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This article by Kathleen McGinn Spring was prepared for the July 24, 2002 edition of U.S. 1 Newspaper. All rights reserved.

Make Your Money Last As Long as You Do

Two years ago, investment returns of 20 percent were

a ho-hum certainty for all but the most unlucky investors. Needless

to say, those days are over. While the new reality is unsettling to

nearly everyone opening 401 (k) statements, it is particularly difficult

for retirees and for anyone nearing retirement.

Is there any way a person with a $1 million portfolio can count on

a 10 percent return? "That’s a difficult question," says Charles

Bowman, vice president of trust and wealth management for Sovereign

Bank. Even that return, less than half the gain the Dow racked up

regularly throughout much of the ’90s, is impossible to guarantee.

Bowman speaks on ways to make assets last a lifetime, despite a dodgey

stock market, at a free seminar sponsored by CareOne, a senior care

community in Hamilton, and held at its Whitehorse-Hamilton Road facility

on Thursday, August 8, at 6 p.m. Also speaking is attorney David

Boyer. In addition to asset growth and preservation, the seminar

addresses legal and financial issues inherent in long-term care and

assisted living. Call 609-586-1600.

Bowman, a 1987 graduate of Lycoming College in Pennsylvania, has been

with Sovereign for one year. Before that, he worked for Summit Bancorp.

A sociology major in college, he is not sure how he ended up in banking,

but counseling clients on how to make their money last as long as

they do draws on some of the skills a good social researcher needs.

For one thing, Bowman must try to figure out each client’s longevity

— a delicate matter — in order to build an effective strategy.

"If a client is 65 years old," he gives as an example, "and

both of his parents lived to be 102, he could be looking at 30 to

35 years in retirement." Eliciting information about a client’s

health, habits, and relatives’ age at death requires sensitivity.

Getting it is not easy, but, says Bowman, the more information a client

is willing to share, the better the plan for his assets can be.

Bowman shies away from providing asset allocation formulas. "Each

client is different," he says. Factors ranging from risk tolerance

to special circumstances, perhaps providing for a handicapped child,

need to be taken into account in deciding where to put each client’s

money to work. Here are some of the considerations:

Length of retirement. A person who plans to continue working

through his 70s has less need for both growth and income than does

a person who wants out of the rat race at 50, and whose parents and

grandparents lived to a ripe old age.

Lifestyle. Most clients, says Bowman, are loath to see

their lifestyle slip below a level they consider comfortable. Lifestyle

factors can include a desire to maintain a vacation home, travel extensively,

or pursue an expensive set of hobbies. Retirees with paid-up mortgages

who envision a retirement of tending the front garden should not need

as big — and high-performing — a portfolio as will retirees

with a yen for big game hunting in Africa and round-the-world cruises.

Inflation. Regardless of the desired lifestyle, Bowman

cautions that goods and services are very likely to cost more —

maybe significantly more — in 10 years, and more yet in 20 and

30 years. Most retirees will need more than asset safety. They will

need asset growth to keep pace with inflation.

Risk tolerance. Somewhere, someone is reaping 20, or 30,

or 250 percent returns. Clients need to realize that over-size returns

generally entail over-size risk. Some people — even in retirement

— think big rewards are worth the lost sleep that often accompanies

them. Others shudder at the thought of losing even a fraction of one

percent of their hard-earned savings.

Wealth transfer. Some individuals are happy to work at

dying broke, spending all of their savings on the lifestyle they want.

Others want to make sure there is something left for their heirs or

to charities that are important to them. When passing on wealth is

the goal, retirees need to be realistic about what they will need

— particularly in light of current low returns on most investments

— before they begin a program of gifting.

Bowman is seeing a number of wealthy, relatively young retirees

at his Princeton Junction office. Did these under-60 retirees make

their money in the stock market, in the corporate suite, or through

a professional practice? "All of the above," he says, adding

that appreciation in the value of real estate in central New Jersey

also has played a role in building wealth.

Bowman, now 37, pauses not at all when asked about when he plans to

retire. "In 20 years," he says confidently. "I will be

ready." He is building the foundation for early retirement through

regular contributions to his 401 (k), IRA, and brokerage accounts.

Among his clients, the most frequently voiced regret is a failure

to implement just such a program of disciplined investing from an

early age. "In the markets," says Bowman, "time is your


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Please Donate

The Mercer County Bar Association is asking members to

help send kids to school in the fall with new backpacks filled with

essential school supplies. A donation of $30 will provide a child

with a filled backpack. Send checks payable to MCBF to 1245 Whitehorse

Mercerville Road, Suite 420, Hamilton, New Jersey, or call 609-585-6200

for more information.

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