Tag Archives: retirement

Key Elements to Retirement Planning

‘YOYO’ Economy Creates New Reality

With Social Security in its 79th year, and with real concerns about the future of the program, there is a different reality for retirement planning than when the agency started many years ago. Preparing for a secure retirement has changed drastically with today’s Baby Boomers living in what many call a YOYO (You’re On Your Own) economy. It is now important to look at retirement planning in a whole new way.

One Phoenix advisor, Andrew Rafal, an investment advisor and founding partner of Strategy Financial Group, offers insight on how to help prepare for the challenges of retirement. “A retirement plan in today’s world will look very different from what it looked like the past. For previous generations, there were company pensions, a well-funded Social Security program and personal savings, including home equity. Today, many retirement savers don’t have those retirement income sources to count on, making planning for requires a much different thought process than generations past,” says Rafal.

While the viability of Social Security is questionable after year 2033, it is still around today. If you’re a Baby Boomer quickly approaching retirement, when and how you file for your benefits is very important to understand. As most people know, you can start claiming Social Security any time between ages 62 and 70, but did you know the longer you can afford to wait, the more your monthly benefit amount grows. This could add up to a significant difference over the course of your retirement. How you file is also important: For instance, a single person has nine different claiming options and couples have 81 all of which could affect the benefits you receive, so it’s critical to evaluate your options carefully.

Another change over the past few years is the decline in the availability of pensions. Many state and corporate pensions have experienced financial difficulties over the years and have cut costs by lowering pension payouts and putting more of the responsibilities to save enough on the individual. Many companies have opted to get rid of their pension program altogether and offer defined contribution plans, such as 401(k) and 403(b) plans and similar, as an alternative.

Rafal says, “This trend away from state and corporate pensions has shifted the burden to the individual who now must contribute enough in order to create a secure income in retirement. In this YOYO economy how well you live in your golden years is up to you and how well you plan.”

No matter where you are on your journey to retirement, it is extremely important to be proactive when building wealth for retirement by saving the most money that you can afford. Put saving on autopilot with automatic payments. If you don’t see the money each month, you may be less likely to miss it.

The key to a secure retirement for most has become personal savings. Unfortunately, the housing and stock market volatility over the past decade stalled many retirement plans. Many have learned over the past decade that accumulating personal wealth, and maintaining it, can be a difficult challenge.

“The “modern retiree” will need to work even harder than generations past to build and manage their personal savings as for most this is all they will have,” says Rafal.

Rafal suggests:

Be cautious with your investments. Extreme stock market volatility and economic uncertainty, as seen over the past decade, shows how unpredictable the economy can be. Take charge of your saving strategies and do not risk too much of your hard-earned money in any one specific savings or investment vehicle.

Be flexible with your investments. Economic conditions often change in a fast-paced global economy, so adjustments to your financial plan may be necessary. The key to success is the ability to adapt to evolving market conditions.

Be strategic with your investments. Choose a variety of different financial instruments and investment vehicles so no one particular investment severely impacts your long-term financial and retirement goals. Diversification is critical to help avoid suffering a huge loss.

While retirement planning has changed over the past decades with some knowledge and guidance, it is still possible to secure a great financial future. One thing is for sure, the earlier you start the better off in the long run you will be so start saving as soon as you can.

Michael Phelps

Phelps will start comeback in Mesa

Michael Phelps is coming out of retirement, the first step toward possibly swimming at the 2016 Rio Olympics.

The 22-time Olympic medalist will compete for the first time since the 2012 London Games at a meet in Mesa on April 24-26.

Bob Bowman, the swimmer’s longtime coach, told The Associated Press on Monday that Phelps is entered in three events — the 50- and 100-meter freestyles and the 100 butterfly.

“I think he’s just going to test the waters a little bit and see how it goes,” Bowman said by phone from Baltimore. “I wouldn’t say it’s a full-fledged comeback.”

Phelps returned to training last fall and re-entered the U.S. drug-testing program. He has completed his six-month waiting period by the U.S. Anti-Doping Agency to be eligible for competition.

Bowman said Phelps is “pretty far” from being back in top form. He’s been training Monday through Friday with Bowman’s team at the North Baltimore Aquatic Club.

