Lynn Toomey – Page 25 – Her Retirement

Do’s & Don’ts of Finding the Right Retirement Advice

First off, I’m NOT an advisor. I’m a retirement researcher, writer and educator. I have a few Do’s and Don’ts to consider as you begin planning your retirement and finding the right person/people to help you go from Savings (401k, etc.) to Security (creating an income for life from your 401k).

DON’T listen to a neighbor, a friend or even that friendly financial/investment advisor who’s probably not well versed in retirement planning and is biased toward investments. The insurance advisor is biased toward insurance. And the big companies in both camps spend a lot of money to spread their version of the truth. Looks for a “retirement advisor” who’s license in both investments and insurance and therefore, doesn’t have the bias of one vs. the other. They should be dedicated and taking the time to educate you about this retirement planning process and all the strategies they are recommending vs. just saying “it’s a good idea because I said so.” All professional service providers make money….they must be paid like everyone else. Just make sure they are 100% transparent in their fees.
DO listen to retirement researchers, academics and economists who focus on retirement planning and there are plenty.
DO base you decisions on research…always ask Why? and ask for the data to support an advisor’s/friend’s recommendation.
The right answer can only be found by answering a number of questions about you and your goals, along with analyzing what you’ve got, what you’ll have, and what you’ll need. And then finding the best combination of strategies to make your money lasts throughout retirement.
You’ll need to have an open mind as it relates to retirement/distribution strategies because they are completely different than the accumulation phase of life.
The traditional 60/40 portfolio is dead. As you approach and enter retirement, you’ll need a portfolio strategy that reduces your risk, while also being positioned to take advantage of growth. You MUST mitigate volatility in retirement. There are a number of ways to do this. With the current low bond returns, you should seek alternatives. For some that may include Fixed Indexed Annuities. For others, it may be structured investments. Stocks will always be a part of your portfolio, albeit a smaller part.
DON’T work with an advisor who knows nothing about tax planning for retirement…and most CPAs don’t know how to do pro-active retirement planning. A true retirement advisor knows how to integrate tax efficient withdrawal strategies into your income distribution plan so that you keep as much of your hard earned money as possible. This may be one of the most important strategies. Side note: ask them about Roth Conversions…2020 may be a perfect storm for Roths for many people.
DO make sure your portfolio is stress tested and proven to last in ALL market environments.
DON’T let anyone guess as to when you should take Social Security. This accounts for 33% of your income in retirement (in most cases) and must be incorporated into your overall income planning. The answer as to when depends on a lot of factors. Also, Social Security must be included in your tax picture as well. Since 85% of your benefit could be taxable without the right planning.
DO find out if they are aware of MAGI and Medicare (and the impact on how much you’ll pay for Medicare). Make sure they have resources to help you navigate the Medicare maze.
DO find out if they help you find ways to fund a Long Term Care policy, if needed?
DO consider a reverse mortgage as an emergency income buffer…this is a perfect example of when having an open mind is important. Find out what the retirement academics say about reverse mortgages. And, no, they can’t take your house away if you follow some basic rules, like paying your taxes. And no, the bank doesn’t own your home. Take the time to find the facts vs. listening to hearsay.
DO find out if the advisor you’re considering working with has a team of providers to help you with other ancillary needs.

I do believe it’s impossible for the layperson (and most of the 300,000 financial advisors in this country), to do ALL of the proper retirement planning that must be done to improve and secure your retirement outcome.

Fortunately or unfortunately, advisors, like many other for-profit companies have to make money. But, with the right advisor you won’t question their fees…their value will be evident in everything they do for you. DO make sure they are committed to spending whatever time you need to be 100% confident in your plan and are acting in your best interests. And there’s nothing wrong with checking their references.

Finally, most of us have good intuition when choosing our professionals. Get to know him/her. Ask about his/her family. Ask about their perspectives on finances and life. Ask why they do what they do. Find out a lot about this person personally, and then dig into their “retirement planning” experience.

It’s easy for an advisor to give you credentials and pretty reports and look good on the surface. But dig a little deeper and you might be able to discover if he or she is the real deal.

Click here to chat with a RetireMentor to help you connect with a retirement planner or other retirement professional (legal, healthcare, etc.):

Who’s the Right Advisor for Me?

“The research is unequivocal that a competent financial guide can both help you achieve the returns necessary to arrive at your financial destination while simultaneously improving the quality of your journey.”

-Behavioral Alpha: The True Power of Financial Advice, Daniel Crosby, Ph.D., Nocturne Capital, 2016

Finding the Right Advisor in a Sea of 300,000

There are more than 300,000 “financial advisors and planners” in the U.S. 80% of them are men and their average age is 60. The title financial planner or financial advisor is used to describe anyone from an insurance agent to a stockbroker to an investment advisor to a Certified Financial Planner (CFP). And there is no shortage of certifications and acronyms on advisor business cards. No wonder people are confused when trying to decipher who they should get financial or retirement advice from.

Many investors assume that any professional who refers to himself or herself as a “financial planner” has received some kind of certification. Unfortunately, there’s no rule governing who can go by the title of financial planner. Anyone can set up shop using that title, whether or not they know anything about finance or have any experience. You’re better off sticking with financial planners who have an actual certification by a governing agency, be it state or federal.

