How To Survive a Retirement: The 3 Questions.

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Posted on May 15, 2016 by Richard M. Rosso, CFP

In the AMC’s hit drama “The Walking Dead,” where the world is overrun by rotting corpses with a desire to feed on the living, there’s something even greater to fear.

The survivors.

Staying alive in a post-apocalyptic society appears to bring out the worst of what’s left of humanity. People are ruthless killers. Strength in numbers is the best defense, yet poses an interesting dilemma.

One wrong move, one bad decision, and you’re history.

Just like that.

Sometimes, overcoming the most complicated of challenges comes down to the obvious. Nothing’s perfect however complexity fosters confusion which can shift focus, divert your attention. And when your enemies, especially within, outnumber you, it’s only a matter of time before.

Well. You know (it isn’t good).

The good guys devised a simple screening method.

An initial shield to determine if strangers they encounter are worth entry into their community.

Three questions.

Let’s see how you do. Will you pass or fail?

Are you team material?

Or are you best left alone to fend for yourself?

How many walkers (corpses with an appetite for the living), have you killed?

To safeguard others, a survivor must be willing to take out the undead (a shot or blow to the head does it). Plain and simple. If your zombie kills are minimal or non-existent there will be doubts about your contribution to the survival of the group.

How many people have you killed?

Unfortunately there are instances when tough decisions must be made for the sake of self-preservation. Best the number of walkers taken out exceed the number of people otherwise you may become a victim yourself.

Why?

Tread carefully. The reasons for taking out the living best be because of personal survival. Or request. You see -There are sad instances when victims of zombie bites would rather die honorably, in their control, rather than expire from the disease they carry.

They would rather not wake up. Walk around.

As I ponder the power of simple questions, whether in fact or fiction, I have come to realize how most situations, no matter how serious, can be broken down to three questions you ask yourself or others ask you.

When it comes to preparing for retirement, there are so many differing rules, theories, planning tools – in my mind I need to consider retirement similar to a zombie apocalypse.

Sort of puts things in perspective, doesn’t it?

If today, you could clear all the noise, reduce retirement planning to what concerns you the most, what you need to do to protect yourself – What three questions would you ask?

As I work with individuals to formulate personalized retirement strategies, three questions emerge consistently. As a matter of fact, it’s rare when one of these queries doesn’t arise.

Once you strip out the confusion, target the basics.

Focus comes down to three main concerns.

Random Thoughts:

A confident retirement comes down to the money coming in to a household.

Cash flow is everything.

Question #1: How much spendable income may I have on a monthly basis post-tax to keep me, or me and my spouse comfortable for 20 years? Simply put, how much can I have?

Why 20 years?

Let’s face it. The odds of becoming a centenarian are as slim as the dead coming back to life. OK, not that slim but infrequent enough to understand that age 100 shouldn’t be a default setting for retirement plans.

Everyone I counsel is asked to complete the thorough, thought-provoking life-expectancy calculator exercise at www.livingto100.com. Eight out of ten outcomes come in between 80-85 years old. Women average longer life expectancies at 83-86 years old. Per calculator results, men rarely live past 84 years old.

Thought leader Dick Wagner and author of the new book “Financial Planning 3.0,” in a recent interview with the Journal of Financial Planning, stated “financial planning is very, very young as a profession. If you believe that 1969 was the first year for the profession, then we’re into our 47^th year. That’s not very many years if you compare it to other authentic professions.”

So who are we as advisers to indiscriminately assume that retirees are going to live to 100? I’m not sure why I see this occur so often. Maybe it feels safe. Perhaps it’s CYA. Regardless, it’s inaccurate.

Candidly, even if the profession were a thousand years old, longevity analysis would remain a slim, educated guess at best. I am 100 percent certain however that establishing retirement income plans to conclude at age ‘unrealistic’ is an exercise in disappointment. People won’t adhere to goals, milestones they find impossible to achieve.

Please plan for reality. Not fiction. A reach to age 100 will most likely lead to unsuccessful plan outcomes. You won’t feel secure enough to retire or you’ll wait too long thus placing the quality of life in retirement, in jeopardy.

If you believe, based on family longevity and state of health, that there’s a great probability of living to 100, by all means, don’t ignore preparing for the possibility.

The topic is challenging and uncomfortable to discuss. It requires acknowledgement of our own humanity.

A seasoned adviser doesn’t overlook or dance around the topic of longevity. He or she should handle the conversation with grace and honesty. After all, we are all going to die (and hopefully not return to life like in The Walking Dead).

It’s something we all have in common. We don’t seem to like to think about it happening before age 100, especially when it comes to retirement planning.

In the same interview financial futurist Dick Wagner continues his thoughts on the financial planning profession:

“The mission and purpose of financial planning is to work with individuals and families and their personal relationships with money and the fearsome forces that it generates. There’s something about ‘fearsome forces’ – it’s terrifying. I mean, it’s a quintessential challenge of the 21^st century: just try to survive with this money stuff. People do something that’s really hard, which is to anticipate their needs of the last 20-30 years of their lives. Now how do you do that? You have no idea what your health will be, you have no idea what your date of death is, you have no idea how long you can continue to earn a living.”

Financial planners deal with plenty of their own fearsome forces. One source of angst is to have straightforward, yet sensitive discussions; balance the thin line between a portfolio and human life because as Dick Warner lamented, there are plenty of unknowns.

Take it from me – we’re not fond of zombies in the planning process but they do exist.

Before you look to have a retirement plan completed, take it upon yourself to go through a life-expectancy calculator. Sit with the outcome for a while. Do the results make sense?

Once you’re at peace with the information, share it with your financial planner. Incorporate it into your analysis. You’ll both be in sync. You’ll tackle fearsome forces together. The synergy will lead to reasonable goals, follow up and fulfillment.

Question #2: Will Social Security be there for me?

The assumption that Social Security is a dying social program, regardless of the generation, runs pervasive. Don’t underestimate the importance of properly integrating Social Security into your retirement arsenal. For the majority of Americans, this is their sole income for life.

So, let’s clear up several misconceptions.

According to financial planning thought leader Michael Kitces in a recent voluminous Kitces Report on the topic, the Social Security system is often considered “going broke” by 2034. At that time it’s believed the Social Security trust fund will be exhausted.

Most planning clients have a difficulty believing the funds will last that long. Per the analysis, the majority of benefits will still be paid through tax revenues on workers paying payroll taxes at that time.

Social Security recipients usually receive Cost-Of-Living Adjustments each year. An added bonus to an income you cannot outlive is inflation protection. Unfortunately, COLA is not in the cards for 2016 (a rare occurrence), however overall, Social Security remains the best lifetime income deal available to the masses.

It’s best a retiree in good health plan to wait until at least full retirement age (66, or 67) or possibly later to apply for Social Security. By the time I’m consulted for formal retirement planning, many recipients have already applied for benefits early – at age 62, in fear of not being “grandfathered” into the system and losing future benefits.

Unfortunately, unless a household is cash-strapped or a recipient’s health is poor, there’s rarely a reason to apply for Social Security before full retirement age.

Starting early will have a lasting impact to monthly payouts. For example, a person with a full retirement age of 66 who started Social Security at age 62 would experience a permanent 25% annual reduction in benefits.

When I began my career in financial services during the great bull market of the 80s and 90s, the numbers worked out favorably for a Social Security recipient to apply for benefits early and invest the difference.

Since the year 2000, this strategy has been less effective. Over the last sixteen years I’ve witnessed improving life spans, people working longer and unattractive returns on investment assets, which has made Social Security a formidable hedge against longevity and adverse portfolio conditions.

In addition, Social Security has become a stealth, forced ‘savings’ program for a majority of households stressed to save for retirement in the face of rising college costs, financially caring for elderly parents and adult children, underwater mortgages and chronic underemployment.

For most recipients, waiting until age 70 to take advantage of an 8% delayed retirement credit is a smart strategy. In a majority of cases a retiree should seek to postpone Social Security, enjoy a permanent 8% bump in benefits, along with annual COLA (Cost-Of-Living-Adjustments).

Question #3: What should I be afraid of? I don’t really know.

This retirement game is unfamiliar territory. You’re outside the safe or familiar zone (which in The Walking Dead, is a dangerous place to be). Don’t be shy. Nothing is off limits. After all, this is a new experience. You’re not an expert (yet) at this next life phase.

