Retirement planning: Ten numbers you need to know

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Brad Weber, Regional Director, Retirement Plan Services

When investors or financial planners talk about a retirement number, often it is the amount that you should try to save.

As this year’s National Retirement Planning Week comes to a close, it is an appropriate time to take a closer look at ten important numbers to consider when contemplating your retirement.

  1. Your current retirement account balance. This is the amount you’ve saved-to-date that is just for retirement and excludes illiquid assets.
  2. The number of years you expect to work before retiring. Do you think you will be working another six months or six years?
  3. The amount of money you plan to set aside each year you remain employed.
  4. The number of years you can expect to live. While no one can accurately predict this number, your average life expectancy is a critical variable in retirement planning. According to the Social Security Administration, a man reaching age 65 today can expect to live until age 84, while a woman of the same age can expect to live until 86. Tools such as the Living to 100, or the more simplified LifeSpan Calculator from Northwestern Mutual, will generate a prediction based on your responses to lifestyle type questions. The point of this exercise is less about trying to predict when you will die than it is to help you prepare for the reality of a retirement of unprecedented length.
  5. A projected rate of inflation throughout your retirement. As Roddy Marino explained in his recent blog post, even mild inflation over a 40-year span can erode your purchasing power and negatively impact your standard of living. Retirees must continue to invest in risk assets that they can reasonably expect will outpace inflation to retire comfortably.
  6. The amount of retirement income you expect to receive, from all sources, including social security, income on rental property, pension payments, and annuity income.
  7. Your anticipated monthly expenses in retirement. A good rule of thumb in thinking about future expenses is to take a hard look at your existing expense structure. While some may disappear or decrease significantly, you may find them being replaced by other expenses. For example, instead of daily commuter costs you may take longer trips so overall transportation expenses may not fluctuate that much.
  8. The percentage of stocks vs. bonds in your portfolio. You should know your portfolio allocation, and its associated level of investment risk. Throughout your retirement, your portfolio will have to provide both income and growth to maintain your purchasing power and support your lifestyle. It’s helpful, however, to know where you stand so you can assess whether your portfolio mix will help you achieve your retirement goals.
  9. The amount of financial support you will likely supply to your loved ones. Care for loved ones can play a significant role in shaping your retirement experience. As John Solomon, EVP of our Wealth Advisory group, points out in a recent blog, the number of adult children who provide personal care and/or financial assistance to a parent has more than tripled in the last 15 years. Currently, 25% of adults, mostly Baby Boomers, provide some care to a parent.
  10. Your anticipated medical expenses. Like predicting longevity, it is hard to know how much you will spend on medical expenses in retirement. According to recent estimates by Fidelity Investments, the average American couple spends nearly $260,000 in retirement on health-related expenses, excluding monthly insurance premium costs.

While all of these numbers play a critical role in shaping your retirement experience, probably the most important one you should know is the telephone number of a financial advisor.

An experienced financial advisor can help you manage your retirement portfolio to meet your preservation and growth objectives, establish an income strategy matched to your spending needs, and track your spending versus assumptions. Regardless of the situation, you know that your trusted financial advisor understands your financial history and can help make decisions that are in your best interests.

For over 10 years, Brinker Capital Retirement Plan Services has worked with advisors to offer plan sponsors the solutions to help participants reach their retirement goals. When plan sponsors appoint Brinker Capital as the ERISA 3(38) investment manager, this allows them to transfer fiduciary responsibility for the selection and management of their investments so they can focus on the best interests of their employees.  This fiduciary responsibility is something that Brinker Capital has acknowledged, in writing, since our founding in 1987.

For additional information on National Retirement Planning week from Brinker Capital, please review Frank Randall’s blog debunking common retirement myths.

The views expressed are those of Brinker Capital and are not intended as investment advice or recommendation. For informational purposes only. Brinker Capital, Inc., a Registered Investment Advisor.

Setting the record straight on common retirement myths

frank_randall

Frank Randall, Regional Director, Retirement Plan Services

It’s National Retirement Planning Week and an important time to take a closer look at some of the common myths that if followed, could decrease your spending power, and your happiness, in retirement.

