Retirement Strategies

By: Ron Paquette

Overview

• Can you retire? • Having a financial plan• Investment strategies• Avoiding pitfalls• Helpful resources

Can you retire?

• Recessions (Bear Sterns, Lehman Bros, Merrill Lynch, GM, AIG, FNMA, stock market crash, housing crisis)

• Scandals (Bernie Madoff, Enron, Worldcom)• Globalization (decline in standard of living)• U.S. Deficit, bankrupt social security system• Health care needs of the boomer generation• World crises (terrorism, N.Korea, Iran)

Financial Plan

• Financial goals• Starting early• Career planning• Money management / personal budgeting• Good credit• Insurance strategies• Investment strategies• Avoiding pitfalls

Setting Financial Goals

• Desired lifestyle (dining, clothes, cars)• Travel, hobbies (golf, travel, RV)• Living accommodations• Geographic location• How much will you need?• What are your sources of cash flow?• What are your expenses?

Starting Early

• More than half of Americans over 50 think their financials challenges are still ahead

• Social security isn’t going to cut it• Learn about investing early on

Career Planning

• Exploring career options• Investing in education• Working in your “golden” years• Government v.s. private sector jobs• Self-employment

Money Management

• Take advantage of 401k matches• Utilize retirement calculators (bankrate.com)• Stick to a budget• Rule of 72 (72/rate of interest = # of years to

double your money• Make wise consumption decisions• Maintain a good credit rating

Insurance Strategies

• Health insurance• Long-term care• Fire• Auto• Life• Disability• Earthquake

Investment Basics• Saving (cash)• Keeping pace with inflation (stocks)• Diversification (managing risk)– Cash & equiv., stocks, bonds, real estate, metals– Small cap, mid cap, large cap– Industry, geographic location, – Defensive v.s. Cyclical

• Mutual funds

Investment Basics• Emergency fund (3 to 6 mos of living expenses)• What is your risk tolerance? (risk & reward)• Rate of Return = Return / Investment Amount• Compare return to benchmarks; indices• Assume less risk later in life & more early on

Investment Strategies

• 401K, IRAs, pensions • Roth IRAs (will you earn more or less?)• Tax planning (municipal bonds, sale of a house)• Estate planning• Rebalance your portfolio – Marriage or divorce– Good or bad portfolio performance– Age– Inheritance, or change in income

Investment Strategies, cont.

• Returns – 10.4% stocks, 5.4% govt bonds, 3.7% T-bills

• REITs

Avoiding Pitfalls

• Find a certified financial planner• Watch out for hidden fees• Avoid borrowing from 401ks• Avoid credit cards & high interest rate loans• Watch out for variable loans• Don’t overspend or over leverage• Avoid junk bonds & penny stocks