of us have financial goals, whether it is to retire at a reasonable
age, fund our children’s education, do some traveling or simply
manage debt. While overall plans haven’t changed, people’s
attitudes have gone through a period of adjustment — and that’s
occurring across all age groups, local industry experts say.
are more concerned with the safety of their investments than ever
before," says David A. Baumgarten, president of Bank Mutual in
Milwaukee. "Baby boomers are concerned if their money will last
the rest of their lives. Their primary question is, ‘Do I have
enough?’ And, even Generation Y-ers under 30, who traditionally didn’t
think much about saving for the future, are thinking more about
retirement, seeing what has happened to the stock market and their
parents," he says.
goal, planning is still the key, financial experts say.
investment involves some risk, it’s important to learn techniques
and strategies that minimize those risks. "When you put an
investment portfolio together, you can’t just set it and forget it.
You need to understand what you own so you can manage it," says
Charles Albrecht, senior vice president, Investments, Wells Fargo
Advisors in Milwaukee.
investors follow these guidelines:
goals. What are you saving for and when will you need your money?
"You may need to review and adjust your goals from time to
time," Albrecht says.
your risk tolerance. "How much can you afford to lose? This
depends on different factors, including age and income," Albrecht
•Know what you
are investing in. "Many people don’t know. Even some investment
advisors don’t understand the investments they recommend to their
clients. That’s why it pays to know something about your
advisor," Albrecht recommends.
your portfolio. "This is extremely important. Don’t invest in
just one type of asset. You need asset classes that tend not to
correlate with each other," Albrecht says.
flexibility and liquidity in your portfolio. "Make sure you are
able to easily make adjustments. A life event can occur that might
necessitate the need to obtain cash quickly," Albrecht says.
portfolio and rebalance it from time to time. "This should be
done at least annually. When circumstances change, review your
investments to see if they still make sense," Albrecht advises.
Finally, just be
prudent, Albrecht says. Avoid falling prey to deals that sound too
good to be true. "We tend to let our guard down when we hear a
good pitch. Many people learned some hard lessons in the last few
years," Albrecht says. "It sounds cliché, but if an
investment sounds too good to be true, it probably is."
years ago, people used to tell me all the time that they wanted to
retire early. I don’t hear that so much anymore," says Blanche
Berenzweig of BSB Financial in Mequon. "These days, people are
planning for two primary goals: retirement and college for their
children. And, an increasing number of my older clients are providing
funds for their grandchildren’s education. They may be concerned
that their children can’t afford it," she says.
The best vehicle
for saving for college is a 529 plan, Berenzweig says. "A 529
plan is a tax-advantaged savings plan designed to encourage saving for
future college costs. These plans are sponsored by the state and some
private colleges and universities," she says.
The 529 savings
plans generally permit investors to establish an account for a future
student, choosing among several different investment options that the
savings plan invests on behalf of the account holder. These options
include stock or bond mutual funds and money market funds, as well as
age-based portfolios that automatically shift toward more conservative
investments as the student gets closer to college age.
many benefits to a 529 plan," Berenzweig says. "Withdrawals
can generally be used at any college or university, and earnings aren’t
subject to federal tax or state tax so long as the withdrawals are
used for college expenses. And, the parent or grandparent can keep
control of those funds. You can keep it going as long as you want, and
if the student gets a scholarship and doesn’t need the money, it can
be transferred to another beneficiary," she says. Generally,
there are no income limitations or age restrictions on 529 plans.
clients might be re-evaluating their investments, most are trying to
stick with their long-term strategies, says Lori Gervais, CFP, senior
vice president, Gervais Group, Robert W. Baird in Mequon. "I don’t
think folks are dropping their dreams. Their perspective might be
different; for example, instead of saying, ‘I want to retire early,’
they are saying, ‘I want to retire comfortably,’" she says.
"Or, they are seeking retirement at 60 or 65 instead of 58."
want something to look forward to, Gervais says. "They may want
to sail around the world or build a home up in northern Wisconsin.
They are still planning for these things," she says.
her clients save for dreams like travel after retirement. "We
have to evaluate a number of factors: When will they need the money,
what is their current income and current investments, and what can
they afford to put aside toward that goal? We have to look at the
present value of that future cost and build a monthly savings budget
for that goal," she says.
You always need
to be focused on what you want to do and when, Gervais advises.
"If you have 10 years to plan for your trip, you likely have the
opportunity to invest your money in multiple investment
vehicles," she says. "But we need to create a customized
plan, to evaluate where it’s best to invest and what makes the most
sense for each individual."
planning involves multiple aspects including, of course, savings and
investment, but also focusing on credit and debt management. Financial
planners can recommend a plan to help lessen your debt, to free up
more money for investment. "In the current environment, many
people are simply looking to properly manage their debt," says
Matt Demet, senior vice president, Wealth Management, at Johnson Bank.
"Ultimately, people are trying to get themselves into a position
to retire at a reasonable age. Part of that is making sure people are
effectively managing their liabilities with regard to credit
cards," he says.
Paying down debt
requires some discipline, Demet says. "Many people have gotten
into situations where they have racked up high credit card bills. And,
many individuals used their homes as ATMs in recent years," he
question to ask is, ‘How did we get here?’ Was it a one-time
situation that drove the problem? Or, is it an ongoing situation? A
plan needs to be put in place that will examine anticipated income
flows and other things that can be done to try to eliminate
debt," Demet says. "We may look for other resources, such as
selling investments. Or, some individuals may have equity in their
homes and they can take advantage of the favorable interest rate to
refinance," he says.
It comes down to
managing your individual balance sheet. "You need to attempt to
strike a balance between reducing liabilities and increasing assets.
The goal is to improve net worth," Demet says.
Closing in on
approaching the traditional retirement age? More importantly, are you
ready for retirement? "The last 10 years before retirement are
the most important years in terms of investment planning. Typically,
these are the 10 highest earning years when you likely have the most
money in the stock market, although you may want to pull back a little
on stocks," says Michael Sadoff, investment advisor with Sadoff
Investment Management LLC, in Glendale.
underestimate the importance of the choices you make during those 10
years between 55 and 65," Sadoff says. "The wrong decisions
can lead to disastrous mistakes, and that applies to people at all
levels, whether annual income is $100,000 or $500,000. The math doesn’t
change," he says.
To prepare for
retirement, people need to determine how much money they have, how
much they plan to save per year, and at retirement, how much they plan
to spend, Sadoff says. "Then, we subtract Social Security and any
pension and say, OK, they need this additional dollar amount. Next, we
look at what is in the retirement account and how much more they will
need to make it last throughout their expected retirement years. And,
that could be 20 years or more," he says.
mix is critical, Sadoff says. "You might have all stocks at age
55, but as you get closer to 65, you need to diversify to satisfy your
comfort level," he says. "Consider how much you’re going
to save and how much the portfolio is going to appreciate."
with the correct team is important, he says. "You need the
correct advice about not just investing, but about insurance, estate
planning and other issues. Odds are that the market will come back,
but the economy is likely to be lackluster for a number of years. You
can only build in so much protection," he says.