  1. “It’s too late to start saving now.” Even in your late 40s or early 50s, you still have 15 to 20 years to grow your nest egg. The government has given incentives by enacting tax laws designed to help people over the age of 50 to contribute a little extra to retirement plans so they can catch up as retirement nears.
  2. “I can’t start saving for retirement until I pay off my debt.” Not all debt is bad. A financial advisor can help you differentiate between debt you can carry and the debt you should prioritize paying off over retirement savings (i.e., high-interest credit cards).
  3. “I’ll start saving after I get my kids through college.” Borrowing for college is easier than borrowing for retirement.
  4. “I need to be super conservative in my investments so my money will last.” The flaw in this strategy is that it doesn’t consider the impact of inflation. While inflation has been tame in recent memory, even at 2-3% over long periods of time, inflation can have a devastating impact on wealth.
  5. “It’ll just be me (and my spouse).” Many retirees either underestimate or do not anticipate the financial toll associated with providing financial support to their adult children, yet over one-third (36%) of the young adults ages 18-31 live with their parents. It’s not uncommon for the adult children to have children of their own, adding layers of both complexity and expense. Furthermore, Securian Financial Group reported that only 10% of the adult children living with their parents contribute to the household finances (e.g., pay rent). Retirees may also have the added expense of providing care to elderly relatives. In a recent blog, John Solomon, EVP of our Wealth Advisory group, pointed out that 25% of adults, mostly Baby Boomers, provide care to a parent.
  6. “I’ll pay it back.” Avoid borrowing against your retirement account. Even if you repay the loan, your nest egg will suffer because you will probably incur interest charges and fees. In addition, you will miss out on the compounding effect of the original funds, your contributions may be suspended while the loan is outstanding, and you will be more likely to sell low and buy high.
  7. “I won’t have to pay as much in taxes.” In retirement your income will be lowered, which will in turn lower your effective tax rate. Keep in mind; however, cost of living is impacted by all forms of taxes, including state income tax, local income tax, property tax, sales tax, capital gains tax, and Medicare tax. Also, in retirement you’ll likely have fewer federal deductions and dependents to claim, so a greater percentage of your income goes to the government.
  8. “Medicare will cover my health care expenses.” Medicare doesn’t cover everything, and the items not covered can add up. The Center for Retirement Research at Boston College estimates out of pocket medical care expenses for retirees at approximately $4,300/year for individuals and $8,600/year for couples. These amounts don’t include long-term care expenses. Many retirees purchase supplemental policies (called Medigap) to cover co-pays, deductibles and other expenses that Medicare does not. Medigap policies can ultimately cost you more than you paid for health care covered when employed.
  9. “I won’t have as many expenses.” Retirement expenses might not be as low as you think. Unstructured time often leads to greater spending. Also, many people wait until retirement to increase travel and pursue hobbies when work is no longer standing in the way.
  10. “I will have more time to study the markets in retirement.” The more you know about investment principles and the long-term historical record of the market, the better outcomes you can expect to achieve in your retirement portfolio. The American Association of Individual Investors found that investing knowledge enhances risk-adjusted returns by at least 1.3% annually. Over 30 years, the improved portfolio performance leads to 25% greater wealth. So, don’t wait until you are in retirement to begin studying up on investment principles. Start today.
  11. “I don’t need help.” While your financial mission in retirement may seem straightforward—to not outlive your money—the decisions you face along the way can be complicated. An experienced financial advisor can help you manage your retirement portfolio to meet your preservation and growth objectives, help you establish an income strategy matched to your spending needs, and track your spending versus assumptions. If a crisis arises, a trusted financial advisor will know your financial history and can help make decisions in your best interests.

For over 10 years, Brinker Capital Retirement Plan Services has worked with advisors to offer plan sponsors the solutions to help participants reach their retirement goals. When plan sponsors appoint Brinker Capital as the ERISA 3(38) investment manager, this allows them to transfer fiduciary responsibility for the selection and management of their investments so they can focus on the best interests of their employees.  This fiduciary responsibility is something that Brinker Capital has acknowledged, in writing, since our founding in 1987.

Click here to learn more about Brinker Capital Retirement Plan Services.

The views expressed are those of Brinker Capital and are not intended as investment advice or recommendation. For informational purposes only. Brinker Capital, Inc., a Registered Investment Advisor.

