The Sequence of Returns

Posted by on Apr 14, 2019 in 401k, 403b, bank statements, Boomers. Millenials, Budgeting, college planning, Consumer Tools, Credit & Debt, Elder Care, estate planning, family finances, financial advice, financial planning, Fixed Income Investing, Inflation, insurance, Investing, IRA, Life Stages, Persoanl Financial tips, Retire Happy, Retire Happy Now, Retirement, retirement, retirement planning, Saving Money, social security, taxes | 0 comments

A look at how variable rates of return do (and do not) impact investors over time. Provided by Frederick Saide, Ph.D. What exactly is the “sequence of returns”? The phrase simply describes the yearly variation in an investment portfolio’s rate of return. Across 20 or 30 years of saving and investing for the future, what kind of impact do these deviations from the average return have on a portfolio’s final value? The answer: no impact at all. Once an investor retires, however, these ups and downs can have a major effect on portfolio value – and retirement income. During the accumulation phase, the sequence of returns is ultimately inconsequential. Yearly returns may vary greatly or minimally; in the end, the variance from the mean hardly matters. (Think of “the end” as the moment the investor retires: the time when the emphasis on accumulating assets gives way to the need to withdraw assets.) An analysis from BlackRock bears this out. The asset manager compares three model investing scenarios: three investors start portfolios with lump sums of $1 million, and each of the three portfolios averages a 7% annual return across 25 years. In two of these scenarios, annual returns vary from -7% to +22%. In the third scenario, the return is simply 7% every year. In all three scenarios, each investor accumulates $5,434,372 after 25 years – because the average annual return is 7% in each case.1 Here is another way to look at it. The average annual return of your portfolio is dynamic; it changes, year-to-year. You have no idea what the average annual return of your portfolio will be when “it is all said and done,” just like a baseball player has no idea what his lifetime batting average will be four seasons into a 13-year playing career. As you save and invest, the sequence of annual portfolio returns influences your average yearly return, but the deviations from the mean will not impact the portfolio’s final value. It will be what it will be.1 When you shift from asset accumulation to asset distribution, the story changes. You must try to protect your invested assets against sequence of returns risk. This is the risk of your retirement coinciding with a bear market (or something close). Even if your portfolio performs well across the duration of your retirement, a bad year or two at the beginning could heighten concerns about outliving your money. For a classic illustration of the damage done by sequence of returns risk, consider the awful 2007-2009 bear market. Picture a couple at the start of 2008 with a $1 million portfolio, held 60% in equities and 40% in fixed-income investments. They arrange to retire at the...

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Your Financial Co-Pilot

Posted by on Apr 5, 2019 in 401k, 403b, atuos, bank statements, Boomers. Millenials, Budgeting, cars, college planning, Consumer Tools, Credit & Debt, credit card statements, Deflation, Elder Care, estate planning, family finances, financial advice, financial planning, Fixed Income Investing, Inflation, insurance, Investing, IRA, IRS, Life Stages, Medicaid Planning, Medicaid Recovery, Medicare Planning, Persoanl Financial tips, Retire Happy, Retire Happy Now, Retirement, retirement, retirement calculator, retirement planning, sales, Saving Money, social security, tax returns, taxes, TSA | 0 comments

