5/22/2014 3:45 PM ET|
5 smart steps for managing money in retirement
Retirement means the end of your working career, but it doesn't mean the end of having to handle your finances.
It is natural to think of retirement as a time of shutting down and taking it easy. From a money management standpoint though, retirement is when the real work begins.
Saving for retirement is tough, but perhaps the biggest financial challenge comes once you stop working. After all, those years leading up to retirement leave you a certain margin for error -- if your retirement savings start falling behind, you have options such as increasing your retirement savings rates over the next few years or even working a while longer than originally planned. Once you walk away from the workplace though, your savings are somewhat locked in -- now you have to make them last.
To help stretch your savings over the course of your retirement and take care of other financial responsibilities in the later part of your life, here are five things you should plan on attending to once you retire.
1. Fine-tune your asset allocation
In terms of risk management, retirement is a real watershed event. It is the point at which you typically go from adding money to a retirement plan to taking money out. That is important, because it has a substantial impact on your liquidity needs and your portfolio's ability to withstand market volatility.
So, once you start drawing from your retirement plan, you should consider shifting to a more conservative asset mix so the portfolio is more stable and liquid. However, you still have a long enough time horizon that you should not totally abandon growth investments, especially given how low bond yields and savings account rates are these days.
2. Consider a second career
Many people cannot wait to quit working -- until they try it. Then, they find themselves missing the activity and engagement of having a job. Finding part-time work can be the ideal solution to fill that void without recreating all the strain of a full-time job. Financially, it has the double benefit of providing income and giving your portfolio more time to grow before you have to start drawing on it heavily.
3. Reset spending targets
You should be drawing a budgeted amount out of retirement savings that will allow those savings to last throughout your retirement. This is not an exact science, so you need to revisit your spending targets every year, to make sure you are not depleting your assets more quickly than planned.
4. Update your will
Retirement is a good time to take a fresh look at your will. Both your resources and priorities may have changed considerably since you first made a will.
5. Make a living will and durable power of attorney
Nobody likes to think about the possibility of becoming physically or mentally incapacitated, but these are possibilities for which you need to prepare. A living will makes it clear what level of medical care you want to receive. A durable power of attorney allows a trusted friend or relative to make financial decisions on your behalf. The nature of both types of instructions is that you need to get these documents in place before you need them, because you won't be in a position to do so once the time comes to employ them.
More from MoneyRates.com
VIDEO ON MSN MONEY
It's an "entitlement" the GOP-er said. Can't afford that any more! Funny, somehow I think they're taking my SS to pay for the Iraq war. And what all this hundreds of billions per year in "aid" to all these other countries? How can we afford THAT?
You pay into SS all your working life, but we can't afford it? Foreign countries do NOTHING for us all our lives, and they get BILLIONS in "aid"? They already have "free" trade, taking our jobs and $$$ - isn't that enough?
Vote for Americans, vote for SS, vote for domestic spending, not foreign spending, vote for YOUR kids, not Middle East kids, or Asian kids, or European kids. Global COMPETITION to us should mean THEY compete with us, not WE fund THEIR competition against us.
6) Vote against anyone who wants to take more of your or your neighbors money and redistribute it to someone else.
7) Vote against anyone who doesn't believe in equal treatment under the law, including the tax law.
8) Vote against anyone who believes that the government can do a better job at managing your retirement or your health care than you can.
9) Vote against anyone who does not believe in enforcement of the laws of the United States.
10) Vote against anyone who believes that the Constitution should be interpreted.
Fisher Investments, Incorporated manages over $41 billion in assets for some 40,000 accounts for primarily individual investors and is run by the Forbes magazine columnist Kenneth Fisher. The firm was ordered to pay a retiree $376,075 in compensatory damages for breaching its fiduciary duties, according to a release by Bloomberg. The case was arbitrated through JAMS in Dallas, TX. JAMS is a private forum for arbitration and mediation, which is based out of Irvine, CA. Apparently, Fisher Investments had a clause in its agreement with the customer that required any disputes between the parties to be resolved through private arbitration, since it is a an adviser firm and not a brokerage firm registered with the Financial Industry Regulatory Authority (FINRA).
Interestingly, Sharyn Silverstein the Claimant, who was a 64 year old retiree, had called up Fisher’s firm simply to get a free copy of his book that was advertised in USA Today, with no intention whatsoever of doing business with the firm. After multiple calls and visits from a Fisher representative, she was pressured into turning over all of her fixed income investments to be invested into equities. This occurred despite vigorous objection from Ms. Silverstein and her husband, Seth. According to the recommendation of the arbitrator, the Claimant is entitled to her losses she incurred as a result of Fisher Investments liquidating her bond portfolio and putting her proceeds 100% into equities. According to testimony at the hearing by Fisher Vice Chairman Andrew Teufel, 80% of the Fisher investors are invested 100% in equities.
