According to Philip Moeller, writing for US News and World Report, the need for income in retirement is essential. None of us plan on outliving our retirement. But far fewer of us actually approach retirement with a good sense of where we should be financially. The focus on amassing great wealth in one place is definitely a plus but it is only part of what you will need.
Where We Turn Matters
Many folks turn to a financial planner for advice without the realization that these folks can come at the issue (I hesitate to use the word problem) from all sorts of different angles. Mr. Moeller’s article profiled several planners, advisers, and wealth managers for his piece on boosting wealth in retirement.
First up was Joy Slabaugh a financial planner with EST Financial Group in Delmar, Del. Ms. Slabaugh’s annuity approach and preservation mode would be perfect for the couple who have amassed enough to draw 4% or less of their portfolio in their retirement years and not dependent on any future growth. Four percent is a widely accepted number to gage your portfolio’s strength to last long enough to leave something in your account after you pass. But a great number of people tend to look at that number as inadequate and shift it higher, jeopardizing the balance quicker.
Ms Slabaugh’s suggestion about non-traded REITs will add an out-sized amount of risk although. This sort of investment hinges too much on the resale value of the underlying properties and the relatively short maturity some of these securities have. I hope she tells retirees about the ability (or willingness) of the REIT to not only determine the maturity on their debt (see this older article about debt determination for more info) but whether refinancing short-term debt might be a problem in the near future.
Just a Dose of Risk
Of the four Mr. Moeller profiled, I liked Erika Safran’s of Safran Wealth Advisors in New York approach the best. Her warning off the conservative investor by suggesting that “peace of mind” comes at a cost is excellent advice for those who have shifted to target date funds, bond mutual funds, or balanced funds early in their work career.
It is refreshing to hear someone talk this way to retirees or those close to the goal. If you consider the 30-year time horizon, switching too early or too much into fixed-income investments is akin in some ways to suggesting that someone fresh to the workforce buy bonds.
George Jackson’s approach (using a TD Amertrade platform at his Jackson Retirement Planning) sounds as if it involves a lot of rebalancing as the markets shift, which to me sounds counterintuitive. Many of these types of shifts take place on the way down and well-after the market has decided on something else. But his ability to rotate out of stocks in “early 2008″ (stocks were beginning to decline) put him well ahead of where the vast majority of investors were in late 2008.
Too Safe Usually Means Annuities
Tom Brown seems to be focused on the safest route of all in suggesting the budget and the ability of the portfolio to cover those expenses. Although he doesn’t say annuity (his association with Northwestern Mutual suggests otherwise) the frequent rebalancing makes me wonder how much his management costs are. As long as the client’s needs are being met, he mentions that they are okay with temporary dips.
None of the advisers seemed too concerned about interest rates or the potential of a maturity wall (a point where a ungainly amount of maturing bonds find the interest rates less accommodative and are forced to borrow at a higher rate) in the coming year. If I were to bet on one adviser’s advice surviving better than the others, it would be Ms. Safran’s approach. She was the only one with an eye on low-cost investments at a time when costs play the major role in how long the portfolio lasts.
Here is the link to the full article US News and World Report article by Mr. Moeller.