Why not ask a tenured planner what you should fear? Better yet – ask friends and associates who have been retired – what did they find scary about this new world? What had they overlooked? What are the mistakes they’ve learned from? What were their greatest oversights?

There could be enemies hiding in plain sight (it’s tough to trust anyone in a world overrun by zombies), that may be overlooked because you’re too close to the situation.

Frequently I receive questions about fear in retirement. They usually have little to do with money. Ostensibly, information regarding Social Security, healthcare costs in retirement and other crucial topics, is widely available. A comprehensive retirement plan will cover all important financial concerns as well.

What’s difficult to find because a person needs to live it to learn it, is information on how emotionally challenging it is to navigate from the accumulation side of the household balance sheet to the distribution mindset – The new reality where a retiree must depend upon his or her assets to survive. Being outside the protective walls of a job or career is rarely discussed in financial planning circles.

From my experience, it takes at least a year for a retiree to gain comfort with a change in lifestyle, a satisfactory portfolio withdrawal rate, a new purpose for a life away from the office.

Never lose sight of the power of simple questions.

If they can keep the survivors of a zombie apocalypse alive.

Think about what they can do for you.

Three Financial Lies that can Reset or Ruin your Retirement.

Posted on February 13, 2016 by Richard M. Rosso, CFP

A version of this writing appears in MarketWatch’s Retirement Weekly.

The financial sector still gets a bad rap.

Seven years after the financial crisis.

Justifiably so.

In his 2013 book “Finance & The Good Society,” economist Robert Shiller describes a utopia where finance can benefit today’s society. He identifies how financial innovations of the past, like insurance and pensions for example, improved the lives of the masses. The lauded professor at Yale shares his suggestions about the future of finance and how the industry can reform and prosper by serving the common good.

Can you imagine?

Yea, me neither.

I’m sorry to be cynical but you have a better chance of finding a unicorn in your driveway and taking it for a trot over a magical rainbow.

The halcyon days for finance are over.

Today, in the shadow of the Great Recession, forgotten by Wall Street and insidiously faded into the fog of averages, the financial industry is more than ever a marketing machine designed to convince the masses to purchase products they don’t need and to stick with investments that offer more risk for less reward.

The pundits seek to convince, not enlighten. They warn (scare) that if we don’t invest in the manner they suggest, we are in great danger of outliving our money, the boogey-man of inflation will inevitably arise from under our cash and devour our nest egg while we sleep.

From behind their manipulated statistics, these ‘experts’ communicate in serious tones a cozy belief that your household balance sheet has recovered from the Great Recession.

You know better.

Now, more than any other period since 2008, retirees and those near retirement, are vulnerable to the lies that appear pervasively in financial media.

Survival depends on you knowing the difference between white lies that don’t matter and dark fabrications that have the potential to derail your retirement planning.

There are three financial lies you must ignore to preserve your wealth right now.

Lie #1 – Cash is trash.

Many financial talking heads consider holding cash dangerous to their livelihoods. Why maintain cash when money could be allocated to expensive managed accounts or locked up in investment vehicles where ongoing fees can be charged.

These cunning souls know if they can convince you to remain invested at all times, especially when markets are sliding, then the financial firms they represent can continue to make a predictable revenue stream to appease shareholders.

The experts hope you fall victim to the behavioral pitfall labeled anchoring. When emotionally connected to a loss, you’ll wait for that losses to recover to your original purchase price before taking action, even if the current value reflects a change in fundamentals. The opportunity cost of sticking with losing investments and waiting for recovery can be detrimental to your financial health.

Gregory L. Morris, author of “Investing With The Trend,” showcases how it takes on average, five years to recover from a 20% loss in stock prices (as represented by the S&P 500). Five years can add up to a healthy stream of fees if you ‘stick with the program.’ Don’t you think?

So, let me ask: How many five-year periods can you survive in the span of a human life, to break even?

Never underestimate the value of cash as a component of your long-term asset allocation.

Mainstream media will never embrace the concept of holding cash. They’ll tout long-term returns as the reason to remain invested in both good times and bad. Most individuals lack the “time” necessary to truly capture 30 to 60-year stock return averages.

For individuals trying to save for retirement, there are several important considerations with respect to cash as an asset class:

Cash is an effective hedge against market loss.
Cash provides an opportunity to take advantage of market declines.
Cash provides stability during times of uncertainty (reduces emotional mistakes)

It doesn’t mean you should be 100% in cash. Holding an increased allocation to cash during periods of uncertainty provides both stability and future opportunity.

When inflation is low and stock valuations as measured by Robert Shiller’s CAPE ratio is at 23x earnings which has historically represented the peak of secular bull markets, the significance of holding cash is revealed.

As the chart above outlines, if you purchase stocks when the CAPE is 6x and switch to cash at 23x, the adjusted return of $100 increases dramatically over time. Of course, cash will lose out during periods of above average inflation like in the 1970s, however holding and investing cash during periods of low valuations produced substantial outperformance compared to waiting for lost capital to recover.

At this juncture, increasing portfolio cash to 20-30% to weather the storm will not kill your returns. As a matter of fact, your portfolio will survive. You won’t need to alter your retirement plans.

Lie #2: Stocks average 10% a year.

This lie may be the most lethal. Recently, I heard a pundit on a popular financial channel flippantly throw out a statement to an afternoon television audience. He said not to worry: Stocks average 10% a year if you hold tight.

Currently on their Twitter feed, a popular roboadviser called WealthFront which is an electronic portfolio asset allocator, regularly shares a chart alone and within blog posts. It shows how the growth of a dollar invested in the stock market appreciates to roughly $34,000 if invested from 1871 through 2015.

1871.

The president of the United States was Ulysses S. Grant.

Orville Wright of the Wright Brothers was born in August of that year.

Is 10% completely false. No.

Misleading, yes.

Is it realistic to base return assumptions for retirement planning on numbers many pundits share in the national media?

No.

From 1871 to present the total nominal return was 8.08% versus just 6.86% on a “real” adjusted for inflation basis. While the percentages may not seem like much, over such a long period the ending value of the original $1000 investment was lower by an astounding $270 million dollars.

Since 1900, stock market appreciation plus dividends has provided investors with an average return of roughly 10% per year. Historically, 4%, or 40% of the total return, came from dividends. The remaining return (60%), came from capital appreciation that averaged 6%.

There are several fallacies with the notion that the markets long-term compound at 10% annually.

The market does not return 10% every year. There are many years where market returns have been sharply higher, significantly lower or flat lined.

The analysis does not include the real world effects of inflation, taxes, fees, and other expenses that subtract from total returns.

SHOCKER – You don’t have 144 years to invest. Using ‘perpetual’ holdings periods for something as finite as a human life is plain irresponsible.

Lie #2 will allow false hope to permeate your retirement planning outcomes. Incorporating unrealistic return projections increases the likelihood of shortfall surprises later in retirement. Perhaps at an age where returning to work is highly unfeasible.

Then what?

This whopper will indeed sneak up on you. If you’re three years from retirement or in retirement, now’s the time to re-visit the return estimates that were used in your financial planning analysis.

Lie #3: Annuities = bad.

For years, several well-known money managers and syndicated financial superstars, have overwhelmed print, social, television and weekend radio media outlets with negative and false information about annuities.

It’s like saying repeatedly – a paycheck for life should always be avoided.

The wide universe of annuities are given an unfair rap as financial professionals with an agenda play on investor misunderstanding. With irresponsible blanket statements like ‘annuities are high commission and good for brokers, not for you,’ this group exploits the masses’ ignorance for their own gain.

They play on a human behavioral pitfall called heuristics. Heuristics are mental shortcuts we employ to digest the onslaught of information we’re slammed with daily. As busy individuals with access to limited information, we create rules of thumb to quickly come to conclusions and make decisions.

Annuities, specifically variable annuities, a blend of insurance and mutual funds, have been the subject of bad press and regulatory scrutiny for decades. Justifiably so. With exorbitant fees and generous commission structures these products were sold inappropriately in many documented cases.

Today, novice recipients of the adverse messages recall how they were told, read or heard somewhere that annuities must be avoided. So it must be true.

What an injustice to investors who would benefit from these products.