Ms. Silverstein placed $876,357 in bonds with Fisher in September 2007. After liquidating the bonds and investing her 100% in equities, her initial investment lost $376,075 by October 2008. According to the award recommendations, the retiree and her husband made it clear that they were going to be taking withdrawals out after he retired at the end of 2007. However, the investment adviser for Fisher used the “Suitability Wizard” to determine her recommended portfolio stating that she had no income needs from the portfolio and her only investment objective was growth until her death. The arbitrator said that the Silversteins had no children and “therefore have no need to leave an inheritance”; that Fisher failed to make reasonable inquiry into the financial situation, investment experience and investment objectives of the Claimant or ignored that information and rubber stamped her for the “one shoe fits all” recommendation of all other Fisher clients: 100% equities benchmarked to the MSCI World (MXWO) Index. Over the time frame she was invested, the MSCI World Index lost about 35% and the Merrill Lynch U.S. Broad Market Index of bonds, which mirrored her investments prior to liquidation, made 2.4%.
When the Silversteins saw they were 100% in equities, they expressed their concern and unhappiness only to be told they would have to pay a fee if they quit, so they stayed. In the summer of 2008, after registering their complaints and concerns of not owning any bonds they were assured that Fisher knew how to predict the market and would take appropriate steps to protect their investments. The arbitrator wrote a 25 page award going over the facts and concluding that Ms. Silverstein is entitled to all of her losses sustained because of the actions of Fisher Investments.
1. Review your car insurance regularly, the big guys like geico and esurance change their pricing every year.
2. Pack a bag lunch most days. Save money by eating out less in general.
3. Don't waste money in bars. They are the biggest frivolous expense in a lot of lives.
4. Get rid of financial advisors who do not bring you any value. The 1% a year they cost adds up to enormous sums over a lifetime.
5. Don't be above using coupons.
6. Do what Suzey Orman recommends and trade in expensive whole life policies for Term life. Mine from Life Ant costs $19 a month and I can sleep at night knowing my family is secure if anything happens to me.
7. Drive slower. You can increase fuel efficiency 20% by driving slightly less aggressive, and slowing down 5-10 mph on highways.
ATTN: FISHER INVESTMENT CLIENTS AND PURISIMA MTUAL FUND INVESTORS
Lower Your Fees, Boost Your Returns
I’ve increased my returns with this one weird trick.
I've written before about how inflection points in the markets are the times when past performance is least helpful. Using total returns, or a risk-adjusted measure of total returns, to drive your fund selection will work fairly well when the markets continue to go in the same direction for a long time. But when you get a big market shift, things can get dicey.
In search of something a little more dependable, I looked back at the predictive power of expense ratios to see how they fared at inflection points even as past performance was less helpful. I grouped funds by asset class and then expense ratio as of June 2008, June 2009, and June 2010.
The success rate tells you what percentage of a company's funds survived and outperformed over the ensuing period. It's important to take into account funds that are liquidated because high-cost funds are more likely to be killed off than low-cost funds. Thus, failures from high-cost groups are wiped away. If you don't account for those failures, your study is survivorship-biased. Thus, I like the success rate for its ability to be bias-free. It's also important to use available data at the time to test the real-world results. Simply taking a data point published in 2014 and looking backward at returns doesn't really lead to useful information.
A MEMORIAL DAY message to KEN FISHER (FISHER INVESTMENTS)
You, SIR (and I use this salutation both disrespectfully and despicably) are a poor excuse for a man.
As the CEO and owner of FISHER INVESTMRENTS, you and your firm have far exceeded the contempt for and divisiveness to your innocent and trusting clients’ investments – even more so than that of the notorious, lying, cheating, thieving, depraved, and egocentric, BERNIE MADOFF!
In your wanton attempt to become a self-proclaimed “Stock Market Guru” and a Multi-Billionaire, you have succeeded in only becoming a smug, narcissistic, lying, cheating, thieving, depraved, malicious, repulsive, filthy mongrel degenerate and a Multi-Billionaire! Granted, you have succeeded in this quest, but solely through the deliberate, deceitful, and egregious transgressions that you have and continue to perpetrate on innocent, inexperienced, and uneducated seniors and elderly investors; mostly hard-working, middle class citizens of the United States. God fearing Patriots of this great nation who selflessly fought for and would have willing died for your freedom -- Life, Liberty, and the Pursuit of Happiness!
Mr. Fisher, I do NOT hate or envy you. Rather, I pray that God will have mercy on your soul. Your enormous wealth ($1.7 billion) and pretentious power will be meaningless when you die and God judges you to eternal hell! When you come before God to be judged, what will be your excuse for stealing the life-savings from seniors and the elderly?
Copyright © 2014 Microsoft. All rights reserved.
Fundamental company data and historical chart data provided by Morningstar Inc. Real-time index quotes and delayed quotes supplied by Morningstar Inc. Quotes delayed by up to 15 minutes, except where indicated otherwise. Fund summary, fund performance and dividend data provided by Morningstar Inc. Analyst recommendations provided by Zacks Investment Research. StockScouter data provided by Verus Analytics. IPO data provided by Hoover's Inc. Index membership data provided by Morningstar Inc.