Wednesday 31 October 2018
Thursday 25 October 2018
Friday 19 October 2018
How Will You Define Retirement?
By
Roy Larsen
There was a time not that long ago that when the subject of retirement came up, we all pretty much had the same vision of what it would look like. We would work to about age 65, retire and live comfortably on our company or union pension, social security and whatever savings we had in the bank. It was similar for everyone. Retirees would kick back on the sofa, visit grandkids, travel and do this for the rest of their lives which was typically only 7-10 more years, give or take. Retirees didn't have to worry about something called Long Term Care yet and medical costs were still somewhat manageable with your old Blue Cross Blue Shield indemnity plan pretty much taking care of everything. Bottom line, retirement was more streamlined, easier in some ways to prepare for, but overall much shorter than it is today.
That traditional and very typical retirement structure is not dead but certainly on life support for a variety of reasons and not all of them bad. Most in what I call the "New Retirement" play by different rules. The goals and dreams of our parents are no longer our vision of how we want to spend our "golden years". If you are not retired yet, you will need to define what your vision is and not think about it necessarily as a destination but perhaps more so a change of course of how you will live in the next phase of your journey.
I am noticing with our own clients that there are now three very specific templates they are deploying or targeting. I think our group is probably a good litmus test for what will continue to evolve over the next 20 years. The three structures are as follows:
1. Traditional Retirement- Yes, it didn't go away completely. Some have saved enough spendable assets to properly budget for living expenses and plan for contingencies. They do not have a driving desire to work any longer and primarily spend their time... well... doing whatever floats their boat! This group however is very small and no longer typical. With longer lifespans our parents' retirement may soon be a lifestyle of the past.
2. The Semi-Retirement Retirement- This group represents what's becoming the largest segment of today's successful retirees. They have enough assets and don't have to work but continue to want to do something productive with their lives, very often in a different capacity. This group realizes that if retirement today can last as long as 30 years, it is more desirable on their terms to spend it on starting a small business, consulting in their past careers part time or choosing to make money at something they love doing. The semi-retirement retirement will be available primarily to those who still value proper financial planning and have saved enough to provide for flexible work for fun options.
3. The Working Retirement- Yes, an oxymoron but this in my opinion will become tomorrow's prevalent structure based on current planning and savings habits of young baby boomers. The prior two scenarios will not be an option as one or both spouses will have to remain in the workforce doing what they may not love in order to provide the necessary income for basic living expenses. I believe this group will do the best they can to take extra time off to find some diversion, but the live for now habits of the past 30 years will have caught up with them. My biggest fear is whether a job will be available to them to stay in the work force. If this does in fact become the predominant structure of the near future, where one or both spouses work full time forever, will the demographics of an ever aging population along with college graduates just joining the work force provide for enough employment opportunities? A very risky proposition but in reality, isn't how this group has played it all along?
The opinions voiced in this material are for general information purposes only and are not intended to provide specific advice or recommendations for any individual(s). To determine which investment(s) may be appropriate for you, consult your financial advisor prior to investing. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly.
Thursday 18 October 2018
Saturday 13 October 2018
5 Smart Investment Management Tips
Have you just started investing in your retirement? Have you been investing but aren’t sure if you’re doing it right? Do you want to have control over your finances and understand what your accountant is talking about?
If you answered yes to any of these questions, you’ve come to the right place!
Read on for five smart investment management tips that will help you build up a nest egg and retire in style.
Start Early and Stick to Your Plan
It is best to start saving as soon as you start working. Even if your job does not offer a 401(k) plan, you can open an Individual Retirement Account (IRA) or a self managed super fund and invest a percentage of your monthly income there.
Once you have an investment plan in place, be sure to stick with it. It’s tempting to make drastic changes during volatile times. However, sticking to your plan will yield better results further down the road.
Keep Costs Low
When you’re new to the investment world, it’s important to start small and keep your costs to a minimum. Look for a discount brokerage firm, and consider index funds since they have lower fees.
Another way to keep your costs down is to focus on long-term investments.
It can be tempting to buy and sell in response to market increases and decreases. But, you will likely rack up a lot of commission expenses and management fees doing. Investing long term also help prevent significant cash losses if your stock goes down in price.