If anything happens to you, your family has someone to consult.   Provided by Frederick Saide, Ph.D.   If you weren’t around, what would happen to your investments? In many families, one person handles investment decisions, and spouses or children have little comprehension of what happens each week, month, or year with a portfolio. In an emergency, this lack of knowledge can become financially paralyzing. Just as small business owners risk problems by “keeping it all in their heads,” families risk problems when only one person understands investments. A trusted relationship with a financial professional can be so vital. If the primary individual handling investment and portfolio management responsibilities in a family passes away, the family has a professional to consult – not a stranger they have to explain their priorities to at length, but someone who has built a bond with mom or dad and perhaps their adult children.      You want a professional who can play a fiduciary role. Look for a financial professional who upholds a fiduciary standard. Professionals who build their businesses on a fiduciary standard tend to work on a fee basis or entirely for fees. Other financial services industry professionals earn much of their compensation from commissions linked to trades or product sales.1 Commission-based financial professionals don’t necessarily have to abide by a fiduciary standard. Sometimes, only a suitability standard must be met. The difference may seem minor, but it really isn’t. The suitability standard, which hails back to the days of cold-calling stock brokers, dictates that you should recommend investments that are “suitable” to a client. Think about the leeway that can potentially provide to a commission-based professional. In contrast, a financial professional working by a fiduciary standard always has an ethical requirement to act in a client’s best interest and to recommend investments or products that clearly correspond to that best interest. The client comes first.1 You want a professional who looks out for you. The best financial professionals earn trust through their character, ability, and candor. In handling portfolios for myriad clients, they have learned to watch for certain concerns and to be aware of certain issues that may get in the way of wealth building or wealth retention. Many investors have built impressive and varied portfolios but lack long-term wealth management strategies. Money has been made, but little attention has been given to tax efficiency or risk exposure. As you near retirement age, playing defense becomes more and more important. A trusted financial professional could help you determine a risk and tax management approach with the potential to preserve your portfolio assets and your estate. Your family will want nothing less. With a skilled financial professional around to...

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You Could Retire, But Should You?

Posted by on Mar 31, 2019 in 401k, 403b, atuos, bank statements, Boomers. Millenials, Budgeting, cars, college planning, Consumer Tools, Credit & Debt, credit card statements, Deflation, Elder Care, estate planning, family finances, financial advice, financial planning, Fixed Income Investing, Inflation, insurance, Investing, IRA, Life Stages, Persoanl Financial tips, Retire Happy, Retire Happy Now, Retirement, retirement, retirement calculator, retirement planning, sales, Saving Money, social security, taxes | 0 comments

It might be better to wait a bit longer.   Provided by Frederick Saide, Ph.D.   Some people retire at first opportunity, only to wish they had waited longer. Your financial strategy likely considers normal financial ups and downs. That said, a big “what if” on your mind might be “what if I retire in a down time that doesn’t swing back upward in a year or two?” It could happen to everyone, and it certainly doesn’t work on your schedule. For that reason, the fact that you can retire doesn’t necessarily mean that you should. Retiring earlier may increase longevity risk. The concern can be put into three dire words: “outliving your money.” Sudden medical expenses, savings shortfalls, financial downturns, and larger-than-planned withdrawals from retirement accounts can all contribute to it. The downside of retiring at 55 or 60 is that you have that many more years of retirement to fund. There are also insurance issues to consider. Medicare will not cover you until you turn 65; in the event of an illness, how would your finances hold up without its availability? While your employer may give you a year-and-a-half of COBRA coverage upon your exit, that could cost your household more than $1,000 a month.1,2 How is your cash position? If your early retirement happens to coincide with a severe market downturn or a business or health crisis, you will need an emergency fund – or at the very least, enough liquidity to quickly address such issues. Does your spouse want to retire later? If so, your desire to retire early might cause some conflicts and impact any shared retirement dreams you hold. If you have older children or other relatives living with you, how would your decision affect them? Working a little longer might ease the transition to retirement. Some retirees end up missing the intellectual demands of the workplace and the socialization with friends and coworkers. They find no ready equivalent once they end their careers. Also, it may be difficult to find a part-time job in another field, so staying a while longer could help you make the change at a pace that will be more comfortable, both financially and emotionally.3 Ideally, you will retire with adequate savings and a plan to stay physically and mentally active and socially engaged, so waiting a bit longer to retire might be advantageous to your bottom line. Fred Saidevmay be reached at 908-791-3831 or Frederick2@gmx.us www.wealthensure.com and www.moneymattersusa.net   This material was prepared by a third party, and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note – investing involves...

