the Great Recession becoming a distant bad memory, people are once
again thinking about the future ≠ó including retirement planning.
But the recent
economic setbacks have left many wary of the market and the security
of their retirement investments. Many question whether once-standard
advice like the 4 percent rule, which recommends retirees withdraw
their retirement savings at a rate of 4 percent per year, still holds
So how are
financial professionals advising clients on retirement planning in
these uncertain times?
Great Recession, more people seem willing to come to us for
advice," says Aaron Kowal, a financial adviser with the Kowal
Investment Group in Waukesha. "They donít want to be shocked
According to a
study published by The Pew Charitable Trusts last May, between 2007
and 2010 every age group experienced a significant loss of wealth.
Early boomers lost 28 percent of their median net worth; the rest of
the American population fared even worse.
like a bucket of cold water," says Karen Ellenbecker, president
of the Ellenbecker Investment Group in Pewaukee. "What I see now
is that people are skeptical about being able to retire."
uncertainty of inflation, the volatility of the stock market and the
rising cost of health care, people are unsure how to move forward.
need to try to insulate their portfolios by being
well-diversified," says Ellenbecker. "We advise our clients
to have the equivalent of five to seven yearsí worth of fixed income
available in cash reserves."
Hill of Crescendo Wealth Management in Grafton says she has seen
allocations to investment portfolios change during the past five
years. Many are favoring more secure investment options like bonds and
mutual funds over the potentially volatile stock market.
definitely some PTSD (post-traumatic stress disorder) going on in the
market," Kowal says. "People are still worried."
retirement today are saving more, spending less and working longer,
says Michael Sadoff, a portfolio manager with Sadoff Investment
For those who
stayed the course and continued to put money away during the
recession, Kowal says their retirement portfolios have rebounded for
the most part. "Nothing can bring us back to 2008," he says.
"But those who stayed consistent in making contributions are
sitting pretty well."
"A lot of people are back on track," he says.
But with the
market rebounding, Ellen-becker cautions that many people are already
forgetting how much the economic downturn impacted their investment
are hearing how well the market is doing and theyíre losing sight of
their investments again," she says. "You always need to keep
a percentage of your portfolio safe."
As a general
rule, many financial planners recommend saving enough to replace 70 to
100 percent of your preretirement income when you leave the workforce.
"It can be
difficult to determine the best way to allocate your assets,"
Hill says. At the very least, she says, people need to plan on having
enough guaranteed income to meet their basic needs in the event of
another economic downturn.
be risky right now," Sadoff says. "More people are relying
on stocks because of the appreciation."
For retirees and
people nearing retirement age seeking to rebuild lost savings,
financial vehicles that offer high rates of return can be a tempting
option. But thereís one major drawback to this approach ó
investments that offer high rates of return also carry the greatest
risk. "The question is how much risk can you afford ó
financially and emotionally," Ellenbecker says.
Clients Donít Tell Their Financial Advisers
personal information from your financial adviser can adversely
impact your financial investment performance. Yet many investors
donít realize the risk involved in not disclosing personal
matters like debt and health problems.
matters can profoundly affect a familyís financial
stability," says Betty Wellhoefer Hill of Crescendo Wealth
Management in Grafton.
to a 2013 survey by Securian Financial Group, nearly one-third
of respondents confessed to holding back critical information
that could affect their finances. Health and marital
difficulties rank high among the critical subjects clients donít
openly discuss with their advisers.
clients keep secrets theyíre ultimately taking on more
risk," Hill says.
Ellenbecker, president of the Ellenbecker Investment Group in
Pewaukee, says clients arenít always forthcoming about the
actual amount of debt they carry.
to Securianís findings, 25 percent of clients surveyed
admitted to carrying debt their financial advisers donít know
lot of couples donít talk about their spending habits, and, as
a result, the debt they report to their financial adviser may
not be accurate," explains Ellenbecker.
also has encountered clients who are reluctant to reveal how
much money they lend to family members.
sometimes donít want to admit how much theyíre helping out
their adult children financially," says Michael Sadoff, a
portfolio manager with Sadoff Investments.
issues can be another sore spot. Aaron Kowal, a financial
adviser with the Kowal Investment Group in Waukesha, recalls a
conversation with established clients who suddenly disclosed
that long-term health insurance was a priority.
sound financial plan is totally dependent on the information
provided by clients," he says.