In the 2013 Retirement Confidence Survey conducted by the Employee Benefit Research Institute, 60% of baby boomer workers said they have less than $100,000 in retirement savings. However 70% of these workers also said they believe they are "doing a good job preparing for retirement". Do baby boomers need a reality check? "Yes!" says Sarah J. Halpin, CERTIFIED FINANCIAL PLANNER™ professional and Vice President-Investments of The Danforth Group of Wells Fargo Advisors who is here to talk about three key knowledge areas and an upcoming event tailored to help boomers face these challenges.
- Create a Retirement Plan:
Of the 70% of workers who said they believe they are "doing a good job preparing for retirement" only 46% of them had a retirement plan. Know the minimum amount of money you need to live the life you want to live. Then run the numbers. Based on the potential sources and amounts of income in retirement and with challenges such as longer life expectancies and the rising cost of out of pocket health care expenses in retirement, the actual amount needed to fund retirement could be much more than you've estimated.
According to BrightScope, a 401(k) rating site, nearly half of employees cash out their 401k retirement savings when leaving one company for another and lose valuable retirement savings. In general, you should roll funds from your 401(k) directly to an Individual Retirement Account (IRA) or to your new employer's plan. Also once you've put the kids through college and the nest is empty (at least for now), look for ways to catch up on your retirement savings.
2. Have a Disciplined Investment Strategy:
Asset allocation can be an effective way for investors to balance a portfolio among various types of investments. The key is to determine the right mix of investments based on an investor's risk tolerance and investment objectives. A significant part of developing an asset allocation strategy is having a diversification plan. Diversification does not prevent losses but spreads out investment capital to help reduce the effect of a loss in a single market. So while a diversified portfolio may not give you the highest absolute return in a given year, it most likely won't give you the biggest loss either. Over time it reduces the tendency of a portfolio to make extreme moves, whether up or down, so that investors can focus on making progress toward their long term goals.
Be aware of financial market trends for the economy, interest rates and inflation. Overall the equity market responds positively to economic growth. After 30 years in which interest rate trends provided fixed income investors with a strong tailwind, interest rates do not have much further to fall. Should the Federal Reserve fail to effectively control future inflation, long term fixed income investors could see a significant decline in the purchasing power of a fixed income stream.
3. Love and Protection Documents
It's hard to discuss and prepare for the major "what ifs" or eventualities of life. But taking the time to organize your financial life can make a difficult time immeasurably easier for those that are left behind. There are also financial and practical consequences of failing to keep documents in order. There are lifetime planning documents such as a power of attorney which allows you to name a trusted person or organization to manage your financial and personal affairs if you are incapacitated. Estate planning encompasses much more than a will which provides instructions for distributing property you own upon your death. And a will is essential if you have minor children, because it is the only way you can name a guardian for them. Remember the distribution of your estate is also affected by how your assets are titled and by beneficiary designations. Be sure to review these documents regularly with your legal and financial advisory team and update them when there is a change in your personal situation.
The Family Wealth Management Day is taking place on Tuesday November 5th from 2pm - 5pm at the Marriott Sable Oaks with workshops on investing, retirement and life and estate planning for details check out www.thedanforthgroup.wfadv.com.
Source: " Ten Things investors should know today" by Wells Fargo Advisors.
"2013 Retirement Confidence Survey" by Employee Benefit Research Institute
The information provided is general in nature and may not apply to your personal investment situation. Individuals should consult with their chosen financial professional before making any decisions. Investment products and services are offered through Wells Fargo Advisors, LLC member SIPC. Neither Wells Fargo Advisors nor its financial professionals are legal or tax advisors.