To mitigate the risk of outliving a nest egg or as a replacement for conservative investments like bonds, deferred-income and immediate annuities can be used effectively to supplement Social Security and portfolios that cannot carry the retirement income responsibilities alone. These annuity types are affordable and can play an important role in a holistic financial plan.

To understand the truth about annuities avoid the ‘real story’ touted in media and advertising. There’s something ‘Fisher’ about this bullshit. As in Ken Fisher.

Instead, check out your resident state’s department of insurance website for objective information. Meet with a Certified Financial Planner who is compensated on an hourly fee basis to understand annuity types and to determine if a lifetime income option, in addition to Social Security, is suitable for your personal situation.

Unfortunately, dystopia thrives within the financial industry.

Now more than ever.

As we appear to be entering the storm of a bear market in stocks.

To survive you must dig deeper, stay vigilant, possess a healthy dose of skepticism.

Because pundits will not disappear as quickly as your wealth can.

And finance and the good society shall remain just a fairy tale.

All charts are the courtesy of Clarity’s Financial Chief Investment Strategist Lance Roberts.

Rules To Live & Die By: Life, Money & Otherwise.

Aside

I appreciate rules.

Rules derived from the heart and mind have saved me.

Rules, forged from experience, can safeguard precious resources – financial and otherwise.

They will protect you from losing your pants.

Naked rules are best.

Pure, simple, raw.

Here are mine.

What are yours?

Random Thoughts:

Part I: Life Rules.

If a woman can’t listen to the Eagles’song Lyin’ Eyes without wincing, or quickly changes the station, run.

Beware of people who carry a stash of ’emergency’ condoms (indeed run, but feel free to have sex first).

You can’t wipe your ass enough (especially men – we’re the worst). When you believe it’s all clear in the deep, take another swipe. Just to be safe.

Never trust a person who rarely uses turn signals.

Be cautious of those who judge based on past mistakes when they’ve made the same ones or worse.

Don’t step back without looking (there’s a dog there, especially in the kitchen).

Never let open wine go to waste. Never. (Did I say never?).

Distrustful people are black pitch through the soul. Avoid them.

Be wary of those who can’t maintain close long-term relationships of any kind.

When I ignore rules I create, bad things happen.

Misjudgments remain with me. I see injury in the mirror every day. I lose a spark that will most likely, never return. Perhaps it’s part of a natural process, like aging.

Living without a personal guide book can hurt you.

Along with Clarity’s Chief Market Strategist Lance Roberts, we’ve created rules to help you protect and understand the key drivers of your wealth.

Remember – For every beginning there is an end. Investments have a shelf life. Eventually you’ll need to liquidate them to fulfill a financial goal, create a paycheck in retirement, gift to loved ones. Whatever. Money is to be spent, enjoyed.

Not hoarded.

And yes, you can indeed sell investments to protect capital.

Huh? What?

Sell: The scariest 4-letter word on Wall Street. Just the mention of it and you’re branded a loon. Leprotic, running amok and licking the neighborhood children.

Part II: Investment Rules:

Cut losers short. Let winners run. Underperforming positions are reduced or removed from portfolios on rallies.

Set financial life benchmarks and take action. Every position purchased has a sell target. Investments without goals are arbitrary, which increases portfolio risk.

Emotional biases are not part of the investment management process.

Follow the trend. 80% of portfolio performance is determined by the underlying trend.

And the current trend is south.

When markets break their long-term bullish trend supports combined with important long-term sell signals and a sharp decline in momentum, it has historically denoted the start of a “bear market trend.” The red highlight denotes the start of the bear market. The yellow highlight shows the ensuing bear market completion.

Never let a profit turn into a “loss.”

Investment discipline is successful if consistently followed.

Losses are part of the investment process. Losing positions are regularly culled to reduce portfolio risk and free up capital for better investment selections. However, you can’t completely avoid losses. Sorry. If that’s the case you’re better off in certificates of deposit. You can minimize but not eliminate. You play, you pay.

$Math-Of-Loss-122115.png$

As fiduciaries of OTHER PEOPLE’S money, the biggest concern is not how much money we make during market advances, but rather how much we keep from losing during market declines.

While this seems counter-intuitive, in reality it is where long-term gains are generated. As William Lippman, CEO of Investment Management at Franklin Templeton quipped:

“Better to preserve capital on the downside rather than outperform on the upside”

A strict discipline of portfolio risk management will NOT eliminate all losses in portfolios. However, it will minimize the capital destruction to a level that can be dealt with logically, rather than emotionally.

This isn’t market timing, people. That doesn’t work. ‘All-or-none’ is a losing strategy. Never go all cash. From a management standpoint, this is a bad idea. Trying to “time the market” is impossible over the long-term and leads to very poor emotionally based decision making.

The objective is to reduce portfolio risk to manageable levels to preserve capital over time. We can do that by increasing and reducing our exposure to equity-related risk by paying attention to the price trends of the market.Odds of success greatly improve when the fundamentals are confirmed by the technical indicators (see? Another rule).

Don’t add to a losing position. This is called “averaging down” and rarely is it effective. How many investors are caught in the energy sector value trap? Or treated master limited partnerships ‘safe’ as fixed instruments?

The slide has been ugly and getting uglier.

Don’t be a hero. Buying energy or “averaging down” at this juncture will most likely be hazardous to your wealth.

Markets are “bullish” or “bearish.” Remain neutral or long in bull markets. In bear markets be neutral and increase cash.

When markets or portfolio positions are trading at extreme deviations from long term trends, do the opposite of “the herd.”

If you haven’t trimmed positions yet –Wait for an opportune time. Most likely, a market bounce is coming. Trim your weakest holdings into strength especially if your gut is in turmoil or you’re 5 years or closer to retirement.

A goal of portfolio management is to achieve a 70% success rate. No process is perfect. Consistency wins the long game.

Manage risk and volatility, not returns. Also, manage emotions. Humans are not wired to invest. Knee-jerk reactions, overconfidence, seeing trends that don’t exist will only destroy portfolio returns.

Never discount the importance of financial planning. The investment process is an element of a financial plan. An important one. However, it’s not the full story. It’s the sexiest chapter, I know.

There’s more to consider.

So we created.

Part III: Clarity’s Financial Planning Rules.

Take a holistic approach. Proper planning integrates all assets, liabilities and sources of income for a complete perspective.

Money is fungible. For planning to be effective, remove the mental boundaries around the dollars you earn and save so they may be allocated to their highest and best use.

Don’t discount Social Security strategies. Take steps to maximize earned benefits. Coordinate Social Security withdrawals with those of other accounts to minimize the impact of taxes.

Healthcare costs including Medicare, and senior housing options must be included in the planning process.

Successful plans are grounded in financial self-awareness which includes prioritizing needs and wants.

Conversations with loved ones and friends about aspects of your financial plan are important. Make sure your estate, gifting and future housing intentions are clearly communicated.

Don’t Get Fooled By Averages. The financial markets do not return 8% a year. A realistic financial plan includes variability in returns, including losses, over time.

Accountability Matters. A financial plan not followed is not a financial plan at all. Long term financial goals need to be broken down into monthly objectives and you and your adviser are accountable in meeting those objectives. (It is easier to consider a savings goal of $500/month versus $6000/yr.) Mental trickery works. Milestones broken down to millstones will convince your brain to take action. Move forward.

Rules.

Boundaries.

They work.

Follow them.

Survive.

With less wear on your face.

Less dark circles under the eyes.

You’ll preserve joy in your heart.

Stamina.

Will be yours.

And you’ll live to play another day.

For a glossy (fancy) copy of our investment and planning rules email me at RichardRosso@myclarityfinancial.com.

Charts by Lance Roberts. Sign up for his weekly market/economic newsletter at http://www.realinvestmentadvice.com.

A Houston Lesson – Be “One” & “Someone” To A Happy Retirement.

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Posted on September 27, 2015 by Richard M. Rosso, CFP

A version of this writing appeared on MarketWatch.

There’s a controversy brewing in Houston.

The conflict between the “one” and the “someone,” is highly visible, to thousands of commuters to see.

Painted on the side of an overpass, for as long as I can remember, at least 17 years, those heading south on a bustling freeway have grown accustomed to the weather-worn message.

“Be Someone.”