Plan Today, Retire Tomorrow

Roddy MarinoRoddy Marino, CIMA, Executive Vice President
National Accounts & Distribution

One essential consideration, whether you’re retiring next month or 50 years from now,  is that you ensure that your savings are aligned with your investment goals. With 33% of U.S. employees not adequately saving to fund their retirement1, this is a good opportunity to look at your own plan today and address any gaps.

While we know that there are behavioral impediments that we must overcome as we prepare for retirement, there are also some certainties that we need to account for:

  1. You’ll need cash.
  2. The amount you spend impacts how long your savings will last.
  3. Money that is not set aside for spending should be invested wisely.
  4. You’ll fare better when you know where you stand. Don’t just wait for your quarterly report to see how you’re doing—have regular check-ins with your financial advisor.
  5. Markets are volatile and can at times be a bumpy ride; but it important to stay the course.

A financial professional can help to guide you through the ups and downs of the market and work with you to create a retirement plan that meets your needs.  While longevity, medical expenses and taxes are among some of the elephants in the room that may be keeping you from planning for retirement, those who begin early develop formal plans and have little to fear.  Retirement resources are growing as quickly as our lifespans—oftentimes you simply just have to ask!

For 10 years, Brinker Capital Retirement Plan Services has been working with advisors to offer plan sponsors the solutions to help participants reach their retirement goals.  The views expressed are those of Brinker Capital and are not intended as investment advice or recommendation. For informational purposes only. Holdings are subject to change. Brinker Capital, Inc., a Registered Investment Advisor.

Source:

1Retirement Confidence Survey 2015, Employee Benefit Research Institute

You’re Scared to Bring it Up

weber_bioBrad Weber AIF®, Regional Director, Retirement Plan Services

A 2004 survey conducted by the American Psychological Association says that 73% of Americans name money as the number one factor that affects their stress level. Number one. The New York Times reports that couples who reported disagreeing about finance once a week were over 30% more likely to get divorced than couples who reported disagreements a few times a month.1 So, in addition to being stress-inducing public enemy number one, money is also highly implicated in whether or not we stay married. It’s no wonder then that we tread lightly around retirement or don’t bring it up at all!

The most common behavior in response to the overwhelming anxiety of preparing for three decades of not working is that we may ignore the conversation entirely. After all, we erroneously suppose, “If I ignore it maybe it will go away.” As anyone who has ever put off a project can attest, it never goes away and anxiety is only compounded as a deadline approaches. In college this may have been as inconsequential as pulling an all-nighter and receiving a subpar grade. With retirement planning, it could quite literally have disastrous personal consequences.

A recent study by the American Institute of CPAs2 found that speaking to children about money to children was among parents’ lowest priorities. In fact, money issues were trumped by good manners, sound eating habits, the need for good grades, the dangers of drugs, and the risks of smoking in terms of perceived importance. Our reticence to talk about money is certainly not out of lack of need. An Accenture report states that Baby Boomers will leave $30 trillion to their children in the next 30 years. This doesn’t even take into account the almost $12 trillion that MetLife predicts that Boomers will receive from their parents. The fact is, money will be changing hands within families at an unprecedented rate in the years to come and we are ill equipped to make the exchange.

There are a number of reasons why talking about money may be so difficult. One is that there has been a vitriolic reaction against the wealthy in the wake of the Occupy Wall Street movement and the global financial crisis. This sentiment was illustrated quite vividly in the September 24, 2016 Fortune magazine cover article, “Is It Still OK To Be Rich In America?” Another reason for this taboo may have a higher source.

The Bible, the best-selling book of all time and a foundational text for a majority of Americans, mentions money no less than 250 times. While not all Biblical references to money are negative, there are certainly enough references to “filthy lucre” to give pause. To a nation founded on Protestant ideals about work and morality, the notion of wealth as potentially corrosive is one that is deeply embedded in the collective American consciousness.

John Levy, a counselor to people who have recently inherited money found the following reasons for the money taboo among his clientele (as cited in O’Neil, 1993):3

  • Good taste – “It’s just not done.”
  • Fear of manipulation – “It will give them power over me.”
  • Concern for spoiling children – “They will never make anything of themselves.”
  • Embarrassment – “I don’t deserve to be so much better off than others.”
  • Fear of being judged – “All they can see is my money.”

