Thinking Long Term

Keeping What You Make

We've all heard stories about lottery winners taking home prizes of millions of dollars and years later having nothing to show for it.

It happens with professional athletes, with people who inherit money or get big packages when they are downsized.

These dramatic situations highlight a common problem.  Some people don't understand personal finance. 

People may obsess about individual investments and fail to  think about the important questions that will determine whether they can accumulate enough money for retirement or bequests or their other goals.

People don't understand the logic of the financial markets and they don't think about what they are trying to accomplish.

They concentrate on the short term and squander one of the greatest assets any investor has: time. With time, your money, if pointed in the right direction, can accomplish wondrous things.

Optimism, too, is in short supply now. After the Great Recession, most people are pessimistic about their financial futures and their actions make that pessimism likely to be justified.

With trillions of dollars earning close to zero interest -- some invested at negative yields -- their investment rewards will indeed by bleak. As it likely will be for people darting in and out of the market at record speeds.

But for those who maintain their optimism and keep to the time-tested basics of proper asset allocations, broad diversification, attention to costs and sensitivity to taxes, there's no reason to fear the future.

Secure Retirement Planning

The Right Choices

Recently I talked to someone nearing retirement. The timing wasn’t totally his choice and he was nervous. As he talked I realized he didn’t grasp what critical choices he has to make now or understand the options. He didn’t see where he needed to put the most thought and energy.

Often we sweat the small stuff and don’t grasp the big picture. He couldn’t tell whether he was in good financial shape or not and he didn’t have a way to measure it.

Eventually, I identified the most important choice that he will have to make soon. That choice could determine the comfort and security of his wife for decades if he dies first. Statistically, that is likely to be the case. And yet many people don’t think of this as a real choice or anything important. Or even whether to involve her.

This item is couched in technical language and not flagged in big or bold type. It’s easy to gloss over and down the road you may even forget you had a choice. But its impact could be profound.

Those are the things I like to help people with. Get the big things right and the rest generally falls into place.

Easy and Simple?

The “Simple” Social Security Formula

I was excited to read that Prof. Laurence Kotlikoff had put together a simple formula for deciding when to claim Social Security retirement benefits. Prof. Kotlikoff is one of the country’s top experts on consumer finance and I thought he had found the Holy Grail for one of the most difficult problems in retirement planning. It was disappointing to finally see his “simple formula.” After making some simplifying assumptions, he boils his formula down to 9 variables.

               B(a) = PIA(a) x (1 – e(n)) x (1 + d(n)) x Z(a) + max((.5 x PIA*(a) – PIA(a) x (1+d(n))) x E(a), 0) x (1- u(a,q,n,m)) x D(a)

Here’s the link to the complete article in a recent edition of Forbes Magazine:

http://www.forbes.com/sites/kotlikoff/2012/07/17/when-should-i-take-social-security-a-simple-formula/

http://www.forbes.com/sites/kotlikoff/2012/07/17/when-should-i-take-social-security-a-simple-formula/ 

Frequently I run across people who think that personal finance is easy and simple and that reading a few magazines or newsletters and catching an occasional cable television show on the markets will give them all the information they need. I don’t claim to have all the answers but if you’d like to tackle that formula together, give me a call.

“A Measly Million: Will I Outlive My Money or Will My Money Outlive Me?”

  

“A Measly Million: Will I Outlive My Money or Will My Money Outlive Me?”

Larry Luxenberg, C.F.A., CSA

n            How Much is Enough?

n            Planning for a Secure Retirement

n            Counting All Your Assets

n           What are the big risks?

n           Taking the Long-Term View

Often people tell us that they won’t be able to retire. Many people have been devastated by the recession and volatile markets. But many are in better shape than they think. Often they don’t include all of their sources of income or aren’t looking at the right risks. Discover the basic building blocks of a comfortable retirement.

“Is Your Retirement Plan Working for You?

 Sandford (Sandy) Wollman

                                                                                                                                                                                                                                                                                                                                                   

   How Entrepreneurs Can Improve Their Company Plan

  The Hidden Costs of Your 401 (K) and What to Do About It

  How the New Retirement Plan Disclosure Can Cut Your Costs

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7 p.m. Thursday June 21, 2012

Comfort Inn

425 E. Route 59
Nanuet, NY 10954
(845) 623-6000

For additional information contact Lexington at luxenberg@lexingtonave.com or 845-708-5306

Lexington Avenue Capital provides individual wealth management and specializes in retirement and Social Security strategies.

Investment Advisory Services provided through Partnervest Advisory Services LLC, a Registered Investment Advisor. 1216 State Street, 3rd Floor, Santa Barbara, California 93101-2602.  Channel Financial Planning and Partnervest are not affiliated.

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