Industry News

"Enough About Assets Already!"

In the November/December 2011 edition of the Profit Sharing/401k Council of America, newsletter, Defined Contribution Insights, Michael Falk, CFA, CRC, Founder, MSF Asset Consulting & Member, Focus Consulting Group, Inc. authored a column with the title above. He presents the thesis that "spending time trying to discern which products to invest in or asset allocation to implement can pale in comparison to aspects someone actually has the ability to control. Changing your spending and/or lowering your spending requirements (need) have primacy." He suggests that you work longer even if only part-time to at least age 70, so that your savings and social security benefit will grow and so that you will have fewer years of making withdrawals. Work where you are most likely to be spending your money, for example at a golf course if you are a golfer to get employee discounts or a yarn shop if you are a knitter. Minimize or pay-off all your debts during your extra years of work. Immunize your monthly spending requirements by matching your spending with your income from social security and possibly purchasing an annuity so you are not at the mercy of the volatile stock and bond markets. Purchasing an annuity can also provide you with the equivalent of "longevity insurance" so that you are not at risk of out living your assets. Once your spending requirements are immunized, then you can consider creating a "policy" for spending wants. You may want to travel more or help with some of the expenses of your children or grand children, but can you really afford to do as much as you would like? Remember that your earning power is dramatically limited or gone once in retirement while theirs is not. One of the most potentially superfluous and sizable monthly expenses is a car. Do you really need two cars now that you are retired or if you live in or near the city do you even need one? Lastly, life insurance can do more than satisfy a bequest desire. It can also help to inexpensively replace monthly income that may be lost when a partner passes away. "…Psychologists say that people are happier when they feel in control. Fewer spending requirements would lead to more control, and just may make retirement an even happier place to be."

(Sources: Insights and FCM)

Updated 11/28/11