Maintain Liquidity
Some people love the thrill of taking big risks with their investments. If you’re just starting out, though, it can be stressful seeing the price of your stock repeatedly rise and fall.
One way that you can manage this stress is by making sure you always have liquid reserves to cover your short-term expenses. Knowing that you will still have enough money to pay your bills will help you manage your investments better. You’ll also be less likely to overreact when the market is particularly volatile.
Invest Incrementally
It is also important to be disciplined and consistent when it comes to putting money into your investments. Invest a fixed amount of money incrementally over full market cycles. This will serve you better than trying to time a market bottom, especially when you’re a beginner.
Diversify
A diversified portfolio will help you manage risk better. Rather than putting all your money into one category, invest in a mix of conservative stocks, stocks with long-term growth potential, and stocks that offer better returns but have a higher risk potential.
By diversifying, you ensure that your portfolio as a whole isn’t seriously affected when one stock goes down. A diversified portfolio might not necessary lead to the greatest monetary gains. But, steady growth is definitely preferable over extreme losses.
Remember, it’s never too early to start making smart investment decisions. Keep these tips in mind, whether you’re just getting started or are just looking to make some positive investment management changes, and you’ll soon be on your way to a successful retirement!
Friday 12 October 2018
Wednesday 10 October 2018
10 Key Ingredients to Demand From Your Retirement Plan
The 10 Key Ingredients to DEMAND for a Successful Retirement Plan!
If a client is working on their retirement plan, it is very likely they have not only personal goals and dreams, but also a minimum level of expectations from their financial planner. Heck, the truth is, a client shouldn't have just a minimum level of expectations, they should have specific things from a retirement plan that they DEMAND!
With life expectancies being greater than ever, retirement could likely be the longest phase of their life. Therefore, I believe that it is absolutely imperative that you have a plan in place that is well-equipped to not only spend and enjoy your retirement years, but also make sure you don't make the mistake of "living too long".
If you have any doubt that retirement planning needs to be an essential part of a financial planner's practice going forward, take a look at these statistics:
• Nearly 80 Million baby boomers are approaching or entering retirement
• By the year 2020, these baby boomers will control approximately two-thirds of the financial assets in the U.S.
• 75% of investors switch or add investment professionals within 15 years of retirement because they doubt the professional who got them to retirement knows how to get them through retirement*
• 68% of investors surveyed between ages 55 and 70 consolidated their assets as a result of completing a retirement income plan; an additional 19% said they would like to consolidate**
What do these facts tell us? Retirement planning is not only a huge opportunity for financial professionals, but it is also a huge challenge!
Retirement planning is an extremely sophisticated process, and I strongly encourage retirees not to attempt this on their own. In addition to the risk of outliving your assets, you've got other money predators to stay away from such as taxes, inflation, stock market and interest rate volatility, health care, social security, and much more.
So the point of this article is to review what I believe to be the "10 Key Ingredients" to a successful retirement plan that every planner should focus on, and every client should DEMAND:
1. Growth Potential - I think it's safe to say you want your money to grow. However, the real reason why you should want your assets to grow is not to become enormously wealthy, but to ensure that you can keep pace with things like inflation, taxes, planned obsolescence, technology changes, rising healthcare costs, long-term care, etc. Just about every retiree I work with tells me that they do not want to spend their principal, but would rather live off the income generated from their principal. Therefore, if you want your income to keep pace with inflation, then you should demand a well-diversified and well-balanced portfolio to allow you to keep pace with your changing lifestyle over the long-term.
2. Safety Provisions - Clearly the two biggest financial fears most investors and retirees face are losing money and running out of money. These fears are not only understandable, but also the most critical! I always tell my clients that "90% of my job is avoiding large losses". If you are taking income from your retirement assets and suffer significant losses in your portfolio, it can be extremely devastating... and also dramatically increase the probabilities of running out of money. Therefore, every client should demand a retirement plan that contains clear strategies to properly insulate you against suffering large investment losses and outliving your income.