“He’s gotten back into good shape since September,” the coach said. “He can give a good effort and certainly not be embarrassed. He’s in enough shape to swim competitively.”

Besides Phelps, USA Swimming said Olympians Ryan Lochte and Katie Ledecky are among those expected to swim in the Arena Grand Prix at Skyline Aquatic Center.

Phelps turns 29 in June and is the winningest and most decorated athlete in Olympic history. He captured 18 gold medals and 22 medals overall at the last three Summer Games. He broke Mark Spitz’s record for a single Olympics by winning eight gold medals at Beijing in 2008.

Phelps had vowed that he wouldn’t swim into his 30s. Since retiring less than two years ago, he has stayed busy with a chain of swim schools, a foundation focused on water safety and appearances on behalf of his sponsors. He devoted lots of time to golf and participated in a reality show with famed coach Hank Haney.

His camp is being low-key about the comeback.

“I think he’s just really enjoying it,” Bowman said. “He enjoys the training and being physically fit. He just kind of wants to see where he’s at. It’s more really for fun. It’s been nice for me to see him swim just for the joy of it really.”

In Mesa, Phelps will swim 100 free and 100 fly preliminaries on the first day. Then, if he qualifies, he’ll decide which race to swim for the evening finals, Bowman said. He’ll swim the 50 free on the second day and might swim the 50 fly “just for fun,” the coach added.

Shifting the financial focus

Dillan Micus

Dillan Micus: Under his leadership since 2006, AXA Advisors Southwest has grown from approximately $5 million to more than $18 million a year and averaged a 30 percent increase in staff each year – even during the recession.

Many fail to plan how retirement funds will be distributed, Micus says

Az Business: What challenges do you see your generation facing in regard to wealth management?

Dillan Micus: In regard to helping people my age with their actual wealth management challenges, I empower my team to use our Retirement Income Distribution Strategy (RIDS). Often, people spend all of their time focusing on pre-retirement accumulation, but fail to plan how those assets will be distributed during retirement, based on the things they want to actually do and places they actually want to go. This way of planning also neglects to address the most common risk factors that threaten one’s seemingly perfectly planned retirement years – longevity, inflation, taxes, interest rates, volatility and emotions. Through RIDS, we help our clients organize their money into three buckets – a cash reserve bucket, lifestyle bucket and inflation fix bucket – thereby creating a greater level of certainty that they will be able to live the lifestyle they want to live in retirement.

Moving on to actual wealth managers in my generation, I see two clear challenges, both of which AXA seeks to turn into opportunities.

First, those in my generation are neither “starting out” in their wealth management careers, nor approaching retirement. More often than not, they are eager for autonomy. So, we give it to them via an uncommon approach to comprehensive planning I developed called “Firm of Firms,” which empowers our best people to launch their own firms with our back-end support. This, in turn, allows our clients to receive a very high level of support and resources through one specific firm while getting the experience of other firms within the family of offices to focus on each integral part of financial management.

Second, those in my generation grew up very close to the “Me Generation,” but it is critical that those in my industry focus on being a “We” generation, meaning community engagement and servant leadership. I model this as a long-time member of the Boys & Girls Clubs of Greater Scottsdale board as well as my work as a Thunderbird. Our office also sets aside one day each year to volunteer together, even going so far as to put on our own charity event as a team.

veterans

USAA CEO Named Executive of the Year

Hiring and helping our veterans is as important today as it’s been at any other time in history. USAA’s chief executive officer will discuss how to assist veterans as they transition to civilian life when he’s honored for his achievements on April 25.

Ret. Maj. Gen. Josue “Joe” Robles served for 28 years in the U.S. Army. He now serves as president and chief executive officer of USAA, a Fortune 500 financial-services provider for members of the military and their families. This month, Robles becomes the 30th annual Executive of the Year chosen by the Dean’s Council of 100, a national group of prominent executives who advise the W. P. Carey School of Business at Arizona State University.

“Robles has set a superb example in serving both his country and his customers,” says W. P. Carey School of Business Dean Amy Hillman. “USAA is known for exceptional customer service and for aiding our active-duty military members, veterans and their families. We’re proud to honor these efforts.”

