Ed Kucharski is a certified financial planner with an expertise in helping women figure out how to budget, save, and allocate their money so that they avoid what, for most, is the biggest fear of all — the specter of poverty in old age.
“My job is to understand client goals, age, and volatility preferences,” says Kucharski. He then guides them in developing an appropriate investment strategy. He will be sharing some of what he has learned in “Smart Women Finish Rich” on Wednesday, July 19, at 6:30 p.m. at Mercer County Community College. Cost: $30. For more information, call 609-586-9446 or email ComEd@mccc.edu.
Kucharski, principal in Kucharski Financial Services in Flemington, doesn’t do his own research, but he says that he knows exactly where to get the best information.
He turns to Morningstar, an independent, third-party research firm for information on stocks and mutual funds, using various filters to select mutual funds for his customers: management tenure of at least five years; top quartile of performance for the last five years; risk rating of average or below average; and expense ratios lower than average. Then he analyzes the fees and expenses of different mutual funds with personalfund.com to ensure that a fund’s costs are reasonable.
To locate money managers to advise his clients about stock selection, Kucharski uses Clark Capital Management in Philadelphia to help him pick “the best money managers in the country to assist clients with positions in individual securities.” After performing due diligence on all the private money management funds in the country, Clark creates lists of seven or eight money managers in each asset class. Clark in turn has designed a long-term protection strategy through Glenmede Trust to protect portfolios by using put options to maintain a 10 percent limit on downside risk.
A financial planner can do something as simple as making people aware of potential problems. When people retire, for example, they have to withdraw funds regularly, but making withdrawals when the stock price is down can decimate a fund.
Kucharski offers this example: Suppose a person had $100,000 in a mutual fund 20 years ago. Without withdrawals, it would be worth about $1 million today, presuming a 10-percent return. If, however, a person withdrew six percent a year over that same time, the fund would run out of money, even though the fund is appreciating at 10 percent a year. Why? Because of bear markets. “During a bear market,” Kucharski explains, “One hundred thousand dollars may go down to $70,000, and if you are taking out $6,000, you will have fewer shares to grow.”
“People may be able to do fine for themselves when the market is rising,” he says, “but when the market is going down, they need to have in place some kind of principal protection or conservation strategy.”
Kucharski bases much of his workshop on David Bach’s best selling book “Smart Women Finish Rich.” Women face unique challenges in preparing for retirement. Women in the United States live five years longer than men, according to the most recent statistics. The average age at which women become widows is 56, and women are out of the labor force for an average of 11.5 years for childrearing. Consequently, he says, women must learn how to take charge of their financial futures so that they don’t outlive their incomes.
Kucharski has several recommendations on how to begin:
Learn about investing. One way is to read one or two investment books every year. He suggests starting with Bach’s book and then checking related Amazon recommendations.
Don’t stop at books, though. Learn one new thing about money every day, perhaps by reading the Yahoo finance page, the business section of the newspaper, or by following the Motley Fool’s website. Seminars aren’t a bad idea either, but be aware that some are held principally to drum up business for financial professionals out to sell products or services.
Pay yourself first. Set aside money each month in an account you won’t touch. You can do this through pretax retirement contribution plans such as a company-sponsored 401K (or for university, government, and not-for-profit institutions, a 403B) or IRAs.
Business owners with no employees may want to create a solo 401K, which allows them to put away a substantial amount of money. This can be a good strategy for the many women who go back to work as consultants, says Kucharski.
Factor in lattes. Combine Bach’s “latte factor” with his seven-day challenge to free up money for savings. “On an average day,” says Kucharski, “people start out with a nonfat latte, have desserts, coffee, and candy bars. They often spend $10 before they leave work.”
Even this small amount, put into savings, would yield $2,500 a year plus interest, which multiplies pretty quickly into a substantial sum.
Kucharski suggests taking a seven-day challenge to find additional ways to reduce unnecessary expenses and come up with free dollars to be saved for retirement. For the challenge, you’ll need a pocket notepad with metal rings (or you can download a challenge form from Oprah’s website at http://www2.oprah.com/download/pdfs/money/money_bach_checklist.pdf.).
For a week, every time you spend money on a credit card, in cash, or by check, write it down. Then go back and examine what you’ve done. Kucharski says that you’ll realize there are areas where you didn’t need to spend money. For example, you could have made coffee at home. Then you have to convince yourself to invest that money for the future. Kucharski also suggests imposing a waiting period for impulse purchases.
Build an emergency fund for unexpected expenses. Try to find a place that pays better than low-interest savings and checking accounts at banks. Kucharski suggests exploring money-market checking as well as ING Bank’s no-minimum savings account (www.ingbank.com), which is currently giving 4.25 percent interest and is FDIC insured, with no fees or service charges.
Review your wills and insurance programs. The most disciplined, focused savings plan can be wiped out in no time at all by a simple fall that breaks a bone or two and forces you to leave work for months on disability.
Fill three baskets. The last step is to build an investment portfolio that comprises three baskets of money, to ensure sufficient funds for different types of needs.
For short-term requirements of the next two years or less, use money markets, certificates of deposit, and savings accounts. For the next two to five years, invest in individual bonds, government savings bonds, Treasury bills, and bond mutual funds. For your dream basket, for goals out five or more years, like education or retirement, invest in stocks, mutual funds, and balanced funds (a mutual fund with a balanced portfolio of stocks and bonds for generating a well-balanced return of both current income and long-term capital gains).
How you allocate your longer-term assets will depend on the length of time they will be invested, your age, and your tolerance for risk/volatility. Kucharski suggests diversifying your holdings across large, medium, and small companies, as well as internationally, and to balance your portfolio between value and growth orientations.
A value stock is one that has dropped out of favor and whose price is currently depressed, but that money managers believe will do better in the future. For example, McDonald’s dropped to $12 a share a few years ago while the company was in the midst of changing management and varying its menu. “A value manager would buy with the confidence that these changes would translate to a better price in the future,” says Kucharski.
A growth stock, like Google, is one that has experienced significant near-term growth that is expected to continue; and the price is rising in expectation of this future growth.
Kucharski grew up in Bridgewater, where his mom was a homemaker and his dad worked as a machinist at Ethicon, a division of Johnson & Johnson, for 30 years. He was definitely not headed toward finance when he graduated from Westchester University in Pennsylvania with a B.S. in criminal justice. He had hoped to work for the FBI, but during the 1979 to 1980 recession, when he was looking for his first job, the FBI had a freeze on hiring. He joined Prudential Insurance for three years and then moved to American Express Financial Advisors, where he stayed from 1984 to 1988.
Then he became an independent0 advisor under the name Kucharski Financial Services and received the Certified Financial Planner trademark designation in 1989 from the College of Financial Planning in Denver, Colorado. He took some of the training by correspondence and online, as well as through classes at Fairleigh Dickinson University. In December, 2000, his company joined FSC Securities, an operating unit of AIG Advisor Group,
He stresses that financial planning is essential — but that no one needs to go it alone. Financial information is bountiful. It’s on the Internet, at community colleges, and available through financial advisors. It just takes motivation to overcome financial inertia — even though the piggy bank on the chest of drawers just seems easier.