Perhaps some of the reasons above are resonant with your personal situation and perhaps not, but it seems difficult to deny that money is a subject that puts us all on eggshells. Consider a handful of your best friends. No doubt you could tell me much about their lives; joys and struggles, highs and lows. But I doubt if you could tell me their exact salary, savings or other relevant financial indicators, because we simply don’t talk about them. While this is fine in polite company, this tendency toward silence can extend beyond the cocktail party circuit. Conversations about money tend to be emotionally fraught and tinged with shame and as such, are best handled by professionals adept at de-stigmatizing and reorienting our sometimes misguided thoughts about preparing for our financial future.

Solution: Begin a dialogue around retirement preparedness today with a professional at your place of employment or through a trusted financial advisor. Just as silence leads to greater inaction, a simple conversation can lead to life-changing progress.

For 10 years, Brinker Capital Retirement Plan Services has been working with advisors to offer plan sponsors the solutions to help participants reach their retirement goals.  The views expressed are those of Brinker Capital and are not intended as investment advice or recommendation. For informational purposes only. Holdings are subject to change. Brinker Capital, Inc., a Registered Investment Advisor.

Sources:

1 “Money Fights Predict Divorce Rates,” Catherine Rampell, The New York Times, December 7, 2009.

2  “Money Among Lowest Priorities in Talks Between Parents, Kids,” AICPA, August 9, 2012.

3 “The Paradox of Success,” John O’Neil. New York: Putnam, 1993.

You Don’t Have a Plan

frank_randallFrank Randall, AIF®, Regional Director, Retirement Plan Services

People anticipate that they will finish their own tasks earlier than they actually do. Consider the following example. Employees who carry home a stuffed briefcase full of work on Fridays, fully intending to complete every task, are often aware that they have never gone beyond the first one or two jobs on any previous weekend.

The psychological term for this is called “planning fallacy” and it is the reason that we are often a day late and a dollar short. In a phrase, the planning fallacy is the human tendency to underestimate the time and resources necessary to complete a task. When applied to a lifetime of financial decision-making, the results can be catastrophic.

There are a variety of hypotheses as to why we engage in this sort of misjudgment about what it will take to get the job done. Some chalk it up to wishful thinking. A second supposition is that we are overly optimistic judges of our own performance. A final notion implicates “focalism” or a tendency to estimate the time required to complete the project, but failing to account for interruptions on the periphery.

Whatever the foundational reasons, and it is likely there are many, it is clear enough that the American investing public has a serious case of failure to adequately plan. Excluding their primary home value, 56% of Americans either have less than $10,000 or no retirement savings at all. 43% of Americans are just 90 days away from poverty and 48% of those with workplace retirement savings plans fail to contribute.1 Perhaps we think we are special. Maybe we are simply too focused on the day-to-day realities that can so easily hijack our attention. Without a doubt, we may wish that the need to save large sums of money for a future date would just resolve itself.

Solution: Antoine de Saint-Exupery famously said, “A goal without a plan is just a wish” and yet the majority (60%) of investors surveyed by Natixis in 20142 said that they had no formal financial plan or goals. If you do not have a formal, updated financial plan in your possession, you lack the road map necessary to begin the journey toward retirement. Most financial planners are happy to create such a plan for a small fee so start today!

For 10 years, Brinker Capital Retirement Plan Services has been working with advisors to offer plan sponsors the solutions to help participants reach their retirement goals.  The views expressed are those of Brinker Capital and are not intended as investment advice or recommendation. For informational purposes only. Holdings are subject to change. Brinker Capital, Inc., a Registered Investment Advisor.

Sources:

1 “Myth of the Middle Class:  Most Americans Don’t Even Have $1,000 in Savings,” www.salon.com, Ben Norton, January 14, 2016.

2 “Getting to the Goal:  Markets, emotion and the risks advisors must manage,” Natixis, 2014

You Can’t See Tomorrow

cook_headshotPaul Cook, AIF®, Vice President and Regional Director, Retirement Plan Services

Thomas Hobbes’ famous description of life in times of war as “nasty, brutish and short” could just as easily have been applied to peacetime in the 17th century. Life expectancy in relatively developed England was just 35 years during Hobbes’ lifetime, owing largely to high infant and child mortality rates. In the less developed American colonies, life expectancy was a scant 25 years in Virginia and 40% of New Englanders died before reaching adulthood.

