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When Clients Spend Through Their Savings

A reporter from Financial Planning Magazine, recently posed a question to several financial advisors asking:

“What happens when an elderly retired client runs out of money?”

Below is my response, which was included in the article:



Michael Lecours, an advisor at Ohanesian/Lecours in West Hartford, Conn., says the time to address the issue of running out of money with retirees is when they start increasing withdrawal rates from their savings.

“We can see the writing on the wall five to 10 years away,” Lecours says. “After a conversation, most clients recognize the issue and find ways to reduce their expenses. They make plans to downsize, move in with a family member, or scale back on their lifestyle.”



Are You Saving Enough For Retirement?

Last week, a chart was circulating the internet helping to illustrate how much you should have saved for retirement based on your age (See Below).

Like many rules of thumb, it can serve as a guide but it lacks several key assumptions. It doesn’t factor in pensions, annuities or real estate. The biggest flaw deals with a term called replacement income, this chart assumes that you will be able to live off of about 80% of your pre-retirement income. You would only know that if you dug into the research that is mentioned in the footnotes.

And in our experience, how much income a retiree needs to live on each year varies greatly.

This chart is probably most helpful for younger savers (50 years and less) and who do not expect much in the way of a pension and have no idea what their retirement income needs will be.


Nine Connections You Didn’t Know Between Happiness and Retirement

Money Magazine recently wrote a great article about happiness and retirement.  Here are a few key take-aways:

  1. People rate happiness highest in their teens and twenties.  Then it drops down between their 30’s and 60’s. But it rises again in retirement.
  2. The age at which folks are happiest, according to a study by Wes Moss, is 85!
  3. According to the Moss study, retirees can buy happiness.  The more money in savings/investments the happier the retiree. But anything over the $550,000 level isn’t as effective at increasing happiness. There is a leveling off effect that occurs.
  4. Retirees have more enjoyment in spending money that comes from a pension or social security rather than spending money from investments in their 401(k)/IRA or savings.
  5. The Moss survey suggested that retirees with 4 hobbies are happier than those with 1 or 2.
  6. Retirees who find a part time job tend to have fewer major diseases.  In many cases, they can find jobs that are fun or connected to a hobby.
  7. Retirees who rent tend to be happier than those who own their own homes
  8. Retirees who live within 10 miles of their children tend to be less happy than those who live farther away. The reason why remains a mystery.
  9. The satisfaction someone receives from spending time with friends and family is highest among those aged 65+.


Do You Have an Out-of-Whack Portfolio?

Research out of Investment Company Institute found that 11% of investors have not rebalanced their investments in the last five years.  As the US stock market continues its bull run, the value of US stocks represent a larger and larger portion of the portfolio.

All of a sudden, a portfolio that was balanced five years ago could be taking on more risk than you originally planned. Money Magazine states that a portfolio in 2009 invested 60% in stocks and 40% in bonds may have a current mix of 75% stocks and 25% bonds.  If you’ve not looked at your portfolio over the last few years. Now is a great time to get started.  Here is a summary of steps to take:

1)      Gather all of your statements – Investments accounts with us, accounts held elsewhere, 401(k) statements, etc. Tally up your overall asset allocation.

2)      Find what looks out of line – Does one mutual fund represent more than 25% of the portfolio? Does one stock represent more than 10% of the portfolio? Is one asset class accounting for a large portion of the portfolio?

3)      Look to rebalance – identify the appropriate asset allocation (primer found here).  You may also want to spend some time developing an asset location strategy, if we haven’t guided you already.