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How Women Can Narrow the Retirement Savings Gap

Posted by on Mar 3, 2019 in 401k, 403b, bank statements, Boomers. Millenials, Budgeting, Consumer Tools, Credit & Debt, credit card statements, Deflation, estate planning, family finances, financial advice, financial planning, Fixed Income Investing, Inflation, insurance, Investing, IRA, IRS, Life Stages, Persoanl Financial tips, Retire Happy, Retire Happy Now, Retirement, retirement, retirement calculator, retirement planning, Saving Money, social security, tax returns, taxes, TSA | 0 comments

Steps toward saving more & revitalizing your retirement strategy. Provided by Frederick Saide, Ph.D. When it comes to retirement saving, many women lag behind many men. Historically, that has been the case. A recent study by Student Loan Hero offers more evidence of the problem –While 29% of men polled in the study indicated that they have no retirement savings strategy, an alarming 48% of women also answered that they have no retirement savings.1 On top of everything else, there is also the income disparity for women in the United States, where women are earning 37% less per year than men. With all these factors, it’s easy to understand both why women find challenges in retirement saving and why these challenges might seem, at first, insurmountable. It could create a frustration that might cause one to avoid learning what needs to be done to begin saving for retirement. Education and talking with a financial professional, however, have the potential to give even the most frustrated retirement saver a boost.1,2 How can women plan to address this? Here are a few positive steps you can take. Find out where you stand in terms of savings now. A simple retirement planning calculator (there are many available online) can help you see how much more you need to save, per year and over the course of your career. Retirement planning calculators are for informational purposes only and should not be considered a substitute for a more comprehensive retirement evaluation. A financial professional can help. Save enough to get the match. If your employer will match a percentage of your retirement plan contributions per paycheck, strive to contribute enough to your plan each paycheck, to ensure that the match occurs. Ask about automatic escalation. Some workplace retirement plans have this option, through which you can boost your retirement contributions by 1% a year. This is a nice “autopilot” way to promote larger retirement nest eggs. Ask for a raise. A higher salary means more money to put toward your savings effort. Make tax efficiency one of your goals. Consult a financial professional about this, for there are potential advantages to having your money in taxable, tax-deferred, and tax-exempt accounts. For example, when you contribute to a retirement plan, you make tax-deferred contributions. This lowers your taxable income today; the distributions from those accounts will be taxable in retirement.4 Some of these suggestions you will do on your own, but it may also be a good thing to speak to a financial professional you trust and create a savings strategy that will be of particular help for you and your needs. Fred Saide may be reached at 908-791-3831 or Frederick2@gmx.us https://www.moneymattersusa.net and https://www.wealthensure.com This...

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Is America Prepared to Retire?

Posted by on Feb 24, 2019 in 401k, 403b, atuos, bank statements, Boomers. Millenials, Budgeting, cars, college planning, Consumer Tools, Credit & Debt, credit card statements, Deflation, estate planning, family finances, financial advice, financial planning, Fixed Income Investing, Inflation, insurance, Investing, IRA, Life Stages, Medicare Planning, Persoanl Financial tips, Retire Happy, Retire Happy Now, Retirement, retirement, retirement calculator, retirement planning, sales, Saving Money, social security, tax returns, taxes, TSA | 0 comments

