By Susan E. Campbell
\nWhether the forecast for the economy and the investment markets is good, bad, or middle-of-the-road, retirement professionals agree that staying the course is the best course.
\n\u201cThe number one thing for 2020 is, in a word, uncertainty,\u201d said Don Tenne, a financial planner with Ameriprise Financial Services and based in Glens Falls.
\n\u201cTariffs, elections, China and other international uncertainties are things that tend to slow down the market even though the economy is doing very well,\u201d said Tenne.
\nMarkets are driven not only by fundamentals but also by investor psychology, which can be impacted by alarmist media, he said.
\n\u201cThe media says a recession is coming, but we don\u2019t know when,\u201d he said. \u201cMany experts say recession may be one to six years ahead. So we see the stories, and then they go away.\u201d
\n\u201cThe retirement specialists in our office attend conferences and listen to economists from such firms as Dreyfus and BlackRock, and they don\u2019t expect a recession in 18 months,\u201d said Ryan Lambert, founding partner with Three Buckets Wealth Management which serves the region and has an office in Glens Falls. \u201cTheir forecast is fundamentally looking very positive.\u201d
\n\u201cFor the past several years the press has been saying the market has to go down,\u201d said Eileen Vitarelle, who founded Peridot Wealth Partners LLC in Clifton Park. \u201cAnyone who panicked and sold during the final quarter of 2018, which posted a 19 percent drop, would have missed out on all the returns of last year.\u201d
\n\u201cIt\u2019s hard to say what\u2019s real because reality can change in a day, week or year from now,\u201d said Vitarelle. \u201cThe 24-hour news cycle has skewed a lot of people\u2019s thinking and done damage, but in the short term, the markets can be irrational.\u201d
\nWhile the public tries to separate what is really going on from what they hear is going on, retirement specialists work to take the emotion out of investing and help clients focus on their individual plan\u2014and stick to it.
\n\u201cThe country is divided on a financial front and people are making emotional decisions,\u201d said Lambert. \u201cOur job is to be a circuit breaker to get clients to think about their specific situation, not the particular political environment. The markets do not like uncertainty.\u201d
\n\u201cWhen the market gets shaky we reach out to clients to assure them to stay the course because long term, that\u2019s how their retirement accounts are going to do better,\u201d said Vitarelle.
\n\u201cOne study showed that six out of the 10 worst days in the market since 1999 occurred within two weeks of the best 10 days,\u201d she said. \u201cThat demonstrates how unpredictable the markets are. Long term, markets tend to be rational.\u201d
\n\u201cThe biggest thing we talk to clients about is accumulating money for retirement,\u201d said Lambert. \u201cBut the biggest challenge is the de-cumulation phase,\u201d which is when assets are withdrawn to pay for expenses in retirement.
\n\u201cWhen you are young you have time on your side, but approaching retirement, if you take money out of the wrong account, you cannot put it back in,\u201d he said.
\nThat is why his firm sets up three investment buckets as a client makes the transition into retirement. This strategy ensures that withdrawals come from the right account from a tax perspective and a risk perspective, he said.
\nLambert said the first bucket is the no-market-risk account investing for zero to three years until retirement. The second is the income-deriving bucket for years four through seven before retirement age, and thus has a strong position in fixed-income investments. The third is the longest-term bucket, eight years out and longer.
\n\u201cThe long-term bucket can accept fluctuations with the stock market because it has a chance to grow,\u201d he said.
\nLambert said \u201cthere is always an underlying fear\u201d that an individual may run out of money during retirement, now that life expectancy is not years but decades longer than when the social security system was established.
\n\u201cThis is one reason why some people don\u2019t do retirement planning or financial planning, because they do not want to face this fact,\u201d he said. \u201cThe longer one lives, the greater the fear.\u201d
\n\u201cIf younger people do not take control, no one will,\u201d said Vitarelle. \u201cThis is no longer a world where people get pensions, and social security does not come near replacing the income needed in retirement.\u201d
\nOn the other hand, some people end up working longer than they had to because \u201cthey never did their homework and didn\u2019t know where they stood\u201d financially, he said.
\n\u201cPeople should invest for the future first, then figure out how much they have to spend,\u201d said Vitarelle. \u201cI ask my clients to consider, do you want to live life like you want to today at the expense of your future?\u201d
\nRetirement saving accomplishes the goals of \u201cpaying yourself first\u201d with money that accumulates with current and future tax benefits, said Vitarelle.
\nMoreover, since retirement contributions are systematic, \u201cit takes the emotion out of investing and purchases are being made during all market conditions,\u201d she said. \u201cBut the more volatile the markets, the better the concept.\u201d
\n\u201cLong-term money, like retirement money, belongs in the market,\u201d said Vitarelle. \u201cEvery financial decision has a risk, but investing in stocks is the only way to beat inflation.\u201d
\nOn the legislative front, Lambert said there are two things to look out for.\u00a0\u201cIf passed, the Secure Act will impact the financial world,\u201d he said.
\n\u201cOne aspect is that the mandatory distribution age will move from age 70 1\/2 to age 72, allowing retirees to accumulate assets another year and a half before forcing withdrawals based on life expectancy,\u201d he said.
\nThe other aspect is less favorable to beneficiaries of taxable IRA acocunts.
\n\u201cInherited IRAs or Stretch IRAs may have to be paid out in only 10 years, down from 25 years,\u201d Lambert said. \u201cMost people have not heard of a Stretch IRA but it becomes a factor as we age.\u201d
\nThis change means the U.S. Treasury may collect taxes on distributed assets sooner because beneficiaries cannot keep them accumulating another 15 or 20 years, according to Lambert.
\n\u201cWith the lowest tax brackets ever, IRS needs to collect revenues faster,\u201d he said. \u201cThe budget deficit cannot go on forever.\u201d
\nLambert and Vitarelle said that whether looking ahead to another year or indeed, another decade, it is best to make sure client portfolios are positioned properly.
\n\u201cThe past does not tell us what the future will be, but it does inform the decision process looking ahead,\u201d said Vitarelle. \u201cWe prefer to consider goals and risk tolerances and be appropriate with the particular client\u2019s investments.\u201d
\n\u201cIf not investing or talking to a financial advisor, you should start, and the sooner the better,\u201d she said. \u201cAfter all, it is time in the market, not timing the market, that is important.\u201d<\/p>\n","protected":false},"excerpt":{"rendered":"
By Susan E. Campbell Whether the forecast for the economy and the investment markets is good, bad, or middle-of-the-road, retirement professionals agree that staying the course is the best course. \u201cThe number one thing for 2020 is, in a word, uncertainty,\u201d said Don Tenne, a financial planner with Ameriprise Financial Services and based in Glens […]<\/p>\n","protected":false},"author":196,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[40],"tags":[],"class_list":["post-34224","post","type-post","status-publish","format-standard","hentry","category-retirement-planning"],"yoast_head":"\r\n