Financial Planning

Despite tightening their wallets, Americans are now further from achieving their retirement goals amidst the weakening economy. That’s the word from Bank of America in its new 2008 Retirement Savings Survey which says that a growing number of Americans are concerned that the current economic crisis is threatening to leave them further behind on their retirement plans. This survey finds that 60 percent of Americans are spending less than they were three months ago as a result of the current economic climate and more than half (51 percent) of the general public and 40 percent of affluent Americans are also saving less than they were, also three months ago; in fact, one in five say it is “much less.” Although the majority of respondents (69 percent) with at least one retirement account say that they have not withdrawn assets from their account(s) prematurely, recent economic conditions have caused 18 percent to withdraw assets prematurely. The leading reasons for these early withdrawals are near-term financial obligations, such as credit card debt (26 percent), and mortgage payments (22 percent), with an additional 22 percent citing recent job loss. Keep in mind that these numbers may increase significantly if the economy worsens because many more people will be dipping into their retirement savings and that could have profound implications for the country’s economic well-being. Moreover, this study shows that many Americans now (a nice 43 percent) believe they face more years in the work force than they expected just a year ago. By the same token, 36 percent of affluent respondents said that the current economic conditions have pushed back their own expected retirement age. The survey also confirms what many of us in the financial planning area already suspected: Americans need better guidance and education regarding how best to plan for retirement and manage their retirement assets. Actually, 59 percent of the general public and 52 percent of affluent Americans don’t know or don’t even have a good idea of how much they’ll need to save in order to maintain their current standard of living in retirement. That’s where the financial planner can enter. Taking it a step further, the findings point out that 47 percent of retired Americans currently do not believe or are unsure if their retirement assets will cover their financial needs throughout their lifetime. And, they are already retired. That’s frightening! So, the bottom line on this latter subject is that many individuals may not be receiving the financial guidance necessary to fully realize the opportunities that retirement presents. Need I say more?

The Securities and Exchange Commission has appointed former Public Company Accounting Oversight Board member Kayla Gillan as senior advisor to new Securities and Exchange Commission Chair Mary Schapiro, effective immediately.

How much, if any, of your Social Security benefits are taxable depends on your total income and marital status.

Canadian consumers are in structurally better financial shape than U.S. consumers. So then, why do Canadians plan more dramatic spending cuts and shifts in behavior this year in response to the recession than do U.S. consumers? "Compared with U.S. consumers, Canadian consumers are entering the downturn with more secure household finances, healthier real-estate fundamentals, and more conservative levels of credit and debt,” says Cliff Grevler, a partner at The Boston Consulting Group (BCG), which has recently completed research and a new survey. “Despite this structural superiority, Canadians are battening down the hatches and bracing for a tough year ahead. Canadian consumers are planning cutbacks in 2009 to a greater degree than their U.S. counterparts. We anticipate that the result will be a 'cycle of thrift' in Canada, and it will have self-fulfilling effects." The BCG research--the first to compare Canadian, U.S., and European consumers in the current downturn--shows that Canadian consumers have entered the recession in a better structural position than U.S. consumers. It is reported that they have higher savings rates: three percent last year compared with about 1.5 percent among U.S. consumers. Moreover, Canadians have lower debt-to-income ratios and bigger equity stakes in their homes. Of course, the residential real-estate market is healthier in Canada than in the United States. In fact, Canada has a lower mortgage-delinquency rate, sub-prime loans aren't nearly as common, and there is less securitization of mortgages, thereby leading to more rigorous lending standards. Canadians are also more conservative with credit cards, notes the survey. Average credit-card debt per household in Canada is $3,100 compared with $8,200 in the United States. More than 70 percent of Canadian households pay off credit card debt each month, but less than half of U.S. households do. Canadians average two credit cards per household, while U.S. consumers average six. And the credit card delinquency rate in Canada is half of what it is in the United States. Despite their superior financial position, Canadians express great economic concern and voice intentions to shift their behavior more dramatically than U.S. consumers say they will, according to BCG. A greater numbers of Canadians--62 percent--plan to reduce spending over the next year, compared with 58 percent of U.S. consumers and 56 percent of European consumers in the United Kingdom, Germany, Spain, Italy, and France. Although the Canadians who plan to cut spending anticipate doing so by 15 percent, the comparable U.S. and European consumers plan to do so by only 13 percent and 12 percent, respectively. "Canadians are more intent on stretching their dollars in 2009 than are their U.S. counterparts," says Grevler. Nearly three-quarters--72 percent--of Canadians said that they will pay more attention to and buy more products that are on promotion. Only 65 percent of U.S. consumers expressed that intention. Incidentally, some 69 percent of Canadians said that they will defer major expenses that can wait, while only 63 percent of U.S. consumers expressed that intention. Furthermore, 58 percent of Canadians said that they will significantly cut spending on nonessential items, compared with only 50 percent of U.S. consumers. The categories that both Canadian and U.S. residents are most likely to focus on for cuts are restaurants and fast food (49 percent), vacation travel (40 percent), consumer electronics (28 percent), home furnishings and décor (27 percent), and cars (20 percent). The Boston Consulting Group (BCG) is a global management consulting firm and the world's leading advisor on business strategy. For more information, please visit www.bcg.com

The Securities and Exchange Commission has begun requiring 500 of the largest companies to start filing their financial statements in an interactive data format.

