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Retire In A Day Workshop [Compatibility Mode]

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While retirement may be years away, planning for it can start now. The fundamentals of retirement income planning are presented along with strategies to help insulate a portfolio from possible …

While retirement may be years away, planning for it can start now. The fundamentals of retirement income planning are presented along with strategies to help insulate a portfolio from possible inflation and deflation while increasing portfolio income to fund a sustainable retirement lifestyle.

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  • 1. Retire in a Day Retirement Rescue Plan An Independent Fee-for-Service Registered Investment Advisor Steve Stanganelli, CFP ®, CRPC ® 978-388-0020 / 978-621-8268
  • 2. What Does • Driver: 108 Retirement • Helicopter Pilot: 82 Mean to You? • Airplane Passenger: 95 Baby Boomers don’t • Sky Diver: 92 plan to retire in the traditional sense. • Marathon Finisher: 90 Many will shift to • Man and Woman to Marry: 96 & 94 more fulfilling careers. • Actress: 114 Can this be done without putting your • Tuba Player: 101 retirement plans at • Racing Driver: 75 risk? • Current Living Person: 115 YES Source: Guinness Book of World Records, 2005 Steve Stanganelli CFP (R) / Clear View Wealth Advisors, LLC 2 978-388-0020
  • 3. You Can Retire Today! • Have a Plan Money is just a tool • Understand the Impact of that helps you get Inflation on Your Way of Life what you want! • Manage Your Finances to RETIREMENT Minimize the Tax Bite SUCCESS PRINCIPLE: • Embrace the Power of With some thought, Diversification creativity and action, you can keep your • Don’t Panic Over the Press financial house in • Control What You Can order. Steve Stanganelli CFP (R) / Clear View Wealth Advisors, LLC 3 978-388-0020
  • 4. Life By Design 1. If money and health were no issue, how would you Before we get to spend your time? “THE NUMBER,” 2. What things in life do you let’s understand where it is that you feel are important now? want to go. 3. What types of activities would you like to participate in that you’re not now and with whom? Steve Stanganelli CFP (R) / Clear View Wealth Advisors, LLC 4 978-388-0020
  • 5. Retirement Facts • Americans are living longer, healthier lives • Today’s retirees have the most healthy and active retirement of any generation • Retirees face formidable financial challenges Steve Stanganelli CFP (R) / Clear View Wealth Advisors, LLC 5 978-388-0020
  • 6. Retiree Common Concerns • Income • Health related matters • Outliving their money 1964 1984 2007 Gallon of Milk $1.06 $1.94 $3.06 Loaf of Bread $0.21 $0.71 $1.97 New Car $2,350 $6,294 $23,000 New Home $30,000 $110,610 $221,000 Average Income $6,080 $12,866 $34,335 Source: Spectrum Unlimited, LLC Steve Stanganelli CFP (R) / Clear View Wealth Advisors, LLC 6 978-388-0020
  • 7. Fundamental #1: Have a Plan Investors with financial plans have twice as much in savings and investments as investors without plans. Steve Stanganelli CFP (R) / Clear View Wealth Advisors, LLC 7 978-388-0020
  • 8. Fundamental #2: Practice 5 Fiscal Fitness Principles 1. Pay Yourself First: Always Save 10% of Annual Income 2. Cash is King – Stay Liquid 3. Fully Fund Qualified Plans 4. Buy the Right House for Your Budget 5. Lighten Your Load – Reduce Credit Cards and Consumer Debt Steve Stanganelli CFP (R) / Clear View Wealth Advisors, LLC 978- 8 388-0020
  • 9. Recommendation: Build a Cash Cushion • 30% of your projected retirement income to pay bills and cover variable short-term expenses • 60% of your projected retirement income to supplement withdrawals and to cover 2 years of fixed expenses (like a mortgage) Steve Stanganelli CFP (R) / Clear View Wealth Advisors, LLC 9 978-388-0020
  • 10. Pay Yourself First Most People Financially Independent Steve Stanganelli CFP (R) / Clear View Wealth Advisors, LLC 10 978-388-0020