Between ominous rusted-steel teeth at the mouth to downtown, I find myself looking for it, expecting the usual sight of what has become a faded element of the urban landscape.

I laugh to myself every time I pass. Why do I care? Is it tradition? Beacon? Wisdom? No idea. I think -Who shall I be today? Can my identity stand the elements and test of time? Will my integrity allow me to remain or be someone?

Until.

An unidentified culprit painted over, messed with the message. A word that completely changed the tone was gone.

The day “BE SOMEONE” became “BE ONE.”

No longer was I someone. A vandal’s vandalism of vandalism merged me into life’s traffic? Houston’s road congestion is bad enough, now this, too.

I wasn’t the only one disrupted by the alteration.

There was local news coverage. Television, radio, print.

Then, as quickly as media attention emerged, an urban hero yet to be named, wronged a graffiti right.

In fresh paint, “BE SOMEONE” was back.

The message in the infrastructure had returned.

Throughout retirement, you will travel the roads, switch lanes between “BE ONE” and “BE SOMEONE.”

The best way to avoid surprises and maximize life in retirement, is to hit the gas.

Embrace both.

A “BE SOMEONE” mindset is you as you stand apart from others.

A “BE ONE” frame of reference arises as you stand together as a share of a greater whole.

Random Thoughts:

Be Someone: Retirement is the opportunity to re-awaken your true identity, rekindle inner passions. Relish the time to march to your own beat, again.

I consult with retirees who are forging a road to awareness and re-connection to what was important to them in the past. I call it a “re-acquaintance list.”

This is no bucket exercise. A bucket list is compiled of grandiose experiences, at least in my opinion. A re-acquaintance list is small in comparison yet ongoing. Like a support bridge underfoot that hasn’t been traveled completely – It’s what makes/made “you” well, “you.” It’s a return to simple passions that lead to greatness which I define as joy and richness of soul.

The relevance of career goals fade.

Greatness is achieved through less monumental actions which occupy slow whispers of time. It’s when the greatness of “be someone” is realized. For retirees, it’s a return to desires they needed to place on the backburner to earn a living, like reading or painting.

Also, they’re seeking educational and lifestyle enrichment by selecting retirement residences that exist on college campuses. For example, The Forest at Duke University offers apartments and single-family homes in a 40,000 square-foot independent wellness community. There is access to private primary care or skilled nursing in a lush, tranquil setting.

What retirees find most attractive about these communities is the chance to fully embark on the “be someone” concept. The Forest offers lifelong learning through regular in-house programs like lectures and resources by local scholars. In addition, the initiative to nourish the mind, body and spirit is appealing with access to performing arts, ballet, yoga and guided mediation. Residences may be apartments or single-family homes for an entry payment and a monthly service fee which is inclusive of all living expenses including meals.

Be One: To “be one” is to be a participant in something bigger. Here, your identity is at its best when part of a greater mission. People who remain engaged with former co-workers, provide deep experience into current projects, and participate in weekly or monthly rituals with friends or those in their communities appear most fulfilled through retirement.

An engineer who retired in 1996 still meets his high school buddies for dinner once a month on Thursdays. The members of this group have never missed a date. Unfortunately, several have passed. However, that hasn’t stopped the ritual.

In 2010, a project manager known for her skills to assemble an effective team accepted a severance package from a large pharmaceutical company. She still mentors and continues friendships with those she hired throughout a 24-year tenure.

Active retirees are involved in coffee groups. Regular meetings of people who bond over hot coffee and highly-caffeinated morning conversation. From Perry, Iowa to Hartwick, New York, these gatherings have been in existence close to a decade and contribute to mental acuity through community, support, active listening and verbal engagement. There’s no room for technology like smartphones or tablets, either.

Be Someone: March to your own drummer, walk the path that brokerage firms purposely choose to ignore and your portfolio will last as long as you do.

In a recent edition of the Journal of Financial Planning, Wade Pfau, professor at The American College re-visited the Trinity Study which appeared in the February 1998 issue of the Journal of the American Association of Individual Investors.

One of the blackest holes at brokerage firms is their continued reluctance to review, update, and contradict any study that was valid during the greatest bull market in history which was an outlier, not a common occurrence.

After all, it’s in the industry’s best interest to perpetuate the myth that stocks are a panacea regardless of cycles. Academics like Wade Pfau are leaders of the “be someone” movement and his work is crucial to your financial success in retirement.

The Trinity Study was published in 1998. The focus of the analysis was to determine the probability of portfolio success upon withdrawing 4% annually (adjusted for inflation), with a mix of long-term corporate bonds and the S&P 500 stock index. With a 50/50 asset allocation, the portfolio survived in 95% of historical rolling 30-year periods.

Per Wade Pfau, who updated the study in the August 2015 edition of the Journal of Financial Planning, today’s markets matter more to the sustainability of portfolio survival than historical outcomes.

Based on the current low interest rate environment and high stock market valuations, a sustainable 4% withdrawal rate will require a drawdown of principal. Income generated will not be enough. For new retirees this is especially dangerous as the first 10 years of portfolio withdrawals can alter permanently future portfolio longevity. If a retiree faces sequence of return risk whereby asset returns are below historical averages in the face of withdrawals that reduce principal, then portfolio success rates must be revised downward.

The outcome of the study is sobering: Wade Pfau’s simulations conclude that a portfolio with a 50% stock allocation now has a 64% probability of success with a 4% withdrawal rate, down from 95%. Success is reduced to 37% at a 5% rate.

Retirees must stay vigilant and examine portfolio withdrawals to be a step ahead of sequence-of-return risk. If portfolio distributions exceed income and appreciation for two consecutive years, withdrawal rates should be reduced for the upcoming period. It’s an exercise that should be conducted once a full year’s worth of liquidations are completed.

Be One: Retirees experience happiness when giving back to their communities. Schedule a couple of hours a week to explore a charitable passion. Serving others provides great reward for all involved. For greater fulfillment, a donation of time over money is healthier.

A list of non-profits seeking volunteers can be found in your area at www.greatnonprofits.org. You may filter by issues from “Animals” to “Women.”

From there, you can gather a deep understanding of how your non-profits of interest, operate. Written reviews by those who have donated and others who sought aid, are there to assist volunteers make informed charitable decisions.

I don’t know how the Houston “battle of the graffiti” will conclude.

Regardless, there are many ways to be “one” and “someone” in retirement. They can co-exist. Form a synergy.

In retrospect, “be both,” works.

Try it.

Seeds: How A Millennial Farms a Retirement Portfolio.

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Posted on July 18, 2015 by Richard M. Rosso, CFP

A version of this writing appears in MarketWatch.

“You’re a farmer now. Will you be a proficient one?”

“Rich, you do realize I work for a startup tech company in Austin.”

“Yes, as I said. You’re a farmer.

What are you planning to grow in your new fields? How will you tend to them? How many can you manage?”

Ely recently earned more seeds than he’s ever held. A six-figure bonus. For this Millennial, a bounty received. Smart enough to seek objective guidance and lay the groundwork for a strategy before the windfall is spread. Not to be cast to the wind. Conditions needed to be perfect for what he was seeking to grow.

“I don’t have fields. I’m from New York City, remember?”

“A seed is an organism. The shell encases life and vigor that will break out and grow strong if tended to as it should be. It works the same for money. Now that you possess financial seeds, you must consider planting them in multiple fields to reap rewards that will sustain you over a lifetime. Picture this…”

Plentiful tracts. Spider webs of rich soil. All different. Tilled with a specific mix of nutrients and attention. Fortified by a plan and philosophy designed to produce opportunities diversified enough to endure changing climates.

Investing for retirement is a robust, varied harvest that may be reaped for decades.

Here’s how an industrious Millennial became a financial farmer.

It starts with a refreshingly different philosophy about life and money. A young farmer’s mindset has the potential to send chills up the spine of every financial services organization that believe stocks are the only crops in town. Wise stewards of money understand that true diversification and investing is more than stocks.

Ely and I call it “holistic diversification.”

Stocks are not ignored; however they represent one field among four deserving attention.

According to Investopedia, diversification is “a risk management technique that mixes a wide variety of investments within a portfolio. Diversification strives to smooth out unsystematic (business) risk events in a portfolio so that the positive performance of some investments will neutralize the negative performance of others. Therefore, the benefits of diversification will hold only if the securities in the portfolio are not perfectly correlated.”