While very few of us would trade the realities of Thomas Hobbes’ day for our own (indoor plumbing is awfully nice), there is no denying that we are psychologically better equipped to prepare for a short life than a long one. The reason this is so is that we have a tendency to focus on the here and now and discount the future that psychologists refer to as “present bias.” To illustrate the power of present bias, consider the following:

Suppose I asked you whether you would like $250 one year (52 weeks) from now or $225 50 weeks from now – which would you choose? Now, what if I offered you a choice between $225 right this second or $250 two weeks from now – would your answer change? If you are like most people, you chose to wait for the larger payout in the first scenario but selected the immediate payoff in the second scenario. The farther we move from the present moment, the more dramatically we begin to discount time. Both scenarios involve a $25 gain for a two-week wait, but we perceive them very differently.

Present bias is rooted, among other things, in our tendency to experience now as a “hot” emotional state and the future in cooler terms. Simply put, right now seems more real than twenty years from now. As a result, many people prioritize meeting the needs of the all-too-real right now but ignore the just as real, but less salient, needs of their future self. If this is done consistently enough, tomorrow becomes today and you find yourself wholly unprepared.

Solution: Stanford Researchers1 have found that seeing a computer simulated aged version of your face makes you more likely to save for retirement. Why? Seeing the “older” version of yourself moves you from a cool to hot emotional state and makes the reality of your retirement more visceral. Psychologists have shown repeatedly that the more salient a variable is, the more likely it is to be acted upon. Start to increase the salience of your own retirement by discussing a few of the following questions with a partner or loved one:

  • Where will I/we live in retirement?
  • How will I spend my days in retirement?
  • What will be the best part of being retired?
  • What problems might arise that I could prepare for now?

For 10 years, Brinker Capital Retirement Plan Services has been working with advisors to offer plan sponsors the solutions to help participants reach their retirement goals.  The views expressed are those of Brinker Capital and are not intended as investment advice or recommendation. For informational purposes only. Holdings are subject to change. Brinker Capital, Inc., a Registered Investment Advisor.

Source:

1 Exploring the “Planning Fallacy”: Why People Underestimate Their Task Completion Times, Roger Buehler, Dale Griffin, and Michael Ross.  Journal of Personality and Social Psychology, 1994.

It’s National Retirement Security Week!

Roddy MarinoRoddy Marino, CIMA, Executive Vice President
National Accounts & Distribution

It’s National Retirement Security Week!

Doesn’t sounds familiar?  You’re not the only one.

This week kicks off the sixth year celebration of National Retirement Security Week (formally National Save for Retirement Week), sponsored by the National Association of Government Defined Contribution Administrators (NAGDCA).  While this is not a Hallmark-holiday, this important week marks a national effort to raise public awareness of the importance of saving for retirement.  The goals of this week are to:

  1. encourage employees to save and participate in their employee-sponsored retirement plans
  2. educate employees about how saving for retirement is crucial to security during retirement years
  3. increase awareness of the various retirement saving options

With the American life expectancy currently at 78.8 years1 and children born today expecting that nearly one-third of their contemporaries may live to see 100 years of age2, we are living lives with greater comfort and more free time than any other point in history. It is truly an incredible time to be alive, but even the best advances can have unintended complications. Such is the case with ever-increasing longevity and the reality of preparing for a retirement of unprecedented length. Successful retirement planning requires a great deal of forethought, tolerance for uncertainty and consistently delayed gratification. This can be challenging for some facing retirement because individuals must invest in risk assets if they are to retire comfortably and most individuals are emotionally and psychologically ill equipped to invest in risk assets.

So, why must you invest if you are to retire? As of today, the median wage in the U.S. is $26,695 and the median household income is $50,500. Let us suppose for illustrative purposes, however, that you are four times as clever as average and have managed to secure a comfortable annual salary of $100,000. Let us further suppose you set aside 10% of your gross income each year until the first day of your retirement. Assuming you begin saving at age 25 and retire at age 65, your efforts will have yielded a nest egg totaling $400,000.

