National Retirement Planning Month

Bill Losey's Retirement Intelligence

2009-07-29T07:48:00.004-04:00

I hope you've enjoyed our daily tips throughout the month. As National Retirement Planning Month 2009 comes to a close I want to be sure to include a couple of links to my free resources. Enjoy!

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Retirement Advice: Why You Need To Keep Some Money Invested in the Stock Market

2009-07-28T08:42:00.003-04:00

For some reason, people automatically assume they need to get more conservative in their portfolio when they retire. It’s probably because they read it in a financial magazine somewhere that says all retirees should do it. But, times have changed. People are living longer, healthier lives than their parents did and your money needs to last a lot longer.

Your retirement could last for 2-4 decades and most people severely underestimate their retirement income needs. At the very least, you should maintain at least 30-40% of your money in stocks. You should also ask your advisor if your investment strategy is designed to double your income over the next 20 years. Due to inflation, you’ll need it.

Bill Losey's Pre-Retirement Advice - Phased Retirement

2009-07-27T09:27:00.003-04:00

Not sure you have enough money to retire? How about a phased retirement? Instead of working 40 hours per week, talk with your employer about a reduced workload with a corresponding pay cut. The result could be just the answer you’re looking for.

Phased retirement is an attractive option for older workers because you continue earning an income while getting more free time for yourself. Your employer benefits by retaining a valued employee at a reduced cost. Often times an employer will free up those financial resources to hire an additional employee and improve productivity. It’s a win-win for everyone.

Asset Allocation & Diversification

2009-07-26T10:46:00.001-04:00

Asset allocation is an investment strategy designed to reduce risk and enhance your return, by spreading your money among the three major asset classes – stocks, bonds and cash.

Diversification refers to how you spread your money among the sub-asset classes. For example, stocks are one of the three major asset classes; however, within this asset class you have various sub-asset classes such as large cap, small cap, mid cap, blend, growth, value, domestic, international and emerging stocks. Bonds, another major asset class have their own sub-asset classes such as government, municipal, corporate, domestic, international and emerging market debt bonds. If you’ve heard the saying, “don’t put all your eggs in one basket”, diversification is what they’re referring to.

Get Out Of Debt By Talking With Your Creditors

2009-07-24T08:34:00.000-04:00

For a company, there is nothing worse than a consumer who has borrowed money, doesn’t make payments, and won’t answer the phone. However, if you’re honest, forthright and contact your company and explain why you’re having trouble paying your bills – it could lead to a reduced payment plan. Additionally, if you authorize the company to automatically deduct their monthly payment from your bank account that would indicate to the company how serious you are about paying them back. If you have the ability to make even a nominal payment and are willing to make that payment, most companies will work with you.

The Best Way To Invest For Retirement

2009-07-23T08:00:00.000-04:00

If you talk with 10 different investment advisors, they’ll all have their own opinion as to what they think is the best way to invest. Some prefer actively managed investments. Some prefer passively managed investments. Some advisors like me prefer a 3-tier combination of actively and passively managed investments called a “Skill-Weighted” portfolio. The point is - you need to do some homework and figure out what strategy resonates with you.

Since neither active management nor passive management has superior performance in all market environments or asset classes (large cap, small cap, growth, value, domestic, international, fixed income, etc.), I think it’s smart to incorporate both strategies into your investing plan. Therefore, I’m a staunch advocate for using low-cost index funds, enhanced index funds and exchange traded fund (ETFs) from investments companies such as Vanguard, SEI and Barclays.

National Retirement Planning Month Asks "What's Your Net Worth?"

2009-07-22T09:36:00.001-04:00

A net worth statement is simply a piece of paper that illustrates your overall financial strength at a particular point in your life. In essence, it’s a snapshot of everything you own (your assets), less all your debts (your liabilities). The calculation is as follows: Assets minus liabilities equals your net worth (personal bottom line). You are said to have a positive net worth when your assets exceed your liabilities. You are said to have a negative net worth when your liabilities exceed your assets.