Financial advisors used to be hired predominantly by people with upwards of several hundred thousand dollars. No matter if you have $1 million of $1,000 to invest, you still have many options. That’s changed over the last decade as the financial landscape has changed. Among other changes are the self-funding of retirement plans vs. pensions. People are also living longer and the financial decisions that accompany are long life are more complicated. The financial industry and products are also much more complex with many more offerings. Not to mention the complexities around retirement, which are myriad.

Here’s a quick overview of the types of advisors and planners and their certifications:

Registered Investment Advisor (RIA): A person or firm who advises individuals on investments and manages their portfolios. RIAs have a fiduciary duty to their clients, which means they have a fundamental obligation to provide investment advice that always acts in their clients’ best interests. As the first word of their title indicates, RIAs are required to register either with the Securities and Exchange Commission (SEC) or state securities administrators. Registered investment advisors seek to offer more holistic financial plans and investing services. They offer very different fee schedules and are typically fee-based by assets under management.

Registered Representatives: Work for a brokerage company and are well versed in investment products including stocks, bonds, and mutual funds. Registered representatives are required to have passed their Series 6 and/or Series 7 exams. They must register with the Financial Industry Regulatory Authority (FINRA) and are governed by suitability standards (which means they ensure an investment is suitable given an investor’s investment profile. Registered representatives, also known as stockbrokers work on commission. Since reps are regulated by FINRA, you can check an advisor’s background on FINRA’s Central Registration Depository at www.finra.org.

Many financial advisors or planners attain other certifications (some of which are listed below). So, for example, you may meet with someone who is both an RIA and a CFP or an RIA and an insurance agent.

Certified financial planner (CFP): The CFP certification is offered by the CFP Board and is generally considered the gold-standard certification for financial planners. CFPs are always fiduciaries, meaning they are legally required to put their clients’ interests ahead of their own at all times.Chartered financial analyst (CFA): The CFA designation is granted only by the CFA Institute. To gain this certification, advisors must meet significant education and work experience requirements and pass a series of three exams. CFAs have expertise in investment analysis and portfolio management.

Chartered financial consultant (ChFC): A chartered financial consultant (ChFC) studies college-level insurance, estate planning, retirement funding, investments and others subjects in financial planning.

Retirement Income Certifications: There are three major retirement income planning certifications that many financial advisors choose to attain to demonstrate their expertise in retirement planning. These include: Retirement Income Certified Professional (RICP), Retirement Management Analyst (RMA), and Certified Retirement Counselor (CRC). While these don’t guarantee your retirement advisor will have a full command of retirement planning, they do indicate a level of education beyond the certifications above. What’s more important than certifications, however, is the process and planning that a retirement advisor offers you. See page 4 for details on finding the right retirement advisor.

Read this entire paper on finding the right advisor for you

When you want some directions on getting connected with a retirement advisor in our network or other solution providers, talk to a RetireMentor.

De-Risking Your Portfolio

Planning for retirement can be confusing and a bit scary. How do you manage your money now so you can be well-prepared financially for retirement? And how do you ensure that your retirement income will last throughout your life? How can you de-risk your portfolio to avoid the volatile markets like we’re seeing now (and will definitely see again). With increased life expectancies, it’s critical that you weigh all your options and plan carefully. This paper will discuss traditional retirement strategies, as well as introduce you to a less conventional, but potentially more effective and efficient approach to help you reach your retirement goals.

The Problem

Often, “the way we’ve always done it” is no longer the best way to achieve something. In retirement planning, a traditional portfolio uses only conventional stock and bond investments. In this paper, we refer to this as the Traditional Asset Allocation 6040 Portfolio (TRAA 6040). The problem? Traditional stocks and bonds on their own are not efficient for 100% of a retirement income portfolio. They expose a retiree to lower return potential and higher risk.

The Solution

Historically, stocks and bonds have been the mainstay of a typical retirement portfolio. The Hybrid Income Portfolio (HIP) offers a change in product allocation to reduce portfolio risk and increase the rate of return potential. The HIP strategy uses a combination of Traditional Investments (stocks & bonds), Structured Investment Products (SIPs) and Fixed Indexed Annuities (FIAs).

In addition to adding SIPs and FIAs, other strategies should be incorporated to lead to a more efficient retirement outcome, including:

Social Security Timing: Using the proper strategy to maximize this guaranteed income source
Tax Planning: Reducing taxes in retirement to increase the net after-tax income annually
Prudent Use of Home Equity: Incorporating HECM loans as a tax-free income source or portfolio safety net
Alpha Portfolio Management: Using active and passive portfolio management in the proper asset classes to add Manager Alpha to potentially increase returns. Manager Alpha is the rate of return an investment manager creates above or below the respective benchmark or index.

The CARES Act Explained

The Coronavirus pandemic has affected virtually every facet of American life and severely impacted the markets and economy. Congress and the federal government have acted to help individuals and businesses get through this difficult time.

Most recently, President Trump signed the Coronavirus Aid, Relief, and Economic Security Act (CARES) Act on March 27, 2020. The House passed the bill by voice vote earlier that day, and the Senate unanimously passed it on March 25. The $2.2 trillion bipartisan bill, the most expensive legislation ever enacted, resulted from negotiations between Treasury Security Steven Mnuchin and Congressional leaders on both sides of the aisle. The following are highlights of many of the federal relief opportunities created thus far which may benefit you.

