income, retirement, Taxes

RMD: What are the Risks and How Can We Address Them?

Several recent studies show peoples number one fear is running out of money during retirement.

To prepare us for retirement the government gives workers the ability to set up qualified accounts in order to save for retirement and get tax deferred growth. By deferring taxes money saved can grow faster. You put money away, not paying taxes now, but paying taxes on the money when you pull it out during retirement.

When you get to retirement, you can start pulling money from your account. In the past it has been considered good practice to not draw more than 4% from an account during retirement in order to make sure you don’t outlive your money. In the past bond yields have been 5-7% and that makes a 4% draw down possible. Now over the past 5 years bond yields have been around 2-3% and because many retirees rely on bonds to deliver income to their portfolio, many economists and advisors have been advising clients to withdraw less from their IRAs; this is so retirees don’t run out of money when they are older.

Now what if I told you there was a government program that requires you to draw more income from your account, without any consideration for how long you or your spouse will live, and without regard for whether you will run out of money or not.

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income, retirement, Taxes

First Steps to Retirement Planning

Many people are paralyzed into inaction when they start thinking about the challenge of planning for retirement. The truth is there are a few first steps anyone can take on their own to improve their chances for success.

A first step is to determine how much income you can expect to receive from social security. In years past SSA would mail annual statements for people to see their expected benefits. Things have changed… go to google and search for “my social security”. You will create an account and through this account be able to determine your numbers.

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income, interest rates, protection, retirement

How to Guarantee Retirement?

Several years ago I read a post on LinkedIn which sounded the alarm bells that the “time is running out” for your retirement account.

I found it offensive and in poor taste, playing on the fears of the public at large. Throughout most of 2019 there has been a palatable undercurrent of fear in the market… on the part of investors, on the part of money managers, on the part of economists…

The 20% pullback in 2018 in the market reinforces that fear for some.

There is no doubt that the current environment is challenging when it comes to managing investments and making suitable choices.

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Climate change, economy, environment, income, retirement, risk management, Socially Responsible Investing, SRI

Rising Seas and the Risk to Retirees

Florida has always been considered a favorite retirement destination. The warmer climate attracting older American’s who have health issues ranging from Asthma to Arthritis, from Heart Disease to Parkinson’s. 20% of Florida’s population is over age 65 (compared to only 15% in New Jersey).

An additional challenge facing retirees in both Florida and New Jersey is climate change risk due to rising seas, storm surge and the potential loss of property in coastal communities.

In 2013, hurricane Sandy delivered a wake-up call to many about the danger to real estate as a result of hurricane force winds and storm surge. This past summer it looked to be Florida’s turn. Hurricanes Irma and Maria threatened to make landfall in Florida with devastating force.

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income, protection, retirement, risk management

5 Tips to Make Your Retirement Savings Last

The statistics are troubling…
10,000 Americans begin their retirement every day.

The Social Security Administration has said the SS Trust Fund will become exhausted by 2035, unless benefits are reduced, the retirement age is raised, or other solutions are put into action. (1)

76% of Baby Boomers are not confident they have saved enough for retirement. (2)

One third of retirees retire with mortgage debt. (2)

Women live substantially longer then men and yet have much less saved for retirement. (3)

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economy, income, interest rates, retirement, risk management, Taxes

Trick or Treat? Revisiting The Potential Downside of Tax Reform for Investors

There is an old story that goes “beware what you wish for…” Things don’t always turn out as expected. Two years ago the President proposed and Congress approved a huge tax cut plan… the Tax Cuts and Jobs Act (TCJA). The results have been controversial.

Along those lines I watched a fascinating interview of Tom Lee, head of research at Fundstrat, on Bloomberg two years ago. His insight proved very valuable and accurate. (1)

His feeling is that a Tax cut, as it was being discussed, could be negative for investors long term. “There’s two reasons; First, when cutting tax rate you raise the after tax cost of debt. Leverage becomes a problem for a lot of businesses. Second, because you are cutting tax rates you are effectively giving cash to all businesses, even businesses where you want to reduce allocation.“

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economy, income, interest rates, retirement, risk management

Economic Fears and Managing Risks

The economy continues to slow and is having an effect on markets. Incoming ECB President Christine Lagarde stated the US trade war with China has “dented global economic growth.”

“You can’t adjust to the unknown. So, what do you do? You build buffers. You build savings. You wonder what comes next. That’s not propitious to economic development,” said Lagarde.

“It means less investment, less jobs, more unemployment, reduced growth. So of course, it has an impact,” she said.

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economy, income, retirement, risk management

Investing with Stocks at Record Levels

I have talked to many clients. I have read and listened to many economists and Chief Investment Officers who are nervous about investing hard earned savings when markets and indexes are making new highs.

Many people feel the market is “due for a correction”; they worry about a “bubble bursting like 2008”; they look at the political environment and feel confused by what is happening in Washington DC.

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economy, income, interest rates, retirement, risk management

Recession Risks Rise

In a recent presentation to investors, Doubleline CEO Jeffery Gunlach stated he sees a 75% chance of a recession by 2020. (1)

Many signs are popping up that point in the same direction.

In August 2019 the yield curve inverted. (2) An inverted yield curve is seen within the financial industry as a reliable leading indicator for recessions.

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income, interest rates, retirement, risk management

Being Too Fearful Can Hurt Financial Security

I have spoken to many people in the past year who are fearful in the current market environment… High market valuation, trade war fears, warnings from pundits, Fed policy moves, volatility… Because of fear, many people have decided to sit in cash or even liquidate their retirement savings.

In a recent study the World Economic Forum examined the savings shortfall around the world… the situation where due to increasing longevity people are expected to outlive their savings. One of the key findings was the demonstration that Japanese savers are extremely conservative in their investing style, avoiding equities and only using cash and bond equivalents for saving. The result is Japanese women face a savings shortfall of 20 years compared to American women who have a savings shortfall of 10.9 years. A lack of growth in assets hurts financial security. (1)

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