The Third Phase of Life during Retirement: No, No, No

Do you act the same today as you did 20-30 years ago?  Do you live the same lifestyle and spend the same amount of money at age 50, as you did at age 25?  If these questions seem ridiculous, why would you expect anything different from your retirement years?  When you think about retirement, and even when you are calculating the needed size of your nest egg, you may only be focusing on that first stage of retirement.  Continue reading

The Second Phase of Life during Retirement: Slow, Slow, Slow

There are three different and distinct phases in retirement.  Initially, you will find yourself in the go, go, go phase.  You might call the second phase slow, slow, slow, later followed by the no, no, no phase. This post will focus on the second phase of retirement life, the slow, slow, slow phase (for more information on the active phase of retirement read our post on the go, go, go phase).Continue reading

Sequence of Returns Risk

One of the greatest risks to a successful retirement is out-living your assets. This could be caused by unaccounted-for inflation, uninsured medical expenses, or just living a lifestyle your assets cannot support for the long term. But sometimes you can save tenaciously, plan fervently, live frugally, adhere to all commonly accepted investing principles and still have your retirement nest egg dwindle. One possible cause of this scenario could be the risk from your sequence of returns.

Sequence of returns risk can be summarized as the risk from the order in which investment returns occur and the impact it has on the longevity of withdrawals available during retirement. Table 1 shows a very basic example:Continue reading

3 Common Retirement Derailers and How to Address Them

So you’re on track with saving for retirement:  you’ve made a plan and you’re carrying it out; you’re saving consistently and aggressively, using a disciplined approach in your investing and staying focused despite life’s distractions.  And then it happens.  The whole plan gets derailed because of an unforeseen and unexpected event.

Any plan is incomplete if it doesn’t prepare for the unexpected.  Here are three categories of retirement “derailers” and suggestions as to how to protect yourself from their effects:

1. Physical Derailers: What happens to your savings plan if you get disabled and can no longer earn a living? What if your spouse passes away and you lose their income? What if you need costly medical attention?Continue reading

Why it is Important to be Research Intensive in Retirement Plan Management

A retirement plan is intricate; every decision you make pertaining to its operation requires careful consideration. Yet, many advisers base their recommendations on purely quantitative information, which may leave you unable to see the whole picture. Pension Consultants does things differently.

The retirement plan industry is riddled with miscommunications and missed expectations between plan sponsors and record keepers. As a research-driven firm, we emphasize prudent process to our clients, establish realistic expectations and monitor vendors to see whether or not they adhere to the plan we outline.Continue reading

Sailboats or Lotto Hopes? Everyone has a Choice in Preparing for the Future.

What do you want to do when you retire?  Some people want to travel the world.  Others want to devote themselves to their favorite hobby.  Still others plan to just sit on the front porch and watch the cars drive by.  For some, the goal may simply be to reduce their employment to part-time when they retire.  Trying to visualize what your retirement lifestyle will look like is the first step to preparing for it.

But there is much more to the process of planning for retirement than just dreaming about how you will fill your time.  You must build a plan for how to get to your retirement goals.  When you develop your retirement plan, it helps to work backwards, which is why we start with visualizing what your retirement lifestyle looks like to you.Continue reading

Can you count on your financial adviser?

You should be more skeptical of the people that offer advice about your company’s retirement plan. Hopefully, you already knew that.

The Huffington Post has an article, Proposal to Protect Retiree’s Nest Eggs Becomes Lobbying Flashpoint, in their June 14th online edition that outlines the current problem and the Department of Labor’s efforts to correct it. Sadly, it accurately reflects the state of the financial services industry.

Few of the so-called financial advisers in the marketplace today have any intent of serving the client’s best interest. They are simply financial salespeople. Unsuspecting retirement plan participants may seek out their “adviser” only to be sold a product that just happens to be offering an extra commission to the salesperson for the next 30 days. Conflicts of interest? You betcha. Pretending to be one thing, but really being something else? Uh huh.

The Department of Labor is trying to help the deceptive practices by issuing proposed regulations that attempt to expand the definition of “fiduciary” in ERISA (see our response to their proposal). A fiduciary must act in the best interest of the other party or they become liable for the bad advice. The proposal, should it become final, would limit financial salespeople from taking advantage of unsuspecting retirement plan participants.

Regulations such as this can help consumers by forcing industry to change its ways. That’s a good thing. But with it comes not-so-good things. The burden that regulation adds to industry, and ultimately to consumers, is substantial costs. Which way the cost-scales ultimately tip is often unknowable and makes me leery in general. No doubt that retirement plan participants deserve to know if the person that is offering them help is a salesperson or a fiduciary adviser.

The financial services industry has been unable or unwilling to act in their client’s best interest en masse. Now the government is determined to fix it. I only wish that I had confidence in their ability to do it. How about you?

PCI’s archived blog entries are dated, the rules and statutes referenced may have changed. The analysis or guidance within these blog entries may have become stale, dated, or no longer accurate. PCI will not update or change these entries to reflect the latest analysis or development.