Tax Relief for Individuals:

Extension of federal tax filing due date. The IRS postponed to July 15, 2020 the due date for both filing an income tax return and for making income tax payments originally due April 15, 2020. The postponement is automatic. Payments that may be postponed are limited to federal income tax payments in respect of a taxpayer’s 2019 taxable year and federal estimated income tax payments due on April 15, 2020 for a taxpayer’s 2020 taxable year. The extension is available to all taxpayers, including individuals, trusts and estates, corporations and other non-corporate entities, including those who pay self-employment tax. As a result of the extension, any interest, penalty, or addition to tax for failure to file or pay tax will not begin to accrue until July 16, 2020.

IRA contribution deadline extended. The deadline for making 2019 IRA contributions has also been extended until July 15, 2020.

HSA and MSA contribution deadline extended. The deadline for making 2019 contributions to health savings accounts (HSAs) and Archer medical savings accounts (MSAs) has been extended until July 15, 2020.

Recovery rebates. Cash payments called “recovery rebates” are available to U.S. residents with income below certain levels who cannot be claimed as a dependent of another taxpayer and who have a Social Security Number. Technically, the rebates are advance refunds of credits against 2020 taxes. The rebate amounts are $1,200 for individuals and $2,400 for married joint filers, with an additional $500 for each qualifying child under age 17. The amount of each rebate phases out by $5 for each $100 of adjusted gross income (AGI) greater than $75,000 (single filers) or $150,000 (married joint filers), based upon AGI as reported on the 2018 federal tax return (or 2019 tax return, if filed). Thus, rebates are fully phased out at $99,000 (single filers) and $198,000 (married joint filers). Individuals do not need to do anything to receive the rebate; the IRS will make payments electronically, if possible, and will send a notice (to the taxpayer’s last known address) within 15 days of payment stating the payment amount and method.

Required minimum distributions (RMDs). All 2020 RMDs from IRAs and retirement plans are waived, including RMDs from inherited IRAs (both traditional and Roth). The RMD waiver includes 2019 RMDs that were previously due by April 1, 2020.

Tax-favored early distributions from retirement plans. The CARES Act waives the 10% penalty applicable to early distributions for coronavirus related distributions up to $100,000 from IRAs and qualified defined contribution retirement plans such as 401(k), 403(b), and governmental 457(b) plans. A coronavirus related distribution is a distribution made during calendar year 2020 to an individual (or spouse) diagnosed with COVID-19 by a CDC-approved test, or to one who experiences adverse financial consequences as a result of quarantine, business closure, layoff, or reduced hours due to the coronavirus. In addition, any income attributable to an early withdrawal is subject to income tax over a 3-year period unless the individual elects to have it all included in their 2020 income. Finally, individuals may recontribute the withdrawn amounts back into an IRA or plan within 3 years without violating the 60-day rollover rule or annual contribution limits.

Retirement Plan Loans. Before the CARES Act, a participant could borrow from a retirement plan the lesser of 50% of the vested account balance or $50,000 (reduced by other outstanding loans). Beginning March 27, 2020 through 180 days thereafter, the maximum loan amount increases to the lesser of 100% of the vested account balance or $100,000 (reduced by other outstanding loans). In addition, participants who had outstanding loans as of March 27, 2020 may defer for one year any payments normally due from March 27 through December 31, 2020.

Charitable Contributions. Individuals who claim the standard deduction may also claim a new above-the-line deduction up to $300 for cash contributions made in 2020 to certain charities. Individuals who itemize deductions and make cash contributions in 2020 to certain charities may claim an itemized deduction up to 100% of AGI (increased from 60%). Eligible charities are those described in Section 170(b)(1)(A) of the Internal Revenue Code (for instance churches, educational organizations, and organizations providing medical or hospital care or research) and do not include donor advised funds or Section 509(a)(3) supporting organizations.

Student Loans. Payments (principal and interest) on federal student loans are suspended through September 30, 2020 without penalty. Interest will not accrue on these loans during this suspension period. In addition, from March 27 through December 31, 2020, an employer may contribute up to $5,250 annually toward an employee’s student loans, and such payment will be excluded from the employee’s income.

Unemployment Benefits. Unemployment benefits have been expanded to assist those who have lost their job during the current economic crisis. Because unemployment benefits are administered by the states (although each state follows the same guidelines established by federal law), check with your state program to determine eligibility requirements and how to file a claim.

Tax Relief for Businesses:

Employer Payroll Taxes. Employers and self-employed individuals may delay the payment of the employer portion of payroll taxes due between March 27 and December 31, 2020. 50% of any payroll taxes deferred under this provision must be paid by December 31, 2021, with the remaining 50% paid by December 31, 2022.

Employee Retention Credit. Employers whose operations were fully or partially suspended due to a coronavirus-related shut-down order or whose gross receipts declined by more than 50% (compared to the same quarter in the prior year) have a new tax benefit if they continue to pay employees. The above employers will receive a refundable quarterly payroll tax credit equal to 50% of qualified wages paid to an employee from March 13 through December 31, 2020. For purposes of the credit, up to $10,000 of qualified wages paid per employee during this period is taken into account. Excess credits are refundable.