  • 11. Real Estate – Buy the Right Size House Home Size Ratio: The Fair Market Value (FMV) Target for a home purchase is 3x – 3.5x your income in high cost states Investable Asset Targets: There are 3 major asset classes Asset Type Benefit Target Real Estate Inflation Hedge & 1/3rd Personal Enjoyment Interest Earning Safety & Deflation 1/3rd Protection Equities Growth Potential – 1/3rd Build Wealth & Inflation Hedge Steve Stanganelli CFP (R) / Clear View Wealth Advisors, LLC 11 978-388-0020
  • 12. Lighten Your Load: Pay Off Credit Cards and Consumer Debt • Stop borrowing from your future to pay for your now. • Use debt wisely • There’s a difference between “good” debt and “bad” debt • The Key to Retirement is managing spending because you are now living on a fixed income Don’t Turn Down Free Money • Maximize contributions to employer-sponsored plans and IRAs • Get your company match • By maximizing your pre-tax contribution you get governement “free money” because of lower taxes on income and interest earned on the money set aside Steve Stanganelli CFP (R) / Clear View Wealth Advisors, LLC 12 978-388-0020
  • 13. RETIREMENT MYTH VS. REALITY Steve Stanganelli CFP (R) / Clear View Wealth Advisors, LLC 13 978-388-0020
  • 14. RETIREMENT MYTH #1: You Need 70% to 80% of Pre-Retirement Income REALITY CHECK: It all depends on your goals and lifestyle. Actual Expenses – Post-Retirement 28% - about the same 27% - somewhat higher 25% - somewhat lower 12% - significantly higher 8% - significantly lower Source: Fidelity Research Institute 2007 Retirement Index Steve Stanganelli CFP (R) / Clear View 14 Wealth Advisors, LLC 978-388-0020
  • 15. RETIREMENT MYTH #2: You Need to Make Your Investment Portfolio More Defensive When You Retire REALITY CHECK: What 3% Inflation Can Do to a $30,000 Per Year Standard of Living 5 Years $34,778 10 Years $40,317 15 Years $46,739 20 Years $54,183 25 Years $62,813 Be prepared to double your money if you’reStanganelli CFP (R) /forView years!! Steve retired Clear 25 Wealth Advisors, LLC 978-388-0020 15
  • 16. RETIREMENT MYTH #3: Your Investment Portfolio Has to Beat the S&P 500 REALITY CHECK: Why does it matter? Is it more important to beat the “market” or make progress toward your personal goals? Benchmark your progress toward the accomplishment of your goals. Primary goal: Prevent yourself from running out of money to maintain the lifestyle you desire. RETIREMENT MYTH #4: You can rely on the equity in your home to retire securely. REALITY CHECK: Really? RETIREMENT MYTH #5: You’ll continue working into your 60’s or early 70’s. REALITY CHECK: See #4. And while possible, more than 40% of us will be forced out of the workforce. And do you really want to work that long anyway? Steve Stanganelli CFP (R) / Clear View Wealth Advisors, LLC 16 978-388-0020
  • 17. RETIREMENT MYTH #6: You don’t need to save. You’ll receive a large inheritance. REALITY CHECK: Don’t count on it. Yes, Baby Boomers are in line to receive the largest transfer of wealth in history. Their in line right behind the doctors, prescription drug companies and nursing homes that their parents will use as people live longer and medical costs increase. So there’s not much left over to pass along … without proper planning. RETIREMENT MYTH #7: You can live on Social Security. REALITY CHECK: Social Security was meant to be a safety net … one of the legs of the three-legged stool that included private savings and company pensions. You’ll need to consider working longer, saving more or reducing your standard of living. Your choice. Steve Stanganelli CFP (R) / Clear View Wealth Advisors, LLC 17 978-388-0020
  • 18. ASSET ALLOCATION – THE SCIENCE OF SUCCESSFUL INVESTING Steve Stanganelli CFP (R) / Clear View Wealth Advisors, LLC 18 978-388-0020
