
Say there are 10 years to retirement and today’s portfolio is $700,000.
That implies an annual return of over 7.9% to get there.
Perhaps, optimistic for today’s low return environment.

However, annual saving capacity injections of $10,000 reduce the rate of return to near 6.9%.
Injections of $20,000 to $30,000 per year reduce the rate close to 5.9% and 4.9% respectively.
This reduces the need to incur higher risks.
Additional analysis can take the form of “what if” the family needs more or less resources.

This example is a simplification of the number crunching power of reverse engineering.
The scope of what the portfolio has to achieve to deliver a successful retirement.
It points to the yardsticks in need of tweaks to make retirement happen.
Much strategy can be discussed before selecting any investment.

Using the analysis

The most critical element is the estimated return that achieves the retirement target.
That rate becomes the “investment benchmark” for the family’s long-term game plan.
I relate portfolio review discussions to the client’s rate of return, not to market moves.
This allows the client to take charge or regain control of the game plan.

The reverse engineering analysis contributes essential guidance for the client’s game plan.
One constant question is “what does it take to build the client’s retirement vision?”
Reverse engineering definitely provides the right tools and is extremely useful.
Particularly, in deciphering the monetary implications of retirement goals.

Looking backwards is a terrific instrument to assess the finances of retirement.
I also call it the capital needs analysis.
Every client has one before investing starts.
Every investor too should have one.

Talk soon,


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July 4th, 2016

Posted In: Adrian Mastracci Blog

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