Retirement Plan Funding & Documentation. The deadline for employers to make contributions to certain workplace-based retirement plans has been extended. In addition, employers sponsoring retirement plans may immediately adopt provisions allowing coronavirus related distributions and plan loans based on the CARES Act but formally amend the plan at a later date.

Net operating losses (NOLs). Generally, a NOL means deductions (for expenses from operating a business) are greater than the income generated from operating a business. A NOL incurred in one tax year generally may be used to reduce taxable income in a future tax year. The Tax Cuts and Jobs Act of 2017 significantly pared back the ability of businesses to carry forward/carry back NOLs, but the CARES Act substantially liberalizes the NOL rules – please consult a tax professional to learn more.

Business Interest Deduction. The CARES Act temporarily increases the amount of interest expense businesses are allowed to deduct on their tax returns, by increasing the 30-percent limitation to 50 percent of taxable income (with adjustments) for 2019 and 2020.

Small Business Administration (SBA) loans. To assist small businesses, the CARES Act greatly expands the availability and features of loans under the SBA’s Section 7(a) loan program. Businesses with 500 or fewer employees are eligible for the expanded loan program, as are sole proprietors, independent contractors, and self-employed individuals. There are many important details and benefits, including potential forgiveness. To learn more, please visit the SBA website at sba.gov or U.S. Chamber of Commerce website at www.uschamber.com.

As you can see, the federal government has created many ways individuals and businesses may receive assistance to get through current financial difficulties. Additionally, most states have provided their own relief such as a delay of the state income tax filing deadline or a temporary grace period for making mortgage payments. Here at Her Retirement we can connect you with a retirement specialist to answer any questions on the above relief or if you would like to discuss the effect of the current economic crisis on your portfolio or financial situation. Her Retirement is here to continue to help you pursue your financial goals during these unprecedented times.

This communication is designed to provide accurate and authoritative information on the subjects covered. It is not, however, intended to provide specific legal, tax, or other professional advice. For specific professional assistance, the services of an appropriate professional should be sought.

Talk to a Retirement Specialist today

Volatility: What’s the Best Defense?

Thoughts and ideas on the recent market losses and volatility due to the Coronavirus scare, and general economic and political uncertainty. Recent panic caused by the spread of the Coronavirus (COVID-19) has led to a stock market decline and has many investors feeling anxious. While portfolios will see ups and downs and this is a normal part of investing, the recent sell-off was sharp. It is in times like these that our team can best serve you by providing perspective on how we see these issues playing out.

The Best Defense is a Strong Offense
Nobody knows where the market is heading. Therefore, we believe that research and pro-actively planning, and implementing strategies that factor in potential significant drops in the market is critical. This is a strong offensive play in the world of portfolio planning (especially for those closing in on retirement). And what we consider to be the best defense to market volatility.

When the market heads up, and we get by this event-driven volatility, having a portfolio that has allocations to global equities to take advantage of market growth is critical. And if the market continues to fall, it’s critical to protect your principal with allocations to Fixed Indexed Annuities.

Either way, this “Hybrid Income Portfolio” strategy balances protection and growth, regardless of where the market heads. This is especially significant now, as equity prices are coming off all-time highs and bond prices are also high, as their yields have fallen to all-time lows. As we have seen recently, market conditions can change quickly in both directions.

For these reasons and more, we believe a Hybrid Income Portfolio to be a powerful alternative to other portfolio strategies. It’s also backed by academic research and has proven itself time and time again.*

The Impact on the Global Economy
Though the impact on human life is at the forefront of everyone’s concerns, there are many uncertainties surrounding the potential impact of the virus to the global economy. The global economy was already fragile from the nearly two-year-long U.S.-China trade war and the spreading virus will likely impact economic growth. While more equity market weakness is possible as the virus continues to grow globally, the downside could be limited as governments and global central banks have possible tools to combat the potential death toll and economic impact.

From the human life perspective, China took severe steps to limit the spread of the virus including forced quarantines, limited social contact, and significant population testing. We expect other inflicted nations to follow suit. From an economic perspective, global central banks including the People’s Bank of China and the Bank of Korea have already increased monetary stimulus or plan to do so. As we have seen in the U.S., and, specifically the U.S. housing market, over the past year, easing monetary policy can provide a potential economic stopgap. Furthermore, in the U.S., given unemployment levels near 50-year lows, the consumer, the driver of the current economic expansion, remains in good shape. We do expect market uncertainty to continue but downside may be limited. We also think the impact to markets will vary by sector. Sectors related to travel, such as cruise lines, airlines, and hotels are already taking a hit. Online entertainment companies and streaming services are performing better.

The team here at Retire Smart Network will continue to monitor and update information about our nation’s financial and physical health. If you’d like to discuss your portfolio strategy with a retirement planner or have a question about any retirement/financial topic, simply reach out and we’ll make it happen.

P.S. Don’t forget the Best Defense is a Strong Offense when it comes to protecting your health too…proper hand washing, eating right, getting enough sleep, avoiding sick people, stocking up on meds, food, water and household supplies, and having an attitude of positivity and gratefulness. Worrying about health or finances isn’t a productive use of time. Embrace optimism and reach out to us at any time.