USAA provides insurance, banking, investment and retirement products and services to 9.6 million members of the U.S. military and their families. The organization is consistently recognized for outstanding service, employee well-being and financial strength. It was founded in 1922 and now employs more than 25,000 people at offices around the world, including one in the Phoenix area.

Robles was a USAA board member from 1990 to 1994, while he was still on active duty in the Army. His stellar armed-forces resume includes command and staff positions in Korea, Vietnam, Germany, and Operations Desert Shield and Desert Storm in the Middle East. He has received many honors, including the Distinguished Service Medal with Oak Leaf Cluster. He also served as commanding general of the 1st Infantry Division (the oldest division in the U.S. Army, also known as “The Big Red One”) and director of the Army budget prior to joining USAA in 1994 as chief financial officer. He became president and CEO in 2007. This new recognition adds to his full shelf of awards.

“I couldn’t be more honored, especially in a community that’s so important to USAA and our mission,” Robles said. “As a veteran myself, I am looking forward to discussing how we can help members of the military transition into civilian careers.”

Robles was named the “No. 1 Veteran in Business” by The Christian Science Monitor in 2009. Among other honors, he also received the Horatio Alger Award for being a dedicated community leader, committed to excellence. He serves on several boards, including the American Red Cross Board of Governors and the board of directors of the Federal Reserve Bank of Dallas’ San Antonio branch.

The event to honor Robles will be held Thursday, April 25 from 11:30 a.m. to 1:30 p.m. at the Fairmont Scottsdale Princess resort in Scottsdale. The W. P. Carey School of Business Dean’s Council of 100 chose Robles to follow previous high-profile winners, including Michael Dell, chairman and chief executive officer of Dell Inc.; Howard Schultz, chairman and chief executive officer of Starbucks Coffee Company; and Alan Mulally, president and chief executive officer of Ford Motor Company.

This event is part of the Economic Club of Phoenix speaker series. For more information about the club or to reserve seats, call (480) 727-0596 or visit www.econclubphx.org.

Retirement

Tips For Maintaining Flexibility In Retirement

By Kim Bridges

Your financial status in retirement is dependent on a number of factors, including available resources, economic and market conditions, and level of expenses. Some of these factors are within our control, and some are not. Since there isn’t much we can do to alter factors beyond our control, such as the inflation rate or asset class returns, the best strategy for planning for uncertainty is to maintain flexibility in as many factors as possible.

1. PLAN YOUR RETIREMENT BEFORE RETIRING – People tend to underestimate the assets needed to fund their lifestyle for a 30-40 year retirement, and many early retirees fail to factor in the cost of health insurance that is most often self-funded until Medicare benefits kick in. It’s wise to review scenarios before retiring to determine if you really are ready financially.

2. LIVE BELOW YOUR MEANS — BEFORE AND DURING RETIREMENT – We’ve all heard the expression, “live within your means,” but to retain maximum flexibility to adjust for unplanned expenses, it’s vitally important to follow this advice. Overhead expenses of maintaining a home can create a rapid cash burn if not kept in check. Be sure you live in a home that, to the extent possible, is easily affordable (including the taxes and upkeep) and does not cause you to stretch your income. Living below your means implies that you not only have adequate income to cover your expenses, but that you have “wiggle room” for contingencies.

3. DEVELOP MULTIPLE STREAMS OF INCOME WHEN POSSIBLE – In running countless retirement models, I have found those least affected by contingencies, such as reduced returns or increased expenses, are most likely to have multiple streams of income. Non-portfolio income includes pensions, Social Security, deferred compensation, annuities, rental income, royalties, gifts, trust distributions, and so forth.

4. MINIMIZE FIXED EXPENSES DURING RETIREMENT – Fixed expenses, such as mortgage and car payments, reduce flexibility in retirement. By eliminating all possible debt prior to retirement, you give yourself more wiggle room to reduce your portfolio withdrawals in years of poor market performance or to accommodate higher health care expenses.

5. MAINTAIN YOUR HUMAN CAPITAL – This advice applies mainly to those in their earning years and early phase of retirement. During any absences from the workforce, it’s important to keep up with the education and skills that make you employable. If hard times hit, you will want to have the flexibility to return to the workforce.