The information then goes on to outline how to diversify with stock investments. If diversification is truly risk management and is a technique that “mixes a wide variety of investments within a portfolio,” why is a portfolio defined solely as a mix of “domestic and international securities?” Is this the “wide variety” that controls or contains risk?

I’m sorry, this definition is not accurate. Farmers shake their heads in disbelief.

Over the years, especially since the financial crisis, stocks have become more positively correlated. In other words, in times of crisis, defensive industries like food and beverage and cyclical growth sectors like industrials have moved increasingly in the same direction: Down. The majority of stocks follow the general trend of the market, especially during bear cycles. So, when diversification among stocks is needed the most, it disappoints the most.

Holistic diversification is grander way to think and invest.

It breaks down mental barriers around money, inspires self-discovery, fosters creativity and generates a thought process where opportunities can seed, plant and prosper in a beautiful lifetime patchwork. Each field requires different levels or types of care.

That’s diversification the way it should be.

Ely (with my encouragement and his self-assessment) re-defined diversification with the wisdom of an investor three times his age (I had him write his philosophy and send to me.)

“I will seed 4 fields with my bonus to increase diversification and wealth: Personal growth (maximize the return on me), my stock and bond portfolio allocation, private investment (perhaps rental real estate or a few startups I’m interested in), and a long-term annuity to help supplement my social security and portfolio income at retirement.”

As you ponder a philosophy that blends life and money in soil where the nutrients are a unique blend of your personal needs and desires, remember to go beyond traditional thinking to cultivate multiple streams of future retirement income.

Cultivate the ROL or “Return-On-Life.” An astute farmer enriches the soil of life by nurturing mental and physical growth. A quarter of Ely’s bonus will seed recreation. A beach vacation, a personal trainer, wine flights, fine dining and a creative writing class.

Return-On-Life isn’t a mathematical calculation. The farmer’s formula is personal. Results are calculated by the health of the bounty from all the fields. A guilt-free plan that blossoms or hones a marketable skill, creates an experience, relieves stress. It’s the spending which provides the farmer a clearer head, endurance and energy to work the other fields to yield maximum output.

Add nutrients to a stock allocation but set realistic expectations. Traditional asset allocation plans deserve attention however farmers have been advised by financial media and popular publications that stocks, bonds, hedge funds and other liquid investments make up the centerpiece of the farm. I was able to help Ely question this guidance: Help him broaden his perspective about planting landscapes and think smaller about the future riches sowed from this area. I needed to set expectations. A likely scenario over the next decade is the returns from this field may reap less return, perhaps close to zero.

Using a formula from money manager Dr. John Hussman of the Hussman Funds to mathematically determine what stock market returns may look like over the next decade, the following result is calculated.

Assume GDP averages a consistent, recession-free 4% annualized growth rate, the current market cap/GDP remains at 1.25 and the current S&P 500 dividend yield of approximately 2% doesn’t change for ten years, forward stock market returns do not appear to aid a formidable bumper crop:

(1.04)*(.8/1.25)^(1/10)-1+.02 = 1.5%

Assumptions are just that: Obviously, change is the only realistic constant. These long-term estimates are based on decade-long rolling periods therefore they are highly inconsistent when it comes to short-term market cycles. Regardless, it allows a farmer to plan and diversify accordingly. The potential of this field is consistently on the radar as resources are directed most often to this space through regular contributions to a retirement plan and a taxable brokerage account.

Plant seeds in unfamiliar terrain with the richest soil for growth. The diversified farmer understands that investing in non-publicly traded ventures is risky, requires patience, yet can reap great personal and financial rewards if the landscape is properly understood and receives the correct balance of nutrients, attention and ongoing provision of resources. Tilling a private field takes passion and focus above and beyond what’s required to sustain consistent pastures. It’s a direction that requires guts to pursue. After all, that part of the farm can go busy, is fragile. A young farmer with vision handles the responsibilities with alacrity and maturity.

Ely set seeds aside for rental real estate to generate passive income and will diversify his farm more effectively than publicly-traded real estate investment trusts that correlate higher small company stocks. He’s also seeking to purchase units of a limited partnership in a wine-tasting venue opening in downtown Austin, Texas.

I’ve experienced a willingness by pre-retirees and recent retirees to invest 5-15% of their net worth in private ventures and small business franchise opportunities as a way to diversify from traditional stock and bond portfolios. It’s a growing trend as investors know they’re not getting the full story on how diversification works. They’re “reading around” Wall Street. Flanking the field, venturing out to undiscovered, fertile ground. I greatly encourage them to take the chance as long as a team we understand the impact of a formidable loss on their retirement strategy.

Grow a pension and supplement Social Security. Safe is a field. It produces the steady, ongoing sustenance a farmer can never outlive. It’s the poster child of proper diversification. An annuity that will provide reliable income to bolster Social Security. The use of insurance to transfer risk in case something goes wrong that sets our farmer back financially in the future, is a smart addition of acreage to the farm. Nothing fancy. Nothing variable: A simple deferred-income option or a single-premium immediate annuity where the farmer knows exactly the bounty to be received on a periodic basis as part of long-term retirement income planning. There’s nothing variable here. No storm fronts that can create loss and vulnerable conditions. Ely believed that this field balanced and fit perfectly into the farm he’s working.

“So you see Ely, you’re a financial farmer. You’re working at a startup in Austin. For the seeds.”

I met with silence at the other end of the phone. Ten seconds max. Felt like 60.

“You know Richard, I understand now. I’m seeking to maximize the fruit of my labor and enrich the other non-financial riches that will blossom.”

I couldn’t have said it better myself. Well done, farmer Ely.

Well done.

Retirement Lessons From The Wolves.

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Posted on July 3, 2015 by Richard M. Rosso, CFP

“I want everything you have. Every last drop.”

In the upcoming season of AMC’s hit series “The Walking Dead” the wolves represent a roving band of ruthless survivors. Unlike menacing characters of the past, the wolves will be the most dangerous and cold-blooded yet.

Marked by the letter “W” on their foreheads, the wolves stalk and prey on human victims. They hunt silently through the woods and appear out of nowhere to confiscate possessions no matter how meager. They kill to bolster a living dead army and use rigged truck trailers full of zombies to trap unsuspecting trespassers.

Wolves (the four-legged kind) can shadow a food source for a week before attacking. Up to 100 miles a day. They’re known to bring down prey up to 10 times larger than themselves. A pack can “intimidate” larger animals. Wear them down by denying them access to food, water and shelter. They’ll nip at a victim’s flank throughout a hunt. Eventually a large beast gives up due to blood loss and exhaustion.

The wolves are beyond the line of sight yet always watching. They appear out of nowhere. They can take the shape of things you’ve grown comfortable with.

Retirees must stay vigilant against predators that wish to impair them mentally, physically and financially. After all, when no longer earning an income from employment and depending on a pool of invested assets for survival, one can’t afford to be vulnerable for long.

Here’s how to recognize, avoid and beat the wolves in retirement.

Random Thoughts:

Stay hungry. I notice that the most successful retirees have a rekindled appetite for life. After several decades at a job, those who hunt for new skills and experiences stay mentally and physically ahead of the wolves.

Dr. George Valiant psychology professor at Harvard Medical School and his colleagues have spent over four decades corresponding with hundreds of individuals from the Study of Adult Development.

Participants shared four key elements to a healthy, enjoyable and rewarding retirement:

Play. Indoor, outdoor activities and travel. Anything goes. The healthiest retirees stick to a varied play regimen. They treat recreational endeavors seriously. Most of the retirees I counsel keep a calendar going out 3-6 months filled with a wide variety of activities from fly fishing in Colorado to Bingo at local venues.

Real wolves can play for several hours at a time. Physical activity makes them sharper for the hunt. Two-legged wolves in a sci-fi drama define play in ways I wouldn’t recommend for retirees (or anyone for that matter.)

For the first several years, many retirees are reluctant to fully embrace recreation. They feel the need to ease into it. Interestingly, new retirees share how they feel ashamed to play. They believe it’s unproductive. That’s why I help retirees alter their perceptions. We outline and discuss activities which improve other areas of their lives. Every element of play is defined by its ability to enhance mental or physical health. For example, a trip to Colorado may improve Type 2 Diabetes because time will be spent undertaking healthy activities like hiking and exploring fresh or organic food restaurants.