*Sources:

Morningstar Analysis, June 23, 2017, Snapshot Report.
Roger G. Ibbotson, PhD Chairman & Chief Investment Officer, Zebra Capital Management, LLC Professor Emeritus of Finance, Yale School of Management Email: ZebraEdge@Zebracapital.com, Fixed Indexed Annuities: Consider the Alternative, January 2018.
Shift Away from Potential Risk and Toward Potential Return, Nationwide (Morningstar), 06/16.

Is Aging the Secret to Happiness?

I’ve always wondered if older people become happier. My mother is 83 and really happy, but then again she’s always been happy. It would be kind of cool to know that even though we age, get wrinkly and our bodies starting hurting, we become happier. In this article we found on: https://www.verywellmind.com/aging-the-secret-to-happiness-2224100, we find out.

Happiness and age are related, but not in the way you might think. For the most part, our culture is youth-driven, so we assume that the young and beautiful also happen to the be the happiest. A young person who has time on their side may appear happy, but the notion just is not true. Happiness actually increases with age.

It might be unfathomable for some young people to believe their grandparents are happier than they are, but research shows that Americans actually get happier as they age despite the health conditions and other problems that arise. Before we celebrate, though, let’s take a look at the evidence on aging and happiness.

Trends in Happiness

Let’s face it: research related to happiness is filled with judgments and subjectivity because happiness is subjective. How can you be sure a research participant who says, “I’m pretty happy,” truly is happy? Maybe they’re content with less? Maybe their happiness is based on material possessions? Maybe each generation has different expectations of happiness? Researchers needed to find a way around these kinds of problems.

Luckily sociologists have consistently conducted more that 50,000 interviews since 1972 for the General Social Survey, a sociological survey conducted by the National Opinion Research Center at the University of Chicago. The survey, which is open to the public, provides a wealth of insight into our society and measures happiness over time. By comparing differently-aged individuals over time within the same year, researchers were able to get around some of these limitations, and what they found is that happiness increases with age.

Aging America: A Happy Place

“How happy are you?” That is the big question researchers ask year after year. Not only did researchers find that older people tend to be happier, but that happiness is not something older participants had all their lives. In other words, as people get older, say starting at age 50, happiness comes to them.

As media continue to warn us about the dangers of an aging America, keep this in mind: An aging America may be the happiest America we have ever seen. Perhaps this is because of the wisdom that comes with age or because older people adjust their expectations in life, but whatever the reason there is solid evidence that older Americans are truly happier than younger ones.

How to Maximize Your Happiness

Improve your own happiness by ignoring the societal norm that youth = happiness. Allow yourself to feel happy as you age. Don’t get caught up in worrying about the small stuff. Take good care of your health and, most importantly, let yourself go. Don’t think that you have to act your age. Here are some more tips to keep you active, happy and having fun as you age:

· Exercise for more energy

· Be social for healthy aging

· Live long, have fun

· Play games for brain fitness

Woman Need to Stop Fearing Heavy Weights

A new study from the Journal of Strength and Conditioning Research suggests that women need to get over their fear of heavy weights, if they truly care about getting results, and now we have a very recent study to prove it. Unfortunately, despite myriad science-based articles and practical real-life results, many women still believe that lifting heavy will make them bulky. It’s time to realize that this fear is nothing but a myth, and get over it.

There is even 1 study that shows that the average self-selected weights that most women choose represent approximately 57% of the weight they could lift for one rep (1RM) (Cotter, et al. 2017). The problem with this 57% number is that, more often than not, it results in sets that women rate as “somewhat hard.” As TC Luoma says “this fear of bulkiness often leads to relatively low-effort workouts and that goes a long way in explaining why a lot of women rarely morph into the swimsuit goddess they aspire to be.”

The Newest Study

Researchers from Coastal Carolina University recruited 20 female participants and divided them into two groups. Training consisted of upper body workouts 2X per week, with 1 lower body workout, for a total of 8 weeks.

• Group 1 trained with heavy weights (85% of 1RM), performing a total of 6-7 exercises for sets of 5 to 6 reps.

• Group 2 did the same amount of exercises but trained with lighter weights (60-70% of 1RM), doing sets of 10-12 reps.

• All subjects worked to momentary failure on each set.

Results

Both groups attained similar improvements in lean body mass, particularly in the lower body. Both groups also showed performance improvements in the vertical jump, chest pass velocity (with a medicine ball), back squat max, and overhead press. And both groups lost significant amounts of body fat.

Muscle size gains were quite modest in both groups, with the subjects gaining a little size in their thighs but nothing notable in the upper body.

The researchers state that “the data obtained in this study also serve to further debunk some of the myths that may otherwise impede young women from strength training, including a fear of excessive hypertrophy.”

Practical Lessons

1. Women should use weights of at least 65% of 1RM to favorably change their body composition.

2. Using less than 65% of 1RM is likely useless, unless women train really hard, and to momentary failure (the point where they can’t perform another rep).

3. Regardless of whether they train with lighter weights (65-80% 1RM) for higher reps or heavier weights (>80% 1RM) for lower reps, it’s not going to make them “bulky.”

