Buffer Accounts for Retirement Longevity

With the markets making new highs daily there is not much to worry about when contemplating retirement planning.  Set it and forget is the mentality taking root in investor’s minds as the markets are pricing in the Trump agenda of tax cuts, infrastructure spending and health care reform.  We have seen this before, like a calm summer’s day with the sun shining and the winds calm.  This is a great time to be an investor with money.  The upcoming generation may not have it so good as some time in the future debt will have to be dealt with, but the future be damned right now.   Should storm clouds ever start to build on the horizon, the use of buffer accounts can be a valuable tool for investors, especially middle class retirees, to use in the event they do not want to further deplete their retirement when things are not so rosy and markets are retreating.  What are buffer accounts?  Well, they may be simply cash on the sidelines in a savings or brokerage account, property owned other than one’s principal residence, an income annuity that pays a monthly income for the balance of an investor’s life or gold stored away.  Another often overlooked option that is gaining popularity is the use of a home equity line of credit through a reverse mortgage.  Reverse mortgages have had a bad name for years as the outrageous upfront costs made them untenable to most investors.  Even today you can get a really bad deal on a reverse mortgage by watching television and following the advice of Tom Selleck or Henry...

New Retirement Rules…

have just been released by the government which will add yet another layer of regulations and more paperwork on brokerage firms in the business of helping retires roll over their 401(k) accounts into IRA’s.  The government suggests the new rules could save investors something approximating 16 billion dollars a year in savings from rogue sales tactics.   What this ultimately means, of course, is higher costs to the investor who chooses to work with a bank or brokerage firm due to the added costs heaped on to comply.  Next you will probably see a ‘government’ account come into law which will provide ‘lower costs’ and ‘government guarantees’ for investors as an alternative to the high cost brokerage firms…ironic eh?!  So, the next time you get that invitation to a ‘free’ steak dinner to talk about retirement income strategies…read annuities… the fine print will be triple the size at the bottom of the invitation to please the government that you have been warned.   Speaking of retirement income, if you haven’t yet done so, go to the social security website, ssa.gov, and set up your personal social security account to be sure your statement looks right and also as a means to protect yourself against identity theft.  Since the bureau has gone green and stopped mailing out the paper statements we all used to get it seems identity theft of benefits has been on the rise…especially for those seniors that do not use a computer.   Check it out and be sure.  Lots of people do worry about social security and the ability of the government to pay future benefits now that...

When Equity Premiums Fade

Re-balancing is a time-tested strategy of asset allocation discipline that allows investors, if nothing else, to sell some securities high and buy other asset classes lower.  Of course, there are times when all assets rise, and sometime fall, in unison making the re-balancing act more of a magician’s act (once you saw it, now you don’t!).  Now that the market has risen six straight years from the bottom set in March of 2009, that holds for stocks and (almost) for bonds, I am reminded of a time back in 1999, a mere 16 years ago, when thoughts of early retirement and day trading were on the minds of many a 40 something year olds.  You like the way your 401(k) statement looks today I bet…but my goodness were those statements looking good back then!  Of course, investors aren’t nearly as exuberant today as they were then having been bitten a few times since, but sit back and watch what happens from here.  In this low interest rate era how many more times can you hear, “there is no other place for people to put their money but the stock market” before another place to put their money becomes obvious?  Equity premiums rise and fall as stocks get overbought and oversold.  Buying a stock today offers a lower potential rate of return than at other times in the past so more caution is warranted.   The moral of this story is to say there is more than one way to re-balance.  Investors have a funny way of always trying to get out of the door at the same time.  Those...

December 2014 Market Views

Negativity Sells…   many things.  Politicians recognized this long ago.  One has only to endure a ‘political ad season’ to know that negativity must work as voters make their choices.  It works in financial services too.  How in the world is a brokerage firm (through one of their many ‘financial advisors’) going to get you to part with your hard earned money and make an investment if their pitch is something like, “stay invested for the long term and avoid the short term market noise generated primarily through the media to get you to act impulsively and on emotion”.  Good luck meeting your monthly numbers that way, kid!  Maybe try a different career?!  You know what works…SAVE YOUR RETIREMENT FROM THE RUINS OF THE STOCK MARKET WITH OUR GUARANTEED, SAFE INVESTMENTS!!!  Or…BUY GOLD NOW BEFORE THE US DOLLAR CRASHES AND BURNS AS THE FED KEEPS THE PRINTING PRESS RUNNING NONSTOP!!!!  Has there ever been a ’safe’ time to invest, really?  That poor broker has heard it a million times, over and over again, “I’m going to wait until things settle down before investing.  Maybe call me in three months”!  Investors have multiple ways to sabotage their investment success and, ‘waiting until things settle down’ is one of the classics.  They might as well say, “I am going to wait until the train leaves the station before buying my ticket to ride” because that is exactly what many do.   BUT…let’s not suggest all is well out there.  We have record debt, the Ukraine/Russia drama, ISIS and multiple hot spots in the Middle East that do not look as though...

Tuition Bills Coming Due…

WOW!… Is this market on a run!  Investors are beginning to forget about the ‘lost decade’ that was and wonder how high this bull can go.  I know this is happening  because I am getting inquiries, from some of the same investors that wondered why they owned stocks four short years ago, as to why they don’t own more stocks today.  Isn’t it time to go ‘all in’?  Well, yes, it is.  It would be great to only own stocks when they go up and not own any at all when they go down for sure.  What a boost to returns that would be!  SO why not just sit back and wait for Cramer to tell us the time to sell?  If you have too much money, this strategy should be fine.  Folks with more than enough can accept more risk and pay higher fees and barely notice.  Active management and market timing is fine for these folks because the only game for them, really, is how much can I accumulate before I die.  Hiring and firing managers feeds their egos and makes them feel important.  Nothing wrong with feeling good about yourself and having cocktail party fodder I say.   But how about the rest of us?  Investing and taking risk is a personal matter and the real purpose of investing is getting from point A to point B and reaching your own personal retirement goals.  Taking on too much risk, getting caught up in the moment that is to say, can lead an investor to some costly tuition bills on investing.  On hindsight, investors should not have...

Insurance Nation

There are billboards all over town advising you to visit ‘the safe money guy’.  Invest your money into a ‘safe’ annuity and forget about the markets, volatility and risk for the rest of your life!  It will cost you nothing and, at the same time, ‘guarantee’ you a 6% return on your principal each and every year.  It can never go down and always goes up in value!  This is, after all, your life’s savings so why risk it!  Sign here please.  So what’s the problem?  Why not accept a guarantee of 6% and forget about your money?  Why not buy your newborn a life insurance policy so he or she will have a head start on life and enjoy the principal rollup that the illustration clearly shows over the next 50 years of his or life?  Why not let the government take care of your healthcare so you never have to worry about THAT expense again?  And don’t forget to buy that whole life insurance policy for your family and mortgages as well as the future and use the hundreds of thousands of dollars as a pension for yourself in 30 years that the illustration shows you will build up?  Why risk your future!  You will also need, of course, auto insurance, homeowners insurance, a million or so in umbrella coverage, disability insurance, flood insurance, long term care, insurance to cover you before the insurance coverage begins to pay as well as riders for your jewelry and art work, your classic cars, pet insurance and coverage for your cell phones and any appliances you buy.  Oh, and if...