Assets: Take out a piece of paper and make a list of everything you own; bank accounts, investments, retirement accounts, cash value life insurance policies, savings bonds, money owed to you, personal residences, investment real estate, collectibles, art, autos or other vehicles, business assets, etc. Once you have your list, provide an accurate value of what the asset is worth. It will be easy to value your investments but in the case of a car or your home, you’ll need to provide a guesstimate of what someone would be willing to pay you for the asset.

Liabilities: On that same piece of paper, make a list of everyone you owe money to; parents, student loan, car loan, home equity loan, boat loan, mortgage loan, credit cards companies, business loans, personal loans, etc. Once you have this, write in your current outstanding loan balances.

Once you have your assets and liabilities organized, subtract your liabilities from your assets and determine if your net worth is positive or negative. Preparing a net worth statement annually will allow you to keep tabs on your progress toward meeting goals such as college or retirement. The goal, of course, is to have a net worth that increases over time.

More Retirement Planning Mistakes: Spending Your IRA Money Too Quickly

2009-07-21T08:17:00.001-04:00

Monitoring how much money you take out of your IRA portfolio each year is crucial to you not outliving your money. 4% is the magic number that you could take out of your saving each year ($4,000 for every hundred thousand you have invested) and put yourself in a position for your money to last 30 years.

Take out more than that and you could run out of money before three decades are up.

Retire in a bear market and take money out when your portfolio is going down and you could run out of money in less than 15 years.

Retire in a bull market and your money could last forever.

Retirement Mistakes

2009-07-20T09:01:00.001-04:00

Retiring when what you really needed was a break. All too often I see people in their fifties and sixties who retire or take an early incentive offer because they think they’re ready to stop working. After a few months or a few years they find themselves bored and restless and wanting to work again. Unfortunately by then many of their business connections may have vanished or the economy turned sour and they can’t find meaningful work. Before you decide to retire fully, discuss a phased retirement or flexible work schedule with your employer. Explore all of your options before retiring.

Retirement Planning Advice - How Much Can I Take Out of My IRA?

2009-07-19T09:23:00.001-04:00

As long as you limit your withdrawals to the amount of interest, dividends and capital gains generated, you won’t have to touch your principal and the value of your account won’t decrease. For example, let’s assume you have a $400,000 account value and by the end of the year your balance has increased to $425,000. If you only take out $25,000, your principal will remain intact.

For most people however, limiting their withdrawals to only interest, dividends or capital gains isn’t realistic because most people don’t hold investments that only go up in value. In short, their portfolios rise and fall in value with the normal stock and bond market fluctuations and could be worth more or less than their original investments. Additionally, most people won’t have a pension so they’ll have to rely heavily on an income stream from their portfolio. In many cases, their IRA portfolios are scheduled to be depleted over time.

Creating An Estate Plan In Retirement

2009-07-18T11:17:00.000-04:00

At a person’s demise there are certain typical problems, which, if not planned for, create a burden on those who are left behind. Proper estate planning can eliminate or reduce these problems. Before you meet with an attorney, there are several items a person should consider, including guardians for minor children and naming an executor of your estate.

Who is best able to cope with the raising of your minor children? A brother, sister or a close friend may be a better alternative than an aging parent. It is important to decide on alternative choices, in the event your first choice is unwilling or unable to serve. If all or part of your estate passes through probate, whom do you want to handle the details of paying your debts and death taxes and distributing the remaining assets to the beneficiaries named in your will? Whom do you trust?

As you can see, there are a lot of things to consider, but decisions need to be made. When your estate and your financial foundation is in order an emotional burden is lifted from the person who is concerned for his or her family’s well being.

National Retirement Planning Month - Retirement Tip #99

2009-07-17T12:59:00.003-04:00

Creating a Safety Net

The purpose of life insurance coverage is to create a pool of money upon your death that your loved ones can use to support their lifestyle. Some people use insurance money to pay off a mortgage, pay off credit card debt, start a business, expand a business, pay for college expenses, meet their monthly obligations or fund their retirement. The uses of the cash are endless. The premiums or amount you pay vary based upon policy type and death benefit amount selected, your age, health, height, weight, smoker/non-smoker status and sex. Do you have enough life insurance to protect your family? If the answer is no or you don’t know, maybe now would be a good time to meet with an advisor.