While $400,000 may seem like a decent sum of money, it hardly provides much for someone who could easily live another 30 years in retirement. At $13,333 per year, you would be living near the poverty line by today’s math, to say nothing of how dramatically inflation would have eroded the purchasing power of that figure 40 years on.

If we turn back the clock 40 years from now, we see that roughly $90,000 in 1975 money would get you $400,000 in purchasing power in today’s dollars. A little back of the napkin math tells us that even though $400,000 may seem alright today, we will need more like $1.5 million 40 years from now to maintain that same level of purchasing power.

Remember too that the average American couple currently spends an estimated $245,0004 in retirement on health-related expenses above and beyond their monthly premiums. Factoring in even modest inflation over the next 40 years, the money spent on medical bills alone would far outstrip your savings on the high-earning-always-saving model.

While you could complicate the assumptions above to greater reflect the reality of the average worker (most people don’t make $100,000 right out of college, most people get raises over the course of a career, most people don’t save 10% of their income), the basic math is the same. You simply aren’t going to get to the necessary savings target by age 65 without a little help from risk assets whose returns exceed the insidious and corrosive power of inflation.

As Burton Malkiel said far more succinctly, “It is clear that if we are to cope with even a mild inflation, we must undertake investment strategies that maintain our real purchasing power; otherwise, we are doomed to an ever-decreasing standard of living.”3

While 2/3 of U.S. employees are saving for retirement, according to data from the 2015 Retirement Confidence Survey conducted by the Employee Benefit Research Institute, they are not adequately saving to fund their retirement.  In the coming days, we will examine three behavioral impediments to retirement preparation that many plan participants experience and ways to overcome them. This week serves as a great time to remind employees of the importance of saving for retirement and provide them with a realistic picture of how to get to their goals.

For 10 years, Brinker Capital Retirement Plan Services has been working with advisors to offer plan sponsors the solutions to help participants reach their retirement goals.  The views expressed are those of Brinker Capital and are not intended as investment advice or recommendation. For informational purposes only. Holdings are subject to change. Brinker Capital, Inc., a Registered Investment Advisor.

 Sources:

1 Centers for Disease Control and Prevention. http://www.cdc.gov/nchs/fastats/life-expectancy.htm

2 Live long and prosper, The Economist, June 4, 2016.  http://www.economist.com/news/books-and-arts/21699886-how-plan-long-long-life-live-long-and-prosper

3 A Random Walk Down Wall Street, Burton Malkiel.

4 “Health Care Costs for Couples in Retirement Rise to an Estimated $245,000,”  Fidelity Investments, October 7, 2015.  https://www.fidelity.com/about-fidelity/employer-services/health-care-costs-for-couples-retirement-rise

Nix the Mixed Emotions About Retirement

cook_headshotPaul Cook, AIF®, Vice President and Regional Director, Retirement Plan Services

The future holds many uncertainties, leaving us to often have mixed feelings when thinking about retirement. Even if you feel more than ready, on an emotional level, to move to the next phase of your life, you may have some uncertainty about whether you will be able to maintain the lifestyle you wish.

Last week in Roddy Marino’s Eight Signs You Are Ready to Retire, he shared some useful statistics from an Ameriprise Financial survey that address this notion of mixed emotion. Close to 50% of respondents felt they were ready to retire, but admitted that there was still some concern. 21% admitted more bluntly that they felt uncertain or not ready at all. Suffice it to say that a large portion, about 63%, of newly retired boomers said they felt stressed about retirement leading up to the decision.[1]

We’ve talked before about how your physical health can impact your retirement, but let’s take another approach and look at six financial certainties that may help to lower your stress and avoid some of the mixed emotions about retirement.