4. For optimal results, women should adjust their protein intake to roughly 1 gram per pound of bodyweight. This is good advice for all women. And this is based on a side note from the study who found that the average protein intake was low, falling well short of the guidelines noted above.

Reference:

Jason M. Cholewa; Fabricio E. Rossi; Christopher MacDonald; Amy Hewins; Samantha Gallo; Ashley Micenski; Layne Norton; Bill I. Campbell. “The Effects of Moderate- Versus High-Load Resistance Training on Muscle Growth, Body Composition, and Performance in Collegiate Women,” Journal of Strength and Conditioning Research. 32(6):1511–1524, June 2018.

Written by person trainer Bob Gardner. Bob can get reached at: bobgardnertraining@comcast.net

Work + Money Article: “The 4% Retirement Rule is Broken”

Unfamiliar with the “Four Percent Rule”? In 1994, financial advisor William Bengen found that he was skeptical of the traditional consensus that 5% was generally considered a safe amount for retirees to withdraw from a retirement account each year in their retirement. Using historical data on stock and bond returns over a 50-year period between 1926 and 1976 with an emphasis on severe market downturns in the 30s and early 70s, Bengen concluded that no historical case existed in which a 4% annual withdrawal exhausted a retirement portfolio in less than 33 years.

Considering that the investment landscape since 1994 has changed dramatically, the publication Work + Money sought out financial advisors to get their take on whether or not this rule of thumb should still be considered the “safe withdrawal” rule, including Your Retirement Advisor co-founder, Lynn Toomey.

Brian concludes that the 4 percent rule may not work in today’s markets if people follow the traditional recommendation of a portfolio made up of 60% stocks and 40% bonds. He explains that because bond yields are at a historic low, 4 percent will end up burning through the portfolio too quickly. For safety, he recommends an annual draw of 2-3 percent. Retirees looking to withdraw 4 percent each year may want to consider a combination of stocks and fixed indexed annuities, Brian advises. “Here at YRA, we have developed such a plan, which we call a ‘Multi-Discipline Retirement Strategy,’ which includes a portfolio of globally-diversified stocks and annuities. It’s a combination critical as one approaches retirement,” Brian states in the article. “It should also be coupled with a [systematic withdrawal income plan] and a buffer strategy in times of severe stock market losses.”

Brian outlines several risk factors that impact portfolios and make the 4 percent rule unfeasible.

Retirement Risk Factor # 1: Living Too Long. Longer-than-expected retirements are becoming the norm as longevity rates increase. As Brian explains specifically the problem with living too long is inflation. In other words in the present, a person is saving money for a future in which the prices of goods and services will have risen and the purchasing power of the consumer will have declined. To combat this problem, Brian advises that retirees need to reconsider portfolios that shortchange stocks for the supposedly safer world of bonds in their retirement portfolios. Due to the fact that historically, stocks have been the only investment that have outpaced inflation, YRS urges investors to consider a diversified portfolio to offset the volatility that is inherent to stocks.

Retirement Risk Factor #2: Volatility. To minimize the second retirement risk factor listed, volatility, Brian recommends utilizing standard deviation to observe the deviation of a portfolio from the average rate of return from year to year. The higher the standard deviation, the higher the volatility and the higher the volatility, the greater the risk of portfolio failure in retirement.

Retirement Risk Factor #3: Sequence of Return. While we cannot completely control sequence of return, the third risk factor featured, Brian expresses that investors can protect themselves from this type of risk by establishing a “safe bucket” of funds to withdraw from in the event of market downturn. In addition to keeping their principal stocks while waiting out the market correction, there is also research that proves this action has psychological benefits which can prevent panic and the sale of stocks when the market dips. “A proper buffer can consist of life insurance cash values, a reverse mortgage reserve account, cash or CDs, a guaranteed annuity, or any other account that will have a limited effect when there is a stock market downturn,” Brian adds in conclusion.

Retirement Risk Factor #4: Interest Rates. Bonds have an inverse relationship with interest rates: when interest rates are high, bond returns are low. And given that interest rates are at historic lows, bonds may be ready to fall from their highs. “Investors expecting bond funds to perform as well in the next ten years as they have in the last ten will be disappointed,” Saranvoitz said, noting there may even be a risk for negative returns. Bonds still have a place in a retirement portfolio, but probably not the half they occupied when the 4 percent rule was in fashion.

Read the full “The The 4 Percent Retirement Rule Is Broken” article here

If you’d like to chat with an affiliated advisor about your portfolio and your withdrawal strategy, requesst a complimentary consultation.

How to be “Cool Hand Luke” during stock market dips

In the movie Cool Hand Luke, Paul Newman’s character Luke says, “Sometimes, nothing can be a real cool hand.” Hence, prompting Dragline (George Kennedy) to nickname him “Cool Hand Luke.”

50 years after this movie was made (yes, 50 years!), this sage advice from Luke can be applied during a stock market dip. While the quote was in reference to Luke’s bluff in a poker game, the concept of doing “nothing” vs. having a knee-jerk reaction and bailing out of the positions in our portfolio, can be a real “cool hand.” History (and Warren Buffet) agree.