National Retirement Planning Month - Successful Retirement Living

2009-07-16T10:07:00.001-04:00

Creating a Spending/Savings Plan

How much money do you make? How much do you take home? How much money do you need to cover your necessary living expenses? Are you spending more or less than your take home pay? Are you saving for a rainy day? Put all your information down on paper, in a spreadsheet, or a software program like Quicken. You’ll be amazed at where you’re money goes and how much you’re spending. Once you make this conscious effort and you pay attention to where your money goes, you’ll be able to make some conscious changes to improve your personal bottom line and save more money.

National Retirement Planning Month - Creating An Emergency Fund

2009-07-15T10:00:00.001-04:00

The purpose of having an emergency fund is to have cash on hand for unexpected emergencies. The goal is to have cash available for these emergencies rather than having to take out a loan or rack up high-interest credit card debt. Many financial advisors recommend setting aside three to sixth months’ worth of living expenses in a savings account. For example, if it costs you $3,000 per month to run your household, you should earmark $9,000 to $18,000. Start setting aside some money from each paycheck even if it’s a small amount like $25-$50. The goal is to develop a savings mentality and the hardest part is getting started.

National Retirement Planning Month - The 110 Rule

2009-07-14T09:28:00.002-04:00

The 100 Rule: Since it’s likely you’ll live a long life you may need to keep a higher percentage of your assets in equity investments. Consider subtracting your current age from 110. The result could be considered a starting point for your equity allocation. For example, if you are 65 consider allocating 45% of your portfolio to equity investments (110-65 = 45) and allocate 55% to fixed income investments.

Please note that this rule might not be applicable to your situation. There are multiple factors that are taken into account for each individual’s situation. Use this rule as a starting point in your planning and consider working with a professional advisor to gain better clarity.

Bill Losey's National Retirement Planning Month - Retirement Tip #77

2009-07-13T07:54:00.002-04:00

The Growth versus Value Debate

Investors and money managers who seek out growth stocks are generally looking for quality companies with higher than average earnings growth rates, regardless of what the current market valuation of the stock is.

By comparison, investors and money managers who advocate value investing typically buy shares of stock in companies that have been beaten down in price because they are going through a period of adversity. Value investing usually calls for selling these shares after they have risen in price as a result of the underlying company having recovered from its difficulty.

Growth stocks can fall in share price and become value stocks. Value stocks can rise in price and become growth stocks. It is a never ending cycle of ups and downs. Money mangers and investors alike have their own methodology for determining if a stock is value or growth. In fact, two different money managers may classify the same stock as both growth and value.

As for what style is better, there are reams of research which can illustrate what strategy has achieved the highest rate of return. What you’ll find is that both styles come in and out of favor and most money managers can’t predict with any certainty which will outperform the other.

Bill Losey's National Retirement Planning Month - Stocks & Bonds 101

2009-07-11T12:21:00.002-04:00

The term “stock” and “share” both refer to a fractional ownership interest in a particular company. When a corporate business is first organized, investors contribute money to fund the enterprise, and in return receive shares of stock representing ownership in that company. When the company is successful, it will grow and have profits, and the shares generally become more valuable. If the business isn’t successful, the value of the shares will usually decline.

While stocks represent ownership in a business, bonds are debt. Bonds are issued by institutions such as the federal government, corporations, and state and local governments. A bond is evidence of money borrowed by the bond issuer. In return for loaning money to one of these institutions, you as the bond holder would receive interest and when the bond matures at some point in the future, the principal would be returned to you.

Stocks and bonds both carry many risks. For example, the market value of your shares will fluctuate up and down every day. If you need to sell your shares or bonds on a day when they are worth less than what you invested, a capital loss will result. If you need to sell them on a day when they are worth more than you invested, you have a profit and a capital gain will result.