Spark creativity. Retirees with an appetite to stay young pursue engagements that consistently stimulate their brains and emotions. Writing, painting, photography and gardening are popular with retirees I counsel. Learning to cross boundaries builds an awareness and appreciation of living.

I request pre-retirees document the creative boundaries they wish to cross during the first three years of retirement then hold them accountable through something I call “lifestyle reporting.”

The exercise is crucial to their ongoing financial planning process. Self-discovery begins with three paragraphs motivated by three questions:

How will you nourish your soul during retirement?

What actions do you believe will take you to another level physically and mentally?

Describe your first creative step. How will you take it?

Along with crunching numbers and stress-testing portfolio withdrawal rates, it’s important for me to challenge people to think outside the employment box they’ve lived in for so long. Mentally strong individuals give themselves permission to stretch their imaginations and try things that help them feel a sense of accomplishment throughout retirement.

Don’t drop out. A long-term focus on the pack or who you spend time with during play will make a difference to quality of life. Retirees who make the effort forge new friendships and strengthen existing relationships are on a path of enrichment.

Retirees are embracing social media to stay in touch. I’m witnessing usage lead to frequent communication with grandchildren, former high-school classmates and long-lost friends. Retirees are not on social media to isolate from the outside world. Facebook is used to set up face-to-face meetups. I observe Retirees are sharing (pinning) photos of hobbies, crafts and other projects with others on Pinterest and discovering new projects to undertake. As one retiree said “Pinterest reminds me of a living community bulletin board. The images and ideas shared are stimulating.”

Never stop learning. The hunger for knowledge grows for young-at-heart retirees. There’s a renewed energy to take on education defined by the desires set aside to raise a family, build a career.

Ongoing learning grows in importance. Retirees are taking on new languages, participating in cooking classes, studying literature, embracing new physical exercise adventures like hiking, skiing and honing skills like writing to keep their minds active.

Retirees are embracing virtual reality to engage their minds. A site www.learningadvisor.com is an educational hub perfect for retirees and popular with several clients. Through their “open learning” initiative, there is access to over 1,300 web pages of free and accessible education from universities around the world. Most topics from art to finance are represented from accredited and respected universities like M.I.T.

Through www.masterclass.com, retirees are taking instruction on acting from Dustin Hoffman and writing from best-selling author James Patterson. For an affordable $90, there is lifetime access to online classes which include video lessons and interactive learning tools.

“I like this. Just talking.”

In the opening scene of the season 5 finale of The Walking Dead, one of the Wolves comes up slowly on a traveler in the deep forest. Sits down across from him calmly and begins a conversation like a long-lost friend.

With that in mind.

Beware of wolves who minimize the long-term impact of the financial crisis. In the face of short-term zero interest rates and below-average rates on longer-dated fixed investments like bonds and CDs, retirees are increasingly receptive to taking on more risk to principal.

Unfortunately, the wolves now gather in every investment regardless of traditional risk definitions. Think about how much risk you take to achieve 3-5% returns today compared to a decade ago. Nobody knows how and when the Fed will unwind from extreme accommodative policies. Bonds and stocks are more erratic as markets transition from Federal Reserve dependent to a focus on fundamentals again.

As stocks and bonds are both expensive based on historical measures, there is no such thing as a safe haven outside of cash. Retirees must understand that financial pundits who tell them different have become wolves.

Frankly, experts have grown nescient. Economists have written off the “great recession” and the worst post-WW2 economic recovery as “average.” They’re bending the numbers to suit their forecasts which showcases their lost touch with Main Street.

The majority have been wrong (big time) over the last 6 years. About everything. Pick a subject any subject: The direction of interest rates, GDP growth, inflation, corporate revenue growth, consumer spending.

The latest media talking point is how the U.S. stock market and economy can handle interest-rate hikes with minimal impact.

The commentary is pervasive.

“Stocks rise in the face of rate hikes,”

“The U.S. economy poised for above-average growth in 2015 and can handle Fed rate increases.”

Can you hear the wolves trying to sooth you? Put you off guard?

Averages and medians are great for general analysis but obfuscate the variables of each cycle.

The story is different today. GDP growth has been consistently below trend. Currently, wage growth is weak, 1-in-4 Americans are on Government subsidies, and 76% of Americans live pay check-to-pay check. This is why central banks globally, are aggressively monetizing debt in order to keep growth from stalling out. In addition, we are aging as a population which doesn’t fair well for above-average economic growth.

Macro-economist Lance Roberts examined the underlying data of Fed interest rates vs. real (adjusted for inflation) economic growth dating back to 1943 and discovered information you won’t hear or read in mainstream financial media:

The average number of quarters from the first rate hike to recession has been 11 (33 months).
The average 5-year real economic growth rate was 3.08%.
The median number of quarters from the first rate hike to the next recession was 10, or 30 months.
The median 5-year real economic growth rate was 3.10%.

There have only been TWO previous times in history where real economic growth was below 2% at the time of the first quarterly rate hike – 1948 and 1980. In 1948, a recession occurred ONE-quarter later. THREE-quarters following the first rate hike in 1980.

To simplify: At the current rate of real growth the economy would head into recession much sooner based on present conditions. An important fact that most pundits ignore.

Many retirees can’t afford the negative financial impact a recession can cause. To keep the wolves at bay, regular meetings with an objective financial advisor to discuss risk management strategies are warranted especially as we get closer to a possible Fed rate hike in September.

At the least, distribution portfolios should be prepared for lower returns and greater volatility going forward. To bolster cash flow, retirees should be receptive to part-time employment which combines their passions with a need for supplemental income. For example, I know a retiree who loves animals and gets paid for providing accounting services for a group of local natural pet food stores three days a week.

Single-premium immediate annuities that generate lifetime income can reduce sequence of return risk where low or negative returns are more likely to occur. The insurance of income for life will compliment a traditional portfolio and allow a retiree to manage longevity risk and help preserve retirement spending.

“I’m taking you too. And you’re not exactly going to be alive.”

Real wolves won’t warn you before they draw blood (unlike in fiction drama.)

Retirees are smart enough to master the beasts that lurk inside and outside themselves.

It’s important to remember that wolves show suddenly and are always beyond your vision.

Now’s the time to be proactive and recognize where they prey in your mind. Your heart.

And in your brokerage account.

From Accumulation to Distribution: A Retirement Crossroad.

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Posted on May 10, 2015 by Richard M. Rosso, CFP

As originally appeared in MarketWatch’s Retirement Weekly.

What’s been my greatest advice to people once they seriously consider retirement?

No it’s not create a budget.

It’s watch the movie “Castaway.”

Take notes. Life is about to get bumpy.

Money is at the bottom of the life list for surprises. There are enough academic studies that prove how people with formal retirement planning are more successful than those who don’t plan.

No, there’s another storm front to weather.

In the 2000 film Tom Hanks portrays a frenetic FedEx systems employee obsessed with time and productivity. During a Christmas evening flight to Malaysia, his delivery plane crashes in the Pacific Ocean. He is violently tossed and cast to a remote island where he remains trapped and surrounded by cascading ocean currents. Over four years, while loved ones consider him lost (they had a funeral), and the love of his life marries and moves on Chuck Noland survives, too.

The drama is layered with lessons of acceptance, perseverance, resourcefulness and a shift in perspective that takes Tom Hank’s character to a rural Texas farm-road crossing, an old FedEx truck route he’s traveled before. Although this time, the weight of his decision is heavy.

It will change his life forever.

Once that retirement decision is made you’ll feel that weight. You’ll stand on a double-yellow line at a crossroad.

Which direction will you turn?

Here are a few lessons to navigate the first and most stinging waves of retirement.

Random Thoughts:

Those truly ready to retire have a sixth sense of sorts. You will too. As the FedEx plane plummeted from a stormy night sky, the odds of human survival were remote. As the aircraft broke apart and sank like a stone, Chuck’s instincts kicked in. Miraculously, he made it to the surface.

A lone survivor.

Pre-retirees seem to sense when their employers’ planes are headed in a different direction than they are. Those I counsel often reference turbulence at work they no longer find appealing or willing to accommodate.