Warren Buffett once said: “Be fearful when others are greedy and greedy when others are fearful.” Unsurprisingly, Warren Buffett’s investment advice is well supported by data. Since 1950, the S&P 500 fell by 3% or more on 100 days. In the ensuing year following those drops the S&P 500 generated a 16.8% investment return average. To ease your mind even further, average annual return over the next 5 years following 3% drops in the S&P 500 was 10.8%. Note that these figures are both higher than the average historical 1-year and 5-year returns (8.7% and 7.5%, respectively).

We understand how stock market fluctuations can make us all feel a bit unsettled. But keep in mind that history shows us repeatedly that knee-jerk decisions to sell after markets fall is often not the best decision.

So are you still asking yourself what to do? It’s important to embrace an investor’s mindset and understand that you’ll never be able to control the markets. Investors are more concerned with long-term growth and tend to remain level-headed about future prospects. They prioritize instead things they can control, like how their portfolio is allocated and the fees associated with the said portfolio. Investors get that the markets have various cycles and they ride out those cycles staying the course. My mother has always said, life is 20% what happens to you and 80% how you react to it. How are you going to react?

For people 5 years out from retirement or just retiring, however, rather than doing absolutely nothing we do suggest that you take a look at the allocation of your portfolio between stocks, bonds, and annuities. A stock market dip or correction in an otherwise long bull market is a “gentle” wake-up call to evaluate the aggressiveness of your portfolio. A dramatic downturn today or sometime in the future could have a severe effect on the long-term survivability of retirees’ portfolio.

The raging bull market since 2009 has made investors feel impervious to the inherent volatility of the stock market. This week’s market dip could be a quick market correction or the beginnings of the next bear market. In either case, it’s important to equip your investment plan with durability and pliability, and consider adding in some hedges against volatility such as a fixed indexed annuity.

A strategy that incorporates this hedge with stocks and bonds could offer individuals (5 years out from retirement or just retiring) a potentially better risk/return portfolio.

Conventional wisdom today is that retirees should invest in a traditional portfolio of stocks and bonds. However, recent research indicates that the portfolio with higher risk or volatility will have a shorter life expectancy when taking income vs. a portfolio with lower volatility generating the same returns. Research also indicates that the safe withdrawal rate from this traditional 60/40 stock/bond portfolio has dropped to 2-2.5% providing for a 3% per year inflation adjustment (based on current market conditions and the bond market). Something might need to change.

The Annuity Advantage

Fixed Indexed Annuities (FIAs) can be an effective alternative to a stock/bond portfolio. As evidenced by the research report, Real-World Indexed Annuity Returns by David F. Babbel, phD, professor at Wharton School, U. Penn. Dr. Babbel analyzed actual fixed indexed annuity contracts between 1997-2010 and concluded, “the real world indexed annuities analyzed in this paper outperformed the S&P 500 index over 67% of the time, and outperformed a 50/50 mix of one year treasury bills and the S&P 500 79% of the time.”

The interesting fact about FIAs is that they offer absolute guarantee of principal. In addition, in, an economic downturn such as 2007-2009 when the stock market was down more than 40% and a 50/50 portfolio would have been down more than 20%, the same FIAs at worst offered a 0% return during these same timeframes.

Individuals within 5 years to retirement or in retirement typically use bonds to reduce volatility in their portfolio. However, with the low interest rate environment over the last 5 years, having a 50/50 stock/bond portfolio could hurt retirees long term. As an example, 10 year U.S. government treasuries had a return of .84% over the past 5 years. For this reason, it’s imperative to find viable low risk alternative to traditional government bonds in light of the current economic environment.

There are some advisors and individuals attempting to use below investment grade bonds (junk bonds), senior bank loan funds, and convertible bonds in an attempt to get additional yield from their bond portfolio. This could ultimately backfire as these types of investments all suffered 20+ percent losses in 2008. As well, there are tactical asset allocation strategies that attempt to increase returns, but once again these alternatives suffered significant losses in 2008 and are not suitable to the US treasury bond.

We’ve witnessed many people throwing caution to the wind due to the stock bull market we’ve had since April. 2009. We’ve witnessed people very close to retirement wanting to keep high stock exposure in their portfolios. We recommend age appropriate portfolio allocations to assure one is properly invested in the event of a major stock market correction or potential bear market, either of which could be on our horizon.

At Her Retirement, we recommend an “unconventional” retirement portfolio that is made up of high quality guaranteed fixed indexed annuities, globally diversified stocks and bonds. We create a higher potential growth rate and lower portfolio volatility as a result. Our research (and experience working with retirees), along with additional research from Morningstar and Nationwide indicates that this unconventional portfolio decreases volatility and offers higher growth potential which has the effect of increasing the safe withdrawal rate back to Bengen’s 4% rule or higher, with a 3% inflationary increase per year. Our white paper, The New Portfolio for a Changing Economy explains this unconventional, but effective and efficient strategy for retirees in more detail.

Unfamiliar with the “Four Percent Rule”?

In 1994, financial advisor William Bengen found that he was skeptical of the traditional consensus that 5% was generally considered a safe amount for retirees to withdraw from a retirement account each year in their retirement. Using historical data on stock and bond returns over a 50-year period between 1926 and1976 with an emphasis on severe market downturns in the 30s and early 70s, Bengen concluded that no historical case existed in which a 4% annual withdrawal exhausted a retirement portfolio in less than 33 years.

