Golden Opportunities

Has this economy got you re-thinking your “re-tirement?” After you re-view all the re-turns you re-ly on, a re-action might be re-quired. But an over-reaction could re-duce your future re-sources. Luckily, Jim Lineweaver is here to help us re-structure our re-tirement readiness plans. Jim is a financial advisor with the Lineweaver Financial Group.

Question: Whether someone has just retired or has been retired for awhile, this economy really presents some challenges. Give us a picture of what the world looks like right now for retirees.

Answer: People have seen decades of savings erased over the past year. And this down market is coming at a time when 78 million Americans – the Baby Boomers – are just starting to retire. Now the IRS has given you some assistance this year; hey have given you a waiver from having to take Required Minimum Distributions from your qualified retirement accounts this year. This way you can leave more in your IRA to grow tax deferred, and you don’t have to sell investments while they are so depressed. So, don’t take a minimum distribution this year.

Question: What else should we do to react to this economic mess?

Answer: Try not to sell your depreciated assets to cover living expenses. If your investments have dropped, and you sell them now, they’ll never bounce back. So, to cover expenses, first spend cash. It may even make sense to take a CD early and pay a penalty. You may also be better off taking a loan against your home or 401(k) instead of selling stocks which are at their lowest point.

Question: What can we do now if we don't have cash available?

Answer: You may postpone retirement, or go back to work to help cover your living expenses. Even a part time job might help. Or you do what you can to reduce your expenses; delay costly home repairs, postpone that new car or expensive vacation, delay funding grand kids education accounts, and the like.
You may even look to cut costs by moving to a less expensive home. But here you’ll also have to consider the costs of selling in a bad market – the loss you take on selling your home could put you in a much worse financial position.

Question: What can we do going forward?

Answer: Create a cash fund and hold it in reserve, so you won’t have to sell investments at a bad time. Next, by having a portion of your portfolio in fixed income securities with the maturities structured, or laddered, so that you have securities maturing at regular intervals, you alleviate the need to sell prior to maturity.

Question: Is the lesson of this recession to be very conservative with out money in retirement and keeping all in cash?

Answer: No, because inflation can hurt, too. We go back to what we have told viewers for years, at this stage of the game your primary objective should be capital preservation.
Follow the rule of 100, and you are probably OK. Take 100 and subtract your age, the resulting number is the maximum percentage of your portfolio that should be at risk.

If you’ve realized you need to redesign your reserves for retirement, give Jim a call. He’ll respond and review your situation. My thanks to Jim Lineweaver.