Retirement Planning Baton Rouge


 

What is Retirement?  

Retirement Planning Baton RougeWhat is the first thing that comes to mind when you hear the word retirement? How do you define it? When you close your eyes and picture it, what is happening in retirement? What are you doing? Who are you helping? How are you living?

One of the pleasures we have at Abel Hall Family Wealth Partners is associating with those who are “Retired In Name Only.” Or what we affectionately call “Rhinos.” Rhinos have a gift for striking a balance between what we call “Joyful self-sacrifice for the best interest of others” (also known as “work”) while making time to savor the fruit of their labor. When I say “retired” I’m not talking about setting aside 20-30 years as a time for prolonged self-centered, self-serving, self-indulgence. Why should we settle for that truncated version of what our years can be? The healthiest retirees have a moral compulsion to marry their newfound gift of free time and experiential insight for the betterment of people, churches, and nonprofits they love the most. Having paid off their debt and accumulated a nest-egg, retirees tend to be the largest financial contributors to non-profit organizations in our society. As is often said, “You can’t take it with you!”

Today’s retiree doesn’t want to be an emotional or financial burden on their children, and this has everything to do with retirement planning. At Abel Hall, we are committed to helping you think through the issues that matter most and will allow you the chance to retire full of vision, along with the dignity and independence that you desire.

For a more detailed definition of retirement, read our blog by Drew Hall on the topic of retiring with purpose

 


 

How To Establish A Budget For Retirement?  

To ensure that you have a retirement plan where your money outlasts you, we begin with your budget. To prepare for a retirement that will last decades, you must know how much money is coming into and out of your life now. Once these numbers are quantified, and the picture becomes clear, you will get a sense of how much it will cost you to live each year of your retirement. So, based on the amount of money you currently have invested, will sustainable distributions cover your living costs? If yes, great; if not, it’s time to determine how much more you’ll need to invest from now until you retire in order to meet, if not exceed, these numbers.

To discover more, read our blog on the topic of budgeting for retirement written by Drew Hall

 


 

How To Design Your Retirement Portfolio?  

Comprising a portfolio primarily of globally diversified equities has historically provided returns which offer the highest probability of success. While the volatility of stocks may not be comforting, it’s important to remember that we are planning to develop a retirement plan where your money outlasts you; and in a rising cost world, fixing your income is financial suicide.

Right now, the average American retires at age 62[1], with the joint life expectancy of this non-smoking, 62-year-old married couple being 92 years[2]. Based on normal inflation, over these three decades, the cost of living will increase over two and half times. Committing to fixed income vehicles like bonds, CDs, and fixed annuities locks in your income while the prices of goods and services continue to rise. We refer to this as “going broke safely.

To learn more, read our blog on the topic of designing your retirement portfolio

 


 

how do you mitigate market declines during retirement?   

While moving all of your money into annuities, money markets, or short-term bonds may seem like a safe solution; this strategy comes with other risks. Participating in an all-cash sinking fund, spending down your cash over your life expectancy is also a risky proposition. To combat inflation, gain returns, and to experience a retirement filled with meaning and purpose, a globally diversified portfolio of equities provides the best approach for most people.

Historically, this strategy has given investors two to three times the long-term returns of bonds when you factor in the effects of inflation. While stocks can be volatile, it is important to know that history has proven volatility to be temporary. 2* Building a portfolio comprised of bonds for the next 30 years could permanently reduce your returns, in exchange for a reduction in the temporary downside of volatility. When considered in this context, basing your retirement solely on the performance of bonds over stocks, logic points out that this is an irrational decision.

 


 

Should I Invest in Stocks or Bonds for Retirement?    

Fear doesn’t have to be rational to be real. It can be imaginary and still be powerful.