Being Happy Now & In Retirement

2009-07-10T07:59:00.001-04:00

What can you do to have a happier, more fulfilling, less financially-driven lifestyle? It’s simple. As Retirement Coach Ann Fry (www.ItsBoomerTime.com) says:

1. Stop doing what you DON’T want to do.
2. Start doing what you DO want to do.
3. Don’t let anyone else tell you what you CAN’T or SHOULDN’T do.

My wish for you and all people is that the next phase of your life is meaningful, filled with fun and stimulating activities, exploration, passion, happiness, good health and true financial freedom.

Remember, life is too long not to be doing those things that are fun and rewarding. Go for what you REALLY want. Start now!

Retirement Planning Advice: The Benefits of a Phased Retirement

2009-07-09T09:11:00.002-04:00

How about a phased retirement? Instead of working 40 hours per week, talk with your employer about a reduced workload with a corresponding pay cut. The result could be just the answer you’re looking for.

Some employers allow workers over age 50 to work half-time at half-salary for up to three or five years while collecting partial pension benefits, if applicable. Often times, a half-time salary combined with a small pension or a monthly supplement from your own investment portfolio will result in a drop to a lower tax bracket.

Phased retirement is an attractive option for older workers because you continue earning an income while getting more free time for yourself. Your employer benefits by retaining a valued employee at a reduced cost. Often times an employer will free up those financial resources to hire an additional employee and improve productivity. It’s a win-win for everyone.

National Retirement Planning Month Tip #84: Debt-Free Retirement Living

2009-07-08T09:40:00.001-04:00

When you're in your 50's, start paying down your non-deductible debt such as credit cards and auto loans. Try to be debt free, perhaps with your mortgage being the only exception, by the time you retire. If you can pay off your mortgage too, more power to you. This can free up a lot of cash flow and keep your expenses low in retirement.

National Retirement Planning Month: How To Find A Financial Planner

2009-07-07T09:15:00.000-04:00

Anyone can call themselves a financial planner or financial advisor; at this point there is no minimum experience or education required by law. To protect yourself, I suggest you only work with a person who has attained the CFP or Certified Financial Planner designation, and has a minimum of 5-10 years experience counseling individuals. This credential demonstrates a base level of knowledge, a degree of integrity, adherence to a strict code of ethics, and a continuing education requirement. While there are millions of “financial planners” nationwide only 55,000-60,000 of those individuals have completed the coursework to become a CFP professional. This should be a starting point for you.

Retirement Planning Advice - The 100% Rule

2009-07-06T09:01:00.001-04:00

The 100% Rule: You may have heard that once you retire you’ll be able to live on 70-80% of your pre-retirement income. However, considering medical costs are rising and life spans are increasing, I’d rather plan that you’re likely to need 100% of your pre-retirement income in retirement just to be on the safe side.

Estate Planning As a Part of Your Retirement Plan

2009-07-05T09:14:00.001-04:00

Your will is a legal expression of what you want to happen to your property when you die. A will can be a simple, inexpensive way for you to ensure your property passes to your heirs or a charity according to your wishes. Contact an experienced estate planning attorney and update your will regularly to reflect changes in your life.

Retirement Planning Tip #77

2009-07-03T10:20:00.000-04:00

Read, listen and learn about different investments and strategies. In the end, your financial well-being and having a successful retirement is your personal responsibility.

Protecting Your Retirement Account From Inflation

2009-07-02T08:41:00.003-04:00

Retirement Planning Tip #166:

The challenge for retirees is to not run out of money while creating a stream of income that is predictable, sustainable and increasing to keep pace with or outpace inflation. Even at a low inflation rate of say 3%, you’d need to double your income in about 20 years just to maintain the same standard of living you have today.

Past performance is no guarantee of future results, but as of now, the equity markets have been the only place that have consistently delivered returns above inflation over long periods of time. That’s why it’s so important to maintain at least some portion of your money in the equity (stock) market. Of course when you have 40%-60% of your money in the stock market, you’ll be subject to market risks too.