A look at some ways to get ready.  Provided by Frederick Saide, Ph.D.   Are Americans saving enough? Only 19% of U.S. adults describe themselves as “very confident” when asked about their savings. Worry spots include retiring without enough money saved (16%) and anxiety about having a “rainy day” emergency fund (14%). These findings come from the 2018 Consumer Financial Literacy Survey conducted by the National Foundation for Credit Counseling. (The survey collected data from 2,017 U.S. adults.)1   Only 41% of us keep a regular budget. If you are one of those roughly two-out-of-five Americans, you’re on the right track. While this percentage is on par with findings going back to 2007, the study also finds that while 65% of Americans are saving part of their annual income towards retirement, 29% indicate they are “not at all confident” that their savings will be enough to sustain them.1 Relatively few seek the help of a financial professional. When asked “Considering what I already know about personal finance, I could still benefit from some advice and answers to everyday financial questions from a professional,” 79% of respondents agreed with the statement. Yet only 13% indicated that they would seek out the help of some sort of financial professional if they had “financial problems related to debt.” While it isn’t surprising to think that 24% of respondents would turn to friends and family, it may be alarming to learn that 18% would choose to turn to no one at all.1 Why don’t more people seek help? After all, Americans of all incomes and savings levels certainly are free to set financial goals. They may feel embarrassed about speaking to a stranger about personal financial issues. It may also be the case that they feel like they don’t make enough money to speak to a professional, or perhaps, a financial professional is something that millionaires and billionaires have, not the average American worker. Another possibility is that they feel like they have a good handle on their financial future; they have a budget and stick to it, and they contribute to an IRA, 401(k), or have some other investments. But that 79% admission, mentioned above, indicates that a vast majority of Americans are not as confident.1  Defined goals lead to definite strategies. If you set financial objectives, you vault ahead of most Americans – at least according to these findings. A written financial strategy does not imply or guarantee wealth, of course, nor does it ensure that you will reach your goals. Yet that financial strategy does give you an understanding of the distance between your current financial situation (where you are) and where you want to be.  How much have you...

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Bad Money Habits to Break

Posted by on Feb 17, 2019 in 401k, 403b, bank statements, Boomers. Millenials, Budgeting, cars, college planning, Consumer Tools, Credit & Debt, credit card statements, Deflation, estate planning, family finances, financial advice, financial planning, Fixed Income Investing, Inflation, insurance, Investing, IRA, IRS, Life Stages, Persoanl Financial tips, Retire Happy, Retire Happy Now, Retirement, retirement, retirement calculator, retirement planning, sales, Saving Money, social security, tax returns, taxes, TSA | 0 comments

   Behaviors Worth Changing Provided by Frederick Saide, Ph.D.   Do bad money habits constrain your financial progress? Many people fall into the same financial behavior patterns, year after year. If you sometimes succumb to these financial tendencies, now is as good a time as any to alter your behavior.   #1: Lending money to family & friends. You may know someone who has lent a few thousand to a sister or brother, a few hundred to an old buddy, and so on. Generosity is a virtue, but personal loans can easily transform into personal financial losses for the lender. If you must loan money to a friend or family member, mention that you will charge interest and set a repayment plan with deadlines. Better yet, don’t do it at all. If your friends or relatives can’t learn to budget, why should you bail them out?   #2: Spending more than you make. Living beyond your means, living on margin, or whatever you wish to call it – it is a path toward significant debt. Wealth is seldom made by buying possessions; today’s flashy material items may become the garage sale junk of the future.   #3: Saving little or nothing. Good savers build emergency funds, have money to invest and compound, and leave the stress of living paycheck to paycheck behind. If you are not able to put extra money away, there is another way to get some: a second job. Even working 15-20 hours more per week could make a big difference.   #4: Living without a budget. You may make enough money that you don’t feel you need to budget. In truth, few of us are really that wealthy. In calculating a budget, you may find opportunities for savings and detect wasteful spending.   #5: Frivolous spending. Advertisers can make us feel as if we have sudden needs; needs we must respond to, or ones that can only be met via the purchase of a product. See their ploys for what they are. Think twice before spending impulsively.   #6: Not using cash often enough. No one can deny that the world runs on credit, but that doesn’t mean your household should. Pay with cash as often as your budget allows.   #7: Thinking you’ll win the lottery. When the headlines are filled with news of big lottery jackpots, you might be tempted to throw a few bucks at a lottery ticket. It’s important, though, to be fully aware that the odds in the lottery and other games of chance are against you. A few bucks once in a while is one thing, but a few bucks (or more) every week could possibly lead to financial...

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