Stressful projects, new bosses. The changes that were easy to overcome before are no longer palatable. If you plan accordingly for retirement, 5-7 years out, you’ll be able to control your escape, maintain focus on an exit. Like Chuck, an event will motivate you to flee. There will be a sense of urgency to depart. For example, a client who recently retired from a large corporation turned in his resignation one day before the executive suite announced the sale of the finance unit he had worked in for 16 years. That’s the uncanny sixth sense I’m talking about. Be open to the message.

Are you listening?

The first year in retirement can be challenging. Prepare to churn through darkness, all the time jolted by waves of self-discovery. When Chuck Noland surfaced he was nowhere out of peril. In the middle of nowhere there was still quite a way to go before safety.

Even those with a well thought-out financial plan are not completely prepared for retirement. The emotional part, anyway. It’s a span of dark distance I call “the black hole” as you cross from accumulating wealth to depending on it. New retirees feel vulnerable through this stage. They go through the motions. They seek a destination. A place that is not on a map because it’s created by the retiree traveling the path.

During the first year in retirement, give yourself a chance to accept life changes. Let the waves jostle you. Use time to re-discover who you were before a 40-year career dominated your life. This should be a new and enriching journey, however it begins with turbulence.

I’m sorry.

As you travel from accumulation to distribution, don’t completely sever the threads of your former environment.

In Castaway, Chuck Noland maintains his watch on Memphis time. It’s comforting to return to hours you remember pre-retirement. Recall the best about the wealth accumulation years. Nothing about you has changed. Except days formerly occupied with deadlines and meetings are now on a clock personally designed and followed by you.

A redesigned sense of value will eventually emerge but not without connection to who you were because it’s still who you are.

Isolated on a tropical island, very unfamiliar territory, the former hard-pressing executive who overlooked what’s truly important now finds survival with simple things he finds inside water-logged FedEx boxes that wash onshore. Items that connect him to life before the crash. It anchors and helps him prepare mentally for this present condition.

He manages to keep near always an antique pocket watch. A Christmas present from his girlfriend. Her photo inside. It provides focus from the time of the ill-fated flight until he’s found floating almost dead, by a cargo ship. She is Chuck’s motivation to survive. His purpose.

“She was with me on that island.”

I advise new retirees to focus on applying tenured ambitions to ventures that nurture their meaning, not their ambition. Core skills can be applied with meaning to hobbies, charities, part-time employment and travel. People, too. I observe retirees live again by spending resources on grandchildren. They’re not buying electronics or clothes or toys either. They’re purchasing experiences.

Who and what will be with you on that island called retirement?

Confide in a listener. Chuck Noland’s confidante was a Wilson-brand volley ball aptly named Wilson. The smiling face on the surface formed from a bloody hand print. Wilson became a source of comfort, a way for Chuck to work through a survival and ostensibly a harrowing escape plan.

Retirees find great comfort sharing their emotional concerns and fears with others, especially through the first year. Spouses and close friends become anchor points. Human pocket watches. Financial advisors can add piece of mind by reviewing retirement plans and budgets with retirees on a regular basis. An objective voice that provides consistent validation that their plan will work is crucial.

I have witnessed some of the greatest emotional and creative discoveries from retirees in the beginning years as long as they share open dialogue with people who care to listen.

I have read magnificent works of fiction writing, observed great paintings and other inspired works from former accountants, attorneys and other hard-driving right brain individuals who didn’t appear to be artistic at all. And I’ve known many of them for over a decade.

Chuck Noland would have never made it off the island without Wilson. I’m convinced. There was a wall of thought and belief to climb before a makeshift raft with a portable toilet sail could be constructed strong enough to encounter the terrifying tides which bordered the island.

Who are your Wilsons?

Define and live your themes. In your past life there were goals. Whether hit or miss, you defined yourself by them.

So did Chuck in his FedEx life.

Goal setting will not enhance your retirement. Themes will.

Think about it: Accomplish a goal and you immediately set another. Enjoy it briefly and anguish over the next one. If you fail, you become discouraged. Goals are no-win for the creator. They are human hamster wheels.

At the conclusion of Castaway, Chuck Noland was not driven by goals. He was no longer the same person. A roadmap of Texas, sunroof open, donned in sunglasses, he was immersed in the freedom of the path. In the passenger seat a new volleyball and an unopened FedEx package he carried throughout his ordeal. On the surface of the weathered-worn box a pair of painted angel wings now faded.

There was one last delivery to be made before continuing a new adventure. Chuck finds and leaves the package at the address of the sender along with a note that the package kept him alive.

Chuck stops to study a map at a crossroad not far from the ranch house. An attractive woman in a pickup truck pulls up alongside him.

“Where you headed?” she asks.

“I was just about to figure that out.”

“Well, that’s 83 South. And this road here will hook you up with I40 East. Um, if you turn right, that’ll take you to Amarillo, Flagstaff, California. If you head back that direction, you’ll find a whole lotta nothin’ all the way to Canada.”

As the truck pulls away, Chuck notices the wings painted on the back of her truck. Identical to the ones on the package.

He turns toward the road she’s traveling and smiles.

Retirement should be focus on roads you seek to travel. Each has meaning.

Every rock under the tires is an experience to feel.

Let the themes you wish to follow reveal their destinations.

There’s a new life in the gravel.

At a funeral a woman who recently retired asked me:

“What am I supposed to do in retirement?”

I said: “Follow what makes you human. Find what you lost. You had wings once, most likely when you were a child. Now use them to fly on the wind of themes you loved once and forgot. You know, before they were clipped by the daily grind.”

Some of the best advice I provide to retirees has little to do with money.

The woman took my business card. She called me.

“Are you sure you’re a financial advisor?”

Sometimes I wonder.

5 Ways To Master A “Super Saver” Mentality.

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Posted on March 28, 2015 by Richard M. Rosso, CFP

“I can never retire.”

At the wake for a client’s son, in the lobby of a plush funeral parlor, a woman I was introduced to seconds earlier looked at me and confessed four impactful words. I wasn’t aware of her personal situation however I felt the weight of her conviction.

I asked: “So, how will you make the best of the situation?”

I hear this sentiment so often, it no longer surprises me. No matter where I go. As soon as people discover I’m a financial adviser, they’re compelled to vent or share concerns, which I value. I’m honored how others find it easy to confess their fears to me. Unfortunately, I rarely listen to good stories especially when it comes to the harsh reality of present-day finances.

Saving money whether it’s for a long-term benchmark like retirement or having enough cash for future emergencies is an overwhelming task for households and this condition has improved marginally since the financial crisis ended over six years ago.

According to a June 2013 study by Bankrate.com, 76% of American families live paycheck-to-paycheck.

Is that a surprising fact?

Consider your own experience. When was your last pay raise?

Wage growth has failed to keep up with inflation and productivity for years. During the heat of the great recession in 2009, you most likely endured a cut in pay from which you never fully recovered.

On top of that, you’re probably juggling multiple responsibilities outside your original job description. To say the least, attempting to bolster savings is an ongoing challenge post financial crisis.

To develop a super-saver mindset you need to first accept the new reality and make peace with the present economic environment. Steady wage growth and job security are becoming as rare as pensions. The below-average economic conditions are more permanent than “experts” are willing to admit.

Before a change in behavior can occur, an attitude adjustment is required as saving is first and foremost, a mental exercise. For example, a super-saver feels empowered after all monthly expenses are paid, and a surplus exists in his or her checking account.

Instead of experiencing a “spending high,” super savers are happier and feel empowered when their household cash inflow exceeds expense outflow on a consistent basis.

You can feel this way, too.

I’ve witnessed hardcore spenders transform into passionate savers by thinking differently and keeping an open mind to the following…

Random Thoughts:

Embrace a simple, honest saving philosophy.

Start with tough questions and honest answers to uncover truth about your past and current saving behavior.

You can go through the grind of daily life and still not fully comprehend your motivations behind anything, including money. Ostensibly, it comes down to an inner peace over your current situation, an objective review of resources (financial and otherwise), identification of those factors that prevent you from saving more and then creating a plan to improve at a pace that agrees with who you are. A strategy that fits your life and attitude.

The questions you ask yourself should be simple and thought-provoking.