  1. You will need cash. Throughout your retirement journey, you will need quick access to your money. Typically, you will need enough liquidity to cover two years’ worth of anticipated living expenses.
  1. The quicker you spend, the shorter it will last. Your predictable expenses may total up to, for example, $2,000 a month. But how many years could you go on spending $24,000? The impact of spending on your portfolio becomes clear once you determine a spend-rate. For example, if you had $500,000 in a retirement savings account and withdrew $2,000 a month, the portfolio would last 20-29 years. A $500 reduction in spending, however, could result in 9-15 more years of longevity for the portfolio.
  1. The money not needed to cover expenses must be invested…wisely. While you can’t control the markets, you should feel confident that your investments are managed with skill and integrity. Choose an investment advisor with whom you have a trust and have a high level of confidence.
  1. Eventually, you will run out of cash and need more. One of the tricky parts of managing your money in retirement involves knowing how to create an income stream from your portfolio. You need to figure out which assets to take distributions from, and when. To ensure that each of your assets performs optimally, you must conduct a careful technical analysis and evaluate moving market trends. If you are like most retirees, you could benefit from having an expert perform this service for you so that you can have confidence that you are benefiting from all possible market and tax advantages.
  1. You’ll make more confident decisions if you know how your investment performance and expenses measure against your goals. Throughout your retirement journey, it is helpful to know where you stand against your goals. If your overall goal is to outlive your savings, then you should have a system in place that helps you contextualize your spending and its relative impact on long-term goals.
  1. Markets are volatile. When markets fluctuate, many investors feel like all semblance of control over their financial future is lost. Having a well-diversified portfolio may help to smooth the ride and reduce some of the emotions of investing.

If you approach retirement by developing an income solution that addresses each of these known facts, you can feel as if you are on more solid ground to enjoy your retirement.

The views expressed are those of Brinker Capital and are not intended as investment advice or recommendation. For informational purposes only. Holdings are subject to change. Brinker Capital, Inc., a Registered Investment Advisor.


[1] Ameriprise Study: First Wave of Baby Boomers Say Health and Emotional Preparation are Keys to a Successful Retirement, February 3, 2015

Eight Signs You Are Ready to Retire

Roddy MarinoRoddy Marino, CIMA, Executive Vice President
National Accounts & Distribution

New England Patriots quarterback is famous, and infamous, for a number of things both on and off the football field. His stance on retirement, however, is a personal favorite. When asked when he will retire, the then 37-year old quarterback said, “When I suck.”

Brady has the benefit of stats, sacks and millions of armchair quarterbacks to tell him when it’s time for him to hang up his cleats, but the decision to retire isn’t as clear for most Americans.

According to a survey conducted by Ameriprise Financial, nearly half of retirees (47%) felt ready to retire, but approached it with mixed emotions. 25% of the people surveyed said they could hardly wait for retirement, but nearly as many (21%) felt uncertain or felt that they were just not ready.[1]

If you are among the group of pre-retirees who feel uncertainty, here are eight signs that will help you decide if the time is right for you to consider retirement:

  1. shutterstock_447538888You are emotionally ready. Choosing when to retire has as much to do with emotions as it does finances. The transition from a full-time job that, for many, shaped their identity, to life with less structure can be scary. According to the Ameriprise study, losing connections with colleagues (37%), getting used to a different routine (32%), and finding purposeful ways to pass the time (22%) pose the greatest challenge for the newly-retired. Despite these challenges, 65%say they fell into their new routine fairly quickly, and half (52%) report to having less time on their hands than they would have thought.
  2. You’ve paid down your debt. Debt represents a key barometer in retirement readiness. If possible, you will want to keep working until your high-interest credit card debt, personal loans or auto loans have been satisfied—or you have a plan to retire such debt.
  3. You have an emergency fund. It’s important to plan in advance for how you will address emergencies, big and small, in retirement. The same survey revealed that 90% of Americans have endured at least one setback that harmed their retirement savings. Setbacks vary from caring for adult children, to college expenses stretching over six years instead of four. Others include loss of a job, assisted living expenses, and disappointing stock performance. As the survey indicates, unexpected life events cost the retirement accounts of the respondents $117,000 on average. An emergency fund can serve to prevent you from having to resort to retirement savings during hard financial times.
  4. You know what it’s going to cost. Some people believe they will enjoy a significant decrease in post-retirement expenses; however, that may not be the case. Instead, many retirees experience trade-off in expenses. For example, instead of daily commute costs, retirees may take longer trips thereby canceling out any savings in transportation expenses. Most retirees’ expenses follow a U-shaped pattern. For the first few years, the expenses mimic pre-retirement expenses, then as the retiree settles in, expenses dip only to rise as health care costs kick in.
  5. You know how you will create income. Much of retirement planning involves asset accumulation, but it is equally important to figure out what assets to tap, and in what order. Your income plan should include a decision on when you will elect to receive Social Security benefits. It should also take into consideration all sources of income including fixed, immediate, and indexed annuity strategies, pensions, and even your house. It should also address the timing as to when and you will withdraw income from all potential sources.
  6. Your children have their financial lives in order. Family dynamics play a significant role in shaping one’s retirement experience, yet are often overlooked during the planning process. Many retirees do not anticipate or underestimate the financial toll associated with providing financial support to their adult children. If you are thinking of retiring and still have a financially dependent child, consider establishing parameters for the arrangement, set expectations, and deepen the child’s understanding and appreciation of what is at stake for you.
  7. You have prioritized your health. When it comes to determining retirement well-being, health is typically more important than wealth. Retirees in better health have the added peace of mind that comes from financial security. They tend to enjoy retirement more, feel fulfilled and are not as prone to negative emotions as their less healthy counterparts.[2] For most, health care costs top the retirement expenses charts so your ability to pay for medical care you will eventually need should be a key consideration. Healthy habits and preventive medical treatment before retirement can help to serve as a cost-containment measurement as well as a lifestyle booster.
  8. shutterstock_128132981Someone you trust can help you make your financial decisions. A trusted advisor is invaluable throughout your retirement journey. He or she can help you manage your retirement portfolio to meet your preservation and growth objectives, help you establish an income strategy matched to your spending needs, and track your spending versus assumptions. If a crisis arises, a trusted financial advisor will already know your financial history and can help make decisions that are in your best interests. Similarly, it is extremely helpful to have a trusted advisor relationship solidified in the event your cognitive abilities decline, and you need help with decisions.