6. DELAY TAKING SOCIAL SECURITY AND PENSION BENEFITS The longer you wait to take Social Security (up to age 70), the higher the benefit you will receive. The same holds true for most pensions. If you or your spouse expects to live beyond age 80, you will usually be financially better off by postponing the receipt of your benefits to get the higher amount. This additional income may be vital to the surviving spouse as well.

7. CHOOSE A WELL-DIVERSIFIED PORTFOLIO AND CONSIDER YOUR TOLERANCE FOR RISK While we can’t control economic and market conditions, we can protect ourselves from wild variations by holding a well-diversified portfolio that accommodates our risk tolerance. Diversification means strategically spreading your assets across various asset classes (such as cash, stocks, bonds, real estate and alternative investments) in a manner which produces the lowest level of risk for a projected level of return. Since asset classes behave differently under various market conditions, it is important to have a good mix and avoid overweighting a particular asset class.

8. BUILD LONG-TERM CARE EXPENSES INTO YOUR PLAN According to AARP Public Policy Institute, two-thirds of people over 65 will need some form of long-term care. With average annual costs of nearly $78,000/year for a private room in a nursing home (growing at 5% annually), failure to plan for a long-term care contingency can be a costly mistake. Many people mistakenly believe that long-term care expenses will be covered by Medicare; however, Medicare limits coverage to 100 days of care in a skilled nursing facility following a three-day hospital stay. It does not cover the costs of ongoing care. Those costs must be self-funded.

9. BE TAX-WISE AND FOLLOW A LONG-TERM TAX STRATEGY – The best way to prepare for uncertainty in future tax rates is to diversify your portfolio across tax categories and employ a long-term tax strategy. You can diversify by holding assets in taxable, tax-deferred, and tax free accounts. Each provides advantages under certain tax situations, and holding assets in all categories will allow you to make adjustments in your withdrawals to adapt to changes in the tax environment.

10. NURTURE RELATIONSHIPS WITH FAMILY AND FRIENDS Good relationships with family and friends are priceless. When times get tough, they are the ones who will stand by our side and give strength. Whether an unplanned event involves disability, divorce, death, downsizing or some other financial or emotional shock, we may need to turn to family and friends for support. Fostering strong, healthy relationships will enrich our lives and provide us support during times of trial.

Kim Bridges is a financial planner for M&I Wealth Management, a part of BMO Financial Group. The firms offer a comprehensive range of wealth management services for high-net-worth individuals and families. Learn more: www.miwealth.com
Podcast: Baby Boomers Redefining Retirement

Podcast: Baby Boomers Redefining Traditional Retirement

The baby boomers generation, comprised of about 90 million people, are beginning to head in retirement, but where are they headed?

In this week’s edition of the AZ Business Magazine’s podcasts, we’ll take a look at not only where the baby boomers will take up residence, but also how this transition into retirement looks, as well as the economical impact it can have in Arizona.

Starting back on January 1, 2011, 10,000 baby boomers will reach the age 65 every day for the next 19 years.

But the baby boomer generation is beginning to redefine how the public sees traditional retirement. According to a survey from the AARP, about 40 percent of baby boomers plan to continue to work until they drop.

It is evident that this new approach to retirement is filled with a generation of citizens looking to live an active lifestyle, and retirement communities filled with amenities can provide exactly what baby boomers are looking for.

With Arizona’s ideal weather and land to build on, new communities will being to take advantage of this new, in-demand market.

But how does this help our economy?

Baby boomers will begin to move to the Valley to call it home for retirement, and while doing so, they will begin to spend money, putting more into our economy; more people equals more demand for businesses and goods.

But what happens when the baby boomer community is gone? Will we still need these communities that were built to meet their needs? Or will businesses and communities have to close up shop once the demand is done?

This week, I spoke with Deborah Blake, vice president of marketing for Robson Resort Communities, about why the baby boomers are so interested in these active, adult living lifestyle communities and what we can expect to see here in Arizona as a result of that.

Also, Joe Scarp, owner and broker of Better Homes and Gardens Real Estate Phoenician Properties, called into the podcast to shed some insight on what kind of real estate trends we can expect here in Arizona and how the baby boomers will provide an impact on the state’s economy.

Hit play below to tune into this weeks podcast about the baby boomers generation, and don’t forget to leave a comment!