Why aren’t you saving enough? Perhaps you just don’t find joy in saving because you don’t see a purpose or a clear direction for the action. Long-term change begins with a vision for every dollar you set aside. Whether it’s for a daughter’s wedding or a child’s education, saving money is a mental re-adjustment based on a strong desire to meet a personal financial benchmarks.

What’s the end game? It’s not saving forever with no end in sight, right? Perceive saving as a way to move closer to accomplishing a milestone, something that will bring you and others happiness or relieve financial stress in case of emergencies. A reason, a goal, a purpose for the dollars. Eventually savings are to be spent or invested.

Recently, I read a story in a financial newspaper about a retired janitor who lived like a pauper yet it was discovered upon his death, that he possessed millions. What’s the joy in that? Did this gentleman have an end game? I couldn’t determine from the article whether this hoarding of wealth was a good or bad thing. I believe it’s unhealthy.

Living frugally and dying wealthy doesn’t seem to be a thought-out process or at the least an enjoyable one. The messages drummed in your head from financial services are designed to stress you out; they’re based on generating fear and doubt. And fear is a horrible reason to save, joy isn’t.

Form an honest and simple philosophy that outlines specific reasons why you need to save or increase savings. Approach it positively, three sentences max to describe your current perspective, why you’re willing to improve (focus on the benefits, the end game) then allow your mind to think freely about how you will fulfill your goals. Don’t listen to others who believe they found a better system. Find your own groove and work it on a regular basis.

Much of what you heard about saving money is false and will lead you down a path of disappointment.

The “gurus” who tell you that paying off your mortgage early is a good idea didn’t generate wealth by saving (or paying off a mortgage early). They made it by investing in their businesses and taking formidable risks to create multiple, lucrative income streams.

So before you buy in understand the personal agenda behind the messages. “Worn” personal finance advice like cutting out a favorite coffee drink and saving $3 bucks sounds terrific in theory but in the long run, means little to your bottom line. The needle won’t budge. And you’ll feel deprived to boot.

Financial media laments pervasively how you aren’t saving enough. From my experience, this message is not helpful; it fosters a defeatist attitude. People become frustrated, some decide to throw in the towel. They figure the situation is overwhelming and hopeless.

Don’t listen! Well, it’s ok to listen but don’t beat yourself up.

Saving money is personal. Meet with an objective financial adviser and don’t give much relevance to broad-based messages you hear about saving; it’s not one size fits all. Create a personalized savings plan with the end result in mind and be flexible in your approach. Appreciate the opportunity to improve at your own pace, to reach the destination for each path you create. Just the fact you’re saving money is important. The action itself is the greatest hurdle. Strive to save an additional 1% each year; it can make a difference. If not for your bank account, for your confidence.

Compound interest is a cool story, but that’s about it.

Albert Einstein is credited with saying “compound interest is the eighth wonder of the world.” Well, that’s not the entire quote. Here’s the rest: “He who understands it, earns it; he who doesn’t pays it.”

I’m not going to argue the brilliance of Einstein although I think when it comes down to today’s interest-rate environment he would be quite skeptical (and he was known for his skepticism) of the real-world application of this “wonder.”

First, Mr. Einstein must have been considering an interest rate with enough “fire power” to make a dent in your account balance. Over the last six years, short-term interest rates have remained at close to zero, long term rates are deep below historical averages and are expected to remain that way for some time. Certainly compounding can occur as long as the rate of reinvestment is greater than zero, but there’s nothing magical about the “snowballing” effect of compounding in today’s environment.

Also, compounding is most effective when there’s little chance of principal loss. It’s a linear wealth-building perspective that no longer has the same effectiveness considering two devastating stock market collapses which have inflicted long-term damage on household wealth. What good is compounding when the foundation of what I invested in is crumbling?

Perhaps you should focus on the “he who understands it, earns it; he who doesn’t pays it.”

I asked a super saver what that means to him. This gentleman interpreted it as the joy of being a lender and the toil of being a borrower. True power to a super saver ironically comes from living simply, avoiding credit card debt, searching out deals on the big stuff like automobiles and appliances.

Super-savers don’t focus much on compound interest any longer. As a matter of fact they believe it’s more a story than reality. They are passionate about fine-tuning what they can control and that primarily has to do with outflow or expenses.

This group ambitiously sets rules:

“I never purchase new autos.”

“My mortgage will never exceed twice my gross salary.”

“I never carry a credit card balance.”

“I’ll never purchase the newest and most expensive electronics.”

I know people who earn $40,000 a year save and invest 40% of their income. Then I’m acquainted with those who make $100,000 and can’t save a penny. Pick your road.

Making tough lifestyle decisions aren’t easy but doable.

I believe the eighth wonder of the world is human resolve in the face of the new economic reality. Not compound interest.

Sorry, Einstein.

Place greater emphasis on ROY (Return-On-You).

The greatest return on investment is when you allocate financial resources to increase the value of your human capital. In other words, developing your skill set is an investment that has the best potential to generate savings and wealth. Your house isn’t your biggest investment (as you’ve been told). It’s your greatest liability.

Many workers were required to re-invent themselves during or after the financial crisis. Their jobs were gone. In some cases, the industries that employed them for years were history, too. If you still need to work then you must consider directing as much as your resources as possible to multiply the ROY.

Take a realistic self-assessment of your skills, sharpen those that fit into the new economy or gain new ones to boost inflow (income). If you must stop saving to do it, do it. The increase in your income over ten to thirty years is real compounding.

People are finally beginning to understand that their current job is a dead end for wage increases or promotions. Finally, the status quo isn’t good enough, and that’s a great motivator to a ROY.

Increase inflow, decrease outflow.

Let’s take an example – You earn $50,000 a year. You save 4% annually, that’s $2,000. If you achieve a 3% return on that money annually after 20 years that comes to $54,607.91. It’s admirable; some goals can be met along the way. However, if you’re looking to retire at the end of 20 years, big changes are necessary.

Super savers embrace the math and take on big lifestyle shifts to increase cash inflow. They’re willing to take on new skills, consider bold career moves, postpone retirement, and downsize to save additional income for investment and add time to work their plan. Everything is open for discussion.

The results have been overwhelmingly positive. Super savers maintain tremendous resolve to stay in control of their household balance sheets. Emotionally this group seems less stressed removed from the chains of debt. They tell me they have achieved control over their finances.

You can’t put a price on that.

To embrace a super-saver mentality peel away habits and lessons you believed were correct and take on a different set of rules; a new, perhaps slightly unorthodox mindset.

Super savers definitely walk in tune with a different drummer.

And they’re happier for it.

Retirement Lessons: Rolled From A Rock.

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Posted on February 28, 2015 by Richard M. Rosso, CFP

A version of this post appeared on MarketWatch.

“How much does your money weigh?”

If people want to engage me and discuss retirement planning, the request I have is for them to take time and think back to their first memories around money. I want them to re-engage with how their views formed in the past, shape their present actions and motivations.

We undertake journeys together – back to the genesis of financial and investment philosophies.

I maintain a passion for client stories. Money plays a significant role in each; it’s a larger-than-life character in the human chapters of life.

Many of the conversations are emotional fire starters; over time, the discussions, although relevant, share commonalities. There are the ones you never forget, too.

I had someone share how adult money attitudes were shaped by spending much of his childhood summers exploring a neighborhood historic cemetery.

So, when I encountered a retiree who learned about handling finances from a rock, well, I anxiously listened.

He said – “everything I learned financially for me began with a rock.”

You see, this 69 year-old gentleman is the seventh and youngest child of a large family from Oklahoma. At 10, he discovered quiet and space and off a rural route. A wooded, gravelly patch cordoned off less than a mile from the homestead.

A perfect (and creative) location to secure his valuables from prying siblings. Over time it became a sanctuary from the vestiges of conflicts that erupt among large families.

From pre-teen to teen, an elaborate system was devised. A natural roadmap outlined on a napkin and changed often to throw off those who may become a bit curious. It was a plan which marked how valuables including baseball trading cards, cash and coins would be secured underneath a labyrinth of various-sized rocks. On a regular schedule, the hiding rocks were changed up, covered or replaced by holes under several dead trees. On numerous occasions, items were lost. Eaten.

Dug up and carried off by small animals.

He employed cigar boxes, plastic sandwich bags with yellow paper covered wire to secure them, empty Wonder Bread wrappers printed with the memorable red, yellow and blue balloons.

I couldn’t