Consider this: If inflation eats away at retirees' purchasing power (ability to purchase the same goods and services you’ve grown accustomed to) and if history teaches that fractional ownership in a broadly diversified basket of companies (often called stock portfolio) has been over twice as effective as bonds in outpacing the corrosive effects of inflation, then it begs the question: Why don’t rational retirees own stocks and not bonds? I believe the answer in a word is fear.

Children of the Great Depression (my grandparents) had a fear of financial markets that was palpable. If this weren’t enough there are the 12, very real, bear markets that saw a decrease in price of 20% or more of a broad index like the S&P 500 or Dow Jones Industrial Average. Today’s baby boomers (my parents) were either born into, or lived through such pullbacks. Insert FEAR. 

Take a deeper dive and read our blog on the topic of retirees owning stocks and bonds


 

Should I Include My Spouse in Retirement Planning?    

If you currently are in a situation where either you or your spouse is in the dark regarding family financial planning meetings please open your mind to the following: When the day comes when your spouse is alone trying to step into the financial battlefield you will not have set them up for a fair fight. You were their plan. The strong, loving, supportive spouse you see before you will have just had the life sucked out of them. Your spouse’s life will have become infinitely more complicated.

Please hear this: The single greatest thing you can do to love your spouse in the context of your retirement is: INCLUDE THEM.

Read more in our blog on the topic of including your spouse in retirement planning.


 

Do I need a Financial Advisor for Retirement, and if so, why?    

Yes. But, more than a financial advisor, many find value in a behavioral investment counselor. Unfortunately, that is not going to be easy to find, and the difference is everything.

There are a number of different types of “financial advisors” today. There’s the professional people-pleaser, the over-planner, and at least two types of portfolio junkies. The professional people-pleaser hangs his hat on sales and relationships. The over-planner obsesses over the sanctity of his or her financial plan. Portfolio junkies spend their professional days under the delusion that they might eventually come to command the world’s most super special portfolio. None of these individuals are likely to deliver a relaxing multigenerational retirement journey because they’ve acquiesced to the exhaustive pursuit of aforementioned half-truths.

Some financial advisors have simply adopted a “people-pleasing strategy.” To these folks, financial advice has become synonymous with financial “suggestions.” To them, a financial professional exists to serve clients the way a bartender serves his patrons. The strategy here amounts to, “Well, what’ll you have…?”

This philosophy is pervasive in the financial industry. But, it is a way of being that is inherently reactive and grounded on nothing more than a client’s opinions and insecurities relegating the financial professional to nothing more than a people-pleaser, prescribing according to the client’s demands. It makes about as much sense as a patient rushing into a doctor’s office and demanding that the experienced physician, “Listen up!” and carry out the wishes of the unwell. If you meet the doctor who will prescribe on the whims of the patient, please run – do not walk – to the next clinic. In the same way, it is nonsensical to assume that because an individual has money (THEIR money!) that they inherently know the best course of financial strategy.

To learn more, read our blog that outlines the differences between a financial advisor and a behavioral investment counselor.


[1] Lisa Greenwald, Craig Copeland, and Jack VanDerhei, “The 2017 Retirement Confidence Survey—Many Workers Lack Retirement Confidence and Feel Stressed About Retirement Preparations,” EBRI Issue Brief, no. 431 (Employee Benefit Research Institute, March 21, 2017).
[2] Azzarello, Samantha M, et al. “Guide to the Markets,” J.P.Morgan Asset Management, March 21, 2018.

 

*See source which demonstrates the long-term performance of the S&P 500 versus the long-term performance of long term corporate bonds (both shown net of inflation).

 

Any opinions are those of Leo Abel & Drew Hall and not necessarily those of RJFS or Raymond James. The information contained in this report does not purport to be a complete description of the securities, markets, or developments referred to in this material. Investments mentioned may not be suitable for all investors. Past performance may not be indicative of future results. Prior to making an investment decision, please consult with your financial advisor about your individual situation. Investing involves risk and investors may incur a profit or a loss.

 

 

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Drew Hall
Drew Hall