[1] Ameriprise Study: First Wave of Baby Boomers Say Health and Emotional Preparation Are Keys to a Successful Retirement, 2/3/15: http://newsroom.ameriprise.com/news/ameriprise-study-first-wave-baby-boomers-say-health-and-emotional-preparation-are-keys-to-successful-retirement.htm

[2] Health, Wealth and Happiness in Retirement, MassMutual. 3/25/15

The views expressed are those of Brinker Capital and are not intended as investment advice or recommendation. For informational purposes only. Holdings are subject to change. Brinker Capital, Inc., a Registered Investment Advisor.

The Impact of Student Loans on Your Own Retirement

Roddy MarinoRoddy Marino, CIMA, Executive Vice President
National Accounts & Distribution

An education is one of the greatest gifts a parent or grandparent can give to the next generation. The problem for many, however, is that it comes at the cost of their own retirement.

People over the age of 60 represent the fastest-growing segment of individuals taking out loans for education. Over the past decade, student loans taken out by individuals over the age of 60 grew from $6 billion in 2004 to $58 billion in 2014. To put the dollars into perspective, consider another staggering statistic—the numbers of senior citizens with student debt exceed 760,000. Some have co-signed loans or taken Parent PLUS loans to help children or grandchildren get an education. Other seniors carry old debt from when they returned to school to get advanced degrees or in the pursuit of new skills needed for a career change.

A mistake some retirees make is they incorrectly assume that they will never have to repay their student debt. Only two things can make federal college debt go away: satisfaction or death of the borrower.

shutterstock_44454148Federal student loans aren’t forgiven at retirement or any age after. Bankruptcy won’t even discharge a federal student loan, and the consequences to a senior who defaults on a federal loan are severe. The government can garnish Social Security benefits and other wages. Recent reports indicate over 150,000 retirees have at least one Social Security payment reduced to offset federal student loans. This number represents a drastic increase from the 31,000 impacted in the year 2002.

The government can withhold up to 15% of a borrower’s retirement benefits and can also withhold tax refunds in the event the borrower defaults on a college loan.

If repayment is not possible, you may want to explore a few options to minimize the impact on cash flow once you are on a fixed income. You could stretch out the term of the loan as long as possible through extended payments, or enter into an income-driven repayment plan. Typically, borrowers must pay 10-20% of discretionary income in an income-contingent scenario.

Both strategies could reduce your monthly payments; however, ultimately either strategy will result in higher total payments. To put it simply, debt of any kind is best retired before you retire.

The views expressed are those of Brinker Capital and are not intended as investment advice or recommendation. For informational purposes only. Holdings are subject to change. Brinker Capital, Inc., a Registered Investment Advisor.