So, I am sitting around the pool at my condo in Florida listening to two 80-year olds behind me discussing not only the price of broccoli but to which of the four banks on the corner of University and Commercial they will move their latest Social Security check.
" Gladys, I can get 2.3 percent from XYZ (sorry AICPA) instead of only 2.1 from Cognitor (mea culpa)."
"Yes, but look what happened last month. XYZ went down from 2.4 and Cognitor went up from 2.0."
My eyes spin in their sockets. My head starts to throb.
Now, these people are obviously not the 401(k)ers. Nope, the first generation of 401(k) savers (that's me) is getting ready to graduate into retirement (that's not me). However, because our generation will live longer and have less retirement money in guaranteed income sources--I hear more than half have no defined benefit pension plan and Social Security won't meet all of their needs--then we are faced with the burden of managing our nest eggs ourselves and the real fear we might outlive them.
Now, I don't make this stuff up. This is all coming to me from my friend, Ron Danilson, vice president of retirement and investor services at the Principal Financial Group. You know those guys, the ones with the television commercial that has a cast of thousands dancing all over a street. No matter. They're pretty good people and they know what they're saying.
Danilson tells me that after seeing big losses due to world events and their impact on the market, he thinks many of us may be tempted to opt for conservative investments which he says won't really provide the growth necessary to cover extended retirements.
Okay, so what do we do?
Danilson suggests starting retirement income planning early, as much as 10 years before the quit date. My brethren out there, are you listening? Along with this, assess retirement objectives, asset allocation, and future distributions, including tax considerations.
Also, consider that longevity in retirement is a new financial risk that needs to be assessed along with other risk tolerance issues impacting retirement savings investments. You might want to consider, say the gurus, that a guaranteed secure income may be more important than active asset management. Something to chew on.
Of course, we have all heard before that asset allocation is a key issue in preparing for retirement and while in retirement. Keep in mind that retirements may last up to 30 years or more (that's kind of comforting, or is it?). Therefore, as Danilson suggests, rebalance when allocations stray from risk tolerance.
Listen, the retiree population continues to explode. I can see it all around me when I head down to my second home in Florida. The heads there are getting grayer and grayer or balder and balder. This means that retirement income management will continue to be at the forefront of any CPA's efforts to guide clients. And themselves.
The group behind has dispersed. It is now 3 o'clock. Time to get ready for the early bird. Oh, and what did Gladys and her friend finally decide? They hadn't. The last I heard was that the one-tenth of a percentage point was being pushed to the side while a furor arose over why the supermarket had upped a stalk of asparagus by a nickel.
And this is retirement?-Stuart Kahan
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