  • 19. • Hierarchy of Investing Retirement Success Principle Decision Process • Time Horizon Asset allocation is more • Asset Classes Most important than the Important • Risk Capacity investments that you own. • Mix Among Asset Classes How long your money lasts and how soon you can retire Important • Sub-Asset Classes Considered are all impacted by this decision • Managers/Funds Used Least Important Steve Stanganelli CFP (R) / Clear View Wealth Advisors, LLC 19 978-388-0020
  • 20. Over 91% of portfolio performance is explained by the Asset Allocation (AA) decision. But most investors give more attention to: 1. Is now a good time to invest (i.e. Market Timing)? 2. What’s the best fund/stock/manager to buy now (i.e. Security Selection)? Steve Stanganelli CFP (R) / Clear View Wealth Advisors, LLC 20 978-388-0020
  • 21. •Asset Allocation Risk/Reward •Annual Returns (1926–2006) Average Annual Inflation: 3.11% •Stocks Bonds Cash •90% Stocks •80% Stocks •70% Stocks •60% Stocks •50% Stocks •40% Stocks •30% Stocks •20% Stocks •10% Stocks •0% Stocks 0% Bonds 10% Bonds 20% Bonds 30% Bonds 40% Bonds 50% Bonds 60% Bonds 70% Bonds 80% Bonds 90% Bonds 10% Cash 10% Cash 10% Cash 10% Cash 10% Cash 10% Cash 10% Cash 10% Cash 10% Cash 10% Cash •-38.90% •-34.80% •-30. 70% •-2 6. 59% •-22 .49% •-18.3 9% •-14.2 9% •-10.19% •-6.08% •Largest Loss •- •-10. 98% •-9.60% •-9.05% •-7.13% •-5.59% •-4.26% •-3.93% •-3.00% •-2.69% Average Loss* 4.24% - Average Return •11.49% •10.7 •10. •9.41% •8.72% •8.03% •7.34% •6.64% •5.95% 9% 10% 1.12% Largest Gain •25 .7 •48.62% •43.41% •38.19% •32.97% •27. •24. •24.94% •26.48% 5.26% 76% 17% 1% Average Gain** •20.39% •18.40% •15.97% •14.48% •12 .8 •11.05% •9.11% •7.70% •6.52% 27.24% 1% •Percentage 5.96% •7 1. •72.84% •76.54% •76.54% •77.78% •80.25% •86.42% •90.12% •93.83% Positive Yrs. 60% 90. 12% •Percentage •28.40% •2 •23 •23.46% •22.22% •19. •13 •9.88% •6.17% Negative Yrs. 7.16% .46% 75% .58% 9.88% •Percentage of •67.90% •70.3 •70 .3 •70.37% •69. •66. •70 .3 •72 •70.37% Yrs. Greater 7% 7% 14% 67% 7% .84% 6 1.73% than Inflation •Stocks – S&P 500 Index Bonds – U.S. Intermediate Term Government Bonds Cash – U.S. 30 Day Treasury Bill Inflation – Consumer Price Index Source – Ibbotson Associates •*Average Loss: the average loss when there is a negative return. **Average Gain: the average gain when there is a positive return. •Mutual Funds: • Are not insured by the FDIC or any other agency • Are not obligations of any financial institution • Involve investment risks, may lose value •The information presented is past performance. Past performance is no guarantee of future return. Investment return and principal value of a mutual fund investment will fluctuate so that an investor’s shares on redemption may be worth more or less than the original cost. •In addition to the normal risks associated with equity investing, narrowly focused investments and investments in smaller companies typically exhibit higher volatility. International investments may involve risk of capital loss from unfavorable fluctuations in currency values, from differences in generally accepted accounting principles or from economic or political instability in other nations. •The indices illustrated herein are unmanaged indices. You cannot invest in an index. Index returns do not reflect the impact of any management fees, transaction costs or expenses. The index information seen here is for illustrative purposes only. For more information, please contact your financial advisor. This piece is provided by SEI Investments Management Corporation. •This is not indicative of any specific investment. It is an illustration of how a certain profile may have performed using the past performance of the indices listed. SEI-M-215 (2/07)
  • 22. CREATING INCOME FOR LIFE Steve Stanganelli CFP (R) / Clear View Wealth Advisors, LLC 22 978-388-0020