Considering that the investment landscape since 1994 has changed dramatically, the website Work + Money sought out financial advisors to get their take on whether or not this rule of thumb should still be considered the “safe withdrawal” rule.

Retirement advisor, Lynn Toomey concludes in the article that the 4 percent rule may not work in today’s markets if people follow the traditional recommendation of a portfolio made up of 60% stocks and 40% bonds. He explains that because bond yields are at a historic low, 4 percent will end up burning through the portfolio too quickly. For safety, he recommends an annual draw of 2-3 percent. Retirees looking to withdraw 4 percent each year may want to consider a combination of stocks and fixed indexed annuities, Brian advises.

“At Your Retirement Advisor, we have developed such a plan, which we call a ‘Multi-Discipline Retirement Strategy,’ which includes a portfolio of globally-diversified stocks and annuities. It’s a combination critical as one approaches retirement,” Brian tells Copeland. “It should also be coupled with a systematic withdrawal income plan and a buffer strategy in times of severe stock market losses.”

Brian goes on to outline several risk factors that impact portfolios and make the 4 percent rule unfeasible. Longer-than-expected retirements are becoming the norm as longevity rates increase. As Brian explains, “The problem specifically with living too long is inflation. In other words, in the present, a person is saving money for a future in which the prices of goods and services will have risen and the purchasing power of the consumer will have declined.”

To combat this problem, Brian advises that retirees need to reconsider portfolios that shortchange stocks for the supposedly safer world of bonds in their retirement portfolios. Due to the fact that historically stocks have been the only investment that have outpaced inflation, YRS urges investors to consider a diversified portfolio to offset the volatility that is inherent to stocks.

To minimize the second retirement risk factor listed, volatility, Brian recommends utilizing standard deviation to observe the deviation of a portfolio from the average rate of return from year to year. The higher the standard deviation, the higher the volatility and the higher the volatility, the greater the risk of portfolio failure in retirement.

While we cannot completely control sequence of return, the third risk factor featured, Brian expresses that investors can protect themselves from this type of risk by establishing a “safe bucket” of funds to withdraw from in the event of market downturn. In addition to keeping their principal stocks while waiting out the market correction, there is also research that proves this action has psychological benefits which can prevent panic and the sale of stocks when the market dips.

“A proper buffer can consist of life insurance cash values, a reverse mortgage reserve account, cash or CDs, a guaranteed annuity, or any other account that will have a limited effect when there is a stock market downturn,” Brian adds in conclusion.

The market is something we can’t control, so we suggest as an investor you focus on the things you can control, sit tight and ride it out. Or, if you’re closing in on retirement, consider how aggressive your portfolio is and make some adjustments to protect it from stock market volatility. This way, the next time there is a dip or downturn, you can be Cool Hand Luke.

To talk with Her Retirement about your portfolio, schedule a complimentary consultation.

Sources:

-The Retirement Killer: Volatility , Frank Armstrong III, Forbes Magazine, Dec 6, 2013

-Does Your Portfolio Have Too Much Interest Rate Risk?, Allianz, 9/2013

-Jack Marrion, Geoffrey VanderPal, David F. Babbel, Index Compendium

-The 18 Risks of Retirement Income Planning, American College of Financial Services

-Investopedia

Fixed Annuities Are an Option Over CDs

YRA’s Lynn Toomey featured in US News & World Report

Lynn Toomey, co-founder of Her Retirement was recently featured in an online US News & World Report report regarding alternative investment options to Certificates of Deposits.

US News & World Report contributor Jeff Brown takes a closer look at investing in fixed annuities over other options such as Certificates of Deposits.

Certificates of deposit can be considered safe but notoriously stingy as currently there are five-year annuities paying about 3.25 percent a year, beating the five-year CD at 2.5 percent, a difference of about 35 percent.

Annuities do offer some different forms of flexibility, such as immediate annuities, which pay monthly income for life as soon as they are purchased. The other option is a deferred annuity, which also pays for life but after a delay of a set number of year, and with the delay comes a more generous return.

Brian explains that five-year deferred annuities will pay a guaranteed rate of return for the duration of the contract. “The credited rate is typically higher than a CD of the same duration,” he continues. Most advisors will tell you that a five-year investment like an annuity are designed for retirement and is really best suited for people in their mid-50s and older.

“Any withdrawals of gains from a non-qualified annuity will be subject to tax at ordinary income tax rates and prior to age 59.5 will be subject to a 10 percent surtax,” Brian tells US News & World Report. “After age 59.5, all gains will be taxed at ordinary income tax rates, but the 10 percent surtax is eliminated. For these reasons, it’s imperative for individuals looking for liquidity to understand the tax implications.”

For more information on the possible advantages annuities have over CDs and the possible caveats of each type of annuity, check out Jeff Brown’s piece on US News & World Report.

To dispel some myths and misinformation about annuities, check out our Guide to Fixed Indexed Annuities

To learn more about the role annuities play in a retirement portfolio, read A Portfolio for a Changing Economy white paper

Also, check out: Why Ken Risher is Wrong on Annuities

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All posts by : Lynn Toomey