Retirement doesn’t have to be just about bingo and shuffleboard.

Morningstar has issued a statement that it is considering establishing its own credit-ratings systems in competition with rating agencies such as Moody’s and Fitch, although it has no plans in place.

Securities and Exchange Commission Chairman Mary Schapiro announced plans to make it easier for SEC staff to bring enforcement actions and indicated that the Financial Accounting Standards Board would further modify fair value accounting standards.

Clients are coming to their CPAs with concerns about their shrinking retirement savings as the recession deepens.

Manny Weintraub is the founder, principal, and portfolio manager of Integre Advisors, based in New York City. He was the former managing director of Neuberger Berman. Integre is a money management firm that was established in 2003 and specializes in risk/reward investing. In fact, their mission is to grow and preserve their clients’ worth. And, they’ve been pretty successful at it for the past five years. But, there has been no question that what is going on now has presented problems. Actually, says Weintraub, “It has been one of the most challenging years investors have ever experienced.” As a result, he has put together what he suggests are 10 resolutions for investors to help them navigate the coming year. They are certainly worth detailing here. 1. Never Put All Your Eggs in One Basket. Weintraub very quickly adds that it doesn’t matter how attractive that basket even is. “This relates to the Madoff case but it could apply equally to anything, such as putting all your pension money into the stock of your employer.” 2. Beware of Conventional Wisdom. He has said that when everyone knows something is going to happen, there’s a decent chance it won’t happen. “When oil was $100, everyone knew that we’re running out of oil and that the price can only go one way – up. It’s the same with China – everyone knew this was the Chinese Century – and that investments related to China would go up. There were all these certainties related to emerging markets that turned out not to be so certain.” 3. Know Your Goal. Weintraub’s admitted goal is to preserve wealth from the ravages of inflation. “If your goal is to outperform the S&P 500 every day, then you might chase things that have worked before but are now overvalued. 4. Match Your attention Span to Your Time Horizon. Weintraub believes that if you are investing money for 10 or 20 years, try not to look at those cable news shows constantly. “To watch these things jiggle up or down, when in the end it doesn’t make a difference, is really a huge waste of time – and a way to get worse results.” 5. Know That We Are Living in History. History is not just something that happened a long time ago. And that’s scary because a lot of scary things have happened in the last 70 years. So you have to be prepared for anything to happen now and in the future. You must have some humility to know that you can’t ever know exactly what’s going to happen, which now brings us to... 6. Avoid Leverage. Anything can happen. The problem with leverage is that it cannot only magnify returns up or down, but leverage is the thing that can say: “game over.” A margin call can sell you out at the worst time whereas, if you’re not leveraged, you can come back some other time. 7. Try to Be as Unemotional as Possible Regarding your Investments. Weintraub says that your stocks don’t “love you” when they’re up or “hate you” when they’re down. They haven’t been “good to you.” “They’re just up. Maybe once a year focus on your investments and ask yourself if you would buy the same thing today, and why. If you don’t have a really good reason, sell.” 8. Paper Losses are Actual Losses. Weintraub points out that alot of people say, “It’s not really a loss unless I sell it.” He retorts, “In that case Warren Buffett isn’t actually a billionaire because he’s a billionaire on paper. One can realize a loss and move on.” 9. Don’t Let Taxes Move Your Portfolio. In other words, don’t let the tail wag the dog. Taxes are important, he says, and if one has the opportunity to buy a triple tax-free bond yielding five percent instead of a corporate bond yielding six percent, go for it. “That’s different from not wanting to sell an investment because you have to pay taxes. A lot of people got completely and totally wiped out by borrowing against their stock instead of selling their stock and paying taxes. They got leveraged and forgot they were living in history. It all ties together.” 10. Wealth is Relative. There you go.If you’re down but not out, you’re in pretty good shape. Even if you’re down 20 percent, you can still buy more yield with the remaining corpus--or more gas, more country house, more modern art, or more expensive clothes--than you could before. If you would like to speak with Manny about Integre, the market, or the stocks in his portfolio, contact Davia Temin, Christine Summerson, or Lauren Balog of Temin and Company at 212.588.8788 or e-mail them at news@teminandco.cominfo@integreadvisors.com.. Or e-mail