  • 23. “I’ve got all the money I’ll Retirement Accumulation ever need, if I die by four o’clock” -- Calculator – An Illustration Henny Youngman Desired Retirement Income (Today’s Dollars) $40,000 (1) Years Until Retirement: ___4___ Estimated Inflation Rate: ___3__ % Figure out what kind of lifestyle you want in Inflation Factor from Table ___1.13___ (2) retirement. Est. Annual Retirement Income Need – Yr 1 $ 45,200 (3) (1) x (2) Family? More Travel? Factor ‘B’ from Personal Calculator Table (#1) __2.36_(4) Hobbies? New Business? Est. Annual Retirement Income Need – Yr 30 $_106,672 (3) x (4) Factor ‘C’ from Personal Calculator Table (#1) 19.65 (5) Sample Calculators at Retirement Accumulation Needed $ 888,180 (6) www.ClearViewWealthAdvisors.com Factor ‘D’ from Personal Calculator Table (#1): 0.767 (7) Investment Value in 30 Years in Yr 1 Dollars $681,234 (6x7) Factor ‘E’ from Personal Calculator Table (#1) 1.861 (8) Investment Value in 30 Yrs in Future Dollars: $ 1,652,903 23 Steve Stanganelli CFP (R) / Clear View Wealth Advisors, LLC (6) x (8) 978-388-0020
  • 24. Will You Outlive Your Money? How Long Does Your Money Need to Last? • Family Longevity? • Health? • Lifestyle? • Actuarial tables from insurance companies • Specialized services like 21st Services Longevity Planning Report © Steve Stanganelli CFP (R) / Clear View Wealth Advisors, LLC 24 978-388-0020
  • 25. Income Predictable Income Sustainable Income • Pension A. 4% Investment Withdrawal • Social Security B. Spending Ratio vs • Rental Income Downside Exposure • Arrange for Scheduled (SORDEX) Withdrawals from C. Asset Allocation to Equities Investments Based on 128 – Attained – In most cases it’s usually Age or at least 33% to 40% better to take money out of D. “Safe-Money Benchmark” non-retirement accounts first Steve Stanganelli CFP (R) / Clear View Wealth Advisors, LLC 25 978-388-0020
  • 26. “Safe-Money” Benchmark Strategy Before Retirement • Determine Expenses • Accumulate Savings Equal to 1 to 5 Years of Withdrawals • Amount Will Depend on Risk Tolerance and Capacity • Harvest Money from Investment Accounts to Place into “Safe Money” Resource (i.e. CD, M/M) Steve Stanganelli CFP (R) / Clear View Wealth Advisors, LLC 26 978-388-0020
  • 27. Safety Net: Laddered US Treasuries An Option to Help Investors Sleep Well at Night • Super-Safe Government Bonds • “Stripped” Securities Pay No Interest • Target 50% of Projected Cash Flow Needs • Can Start Strategy in Year of Retirement • Treasuries are “non-callable” • Use This Strategy in a Qualified Plan or IRA Steve Stanganelli CFP (R) / Clear View Wealth Advisors, LLC 27 978-388-0020
  • 28. Creating Increasing Income in a World of Inflation or Recession 5 Inflation-Beating Bond Picks – TIPS or other inflation-linked corporate bonds – Go Short: Keep the average maturity down (When the 7- Year US Treasury yield is trending higher than it was 6-months prior than stay short; if trending lower then consider more intermediate bond maturities) – Consider Floating Rate Notes – Look at adding Convertible Bonds – High Yield or “junk” bonds still offer opportunities Steve Stanganelli CFP (R) / Clear View Wealth Advisors, LLC 28 978-388-0020
  • 29. Income-Producing Recommendations • Dividend-Paying Stocks: Those with a history of continuing and increasing dividends • Dividend-Payors act as an inflation hedge • A $1,000 investment started in January 1, 1957 thru December, 2009 in the top 100 highest-dividend yielding stocks would have accumulated more than $450,000 (assuming dividends reinvested) or a 12.5% annual return beating the S&P 500 by 2.5% Steve Stanganelli CFP (R) / Clear View Wealth Advisors, LLC 29 978-388-0020
  • 30. Other Income Resources • Real Estate Investment Trusts (REITS) • Master Limited Partnerships (MLPs) Other Options: • Reverse Mortgages • Fixed Annuities as CD Replacement Steve Stanganelli CFP (R) / Clear View Wealth Advisors, LLC 30 978-388-0020
  • 31. 6 Deadly Investing Sins 1. Overconfidence 2. Following the Herd: Euphoria & Pessimism Are Contagious and Usually Wrong 3. Timing the Market 4. Assuming You Control More than You Have 5. Paying Too Much in Fees 6. Trusting Stockbrokers Steve Stanganelli CFP (R) / Clear View Wealth Advisors, LLC 31 978-388-0020

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