3. Tax Efficiencies - Everyone's least favorite uncle is a man named "Uncle Sam". I have yet to meet someone who truly enjoys paying taxes... whether an ordinary income tax, capital gains tax, or tax on dividends and/or interest. John D. Rockefeller once said; "The fastest way to accumulate wealth is to make sure you never pay tax on income you don't use." That may be one of the most brilliant statements I've heard aside from Einstein's theory on compound numbers. Therefore, a successful retirement plan should entail two pieces. First, your money should grow with as little (or no) tax consequences as possible. Second, your income should be received in the most tax-efficient way that is legally possible. The truth is, we can't beat the unbeatable opponent (the IRS). However, our job as financial professionals is to work as master technicians in helping our clients avoid unnecessary taxation.
4. Income We Cannot Outlive - With the explosion of baby boomers and the improvements in modern medicine, today's life expectancies are greater than ever. When Social Security was first enacted in 1931, the average life expectancy for a male was approximately 59 years old... and yet Social Security didn't start paying benefits until age 62! Today the average male's average life expectancy is approximately 85 years old... so you can see why we are having such a tremendous battle with Social Security benefits. Many studies show that by the year 2030, more than 2/3 of the people alive (in the U.S) will be above the age of 60... WOW! So the message here is that retirement plans today should demand an outlook consisting of at least a minimum of 30 years.
5. Income Growth Potential - In order for your income to grow, your assets must grow at a rate that exceeds your withdrawal rate. This means that, as much as some of you don't want to hear this, investing a portion of your monies in the stock market plays a vital role in your retirement plan. Many of you may think that you can accomplish adequate retirement income by simply investing in bonds and CD's, but that is usually not the answer. For example, if you consider investing in bond's or CD's, and you factor in inflation and taxes, using these income-producing investments may not accomplish the growth you need over the long haul in order for your income to grow (especially considering the fact that interest rates over the past decade have been historically low). Therefore, this is where the demand for professional money management plays a key role in a financial planner's retirement strategy.
6. Maintain Control - Although I mentioned earlier that a successful retirement plan should virtually guarantee that you not only have the income you need, but that you also never run out. In the old days, this could only be accomplished through an annuity. The huge downsides to these "old school" annuities were that you would give up the two most important things... control and access to your money. In other words, an annuity would pay you a fixed income for life, but you would no longer have access or control to these monies. Not an option!! In a retirement plan, you should demand that you maintain total control over your assets, both during accumulation as well as distribution, so that you can choose how and where to invest or spend these hard-earned monies.
7. Maintain Access - Similar to the previous demand for control, you also should demand that you have access to your monies in the event that you need them. Although every retirement plan should include setting some monies aside for unexpected events or emergencies, sometimes life brings about severe changes that no retirement plan is prepared for. Because there are so many moving parts in our retirement lives such as our health, interest rates, taxes, inflation, health care costs, long-term care needs, etc., you need to be certain your money is not "locked up" in the event you might need to access it.
8. Full Transfer to Beneficiaries -- Another common theme I hear from my retired clients is the importance of leaving a legacy. At a bare minimum, every retirement plan should demand that there is a plan in place to ensure that whatever money you don't spend will efficiently pass on to your children, family, loved ones, or charities.
9. Professional Supervision - Retirement should be one big vacation, where you get to enjoy all of the things you love such as traveling, dining out, buying nice things, gifting or spending money with our families, donating, etc. The very last thing you should be focusing on in retirement is worrying over your money and your financial plan. In every important aspect of our lives, there are professionals out there who are passionate about taking care of you. Therefore, you should demand to enjoy your retirement, and leave the worries about your finances to the professionals.
10.Consolidation - One thing I have learned from my clients is that when you retire, the last thing you want to do is receive multiple statements from many different companies. I believe a retirement plan should adopt Warren Buffet's philosophy, which is "Put all you eggs in one basket. But first, make sure you know everything about that basket. Then, make sure someone is watching over it very closely". Having a consolidated financial life in retirement can not only lead to less stress and worries, but also greater success.
In summary, here is my strong recommendation: Use these "10 Key Ingredients" as a challenge to put your current financial professional to the test. It is exactly what my clients DEMAND from my retirement plans, and the truth is, they should not consider working with me if I cannot provide this for them. I think you'll agree that these bequests are not only essential, but they really aren't "asking too much".
Article Source:
http://EzineArticles.com/expert/Christopher_P_Hill/451550
Tuesday 9 October 2018
Sunday 7 October 2018
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