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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
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
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:
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.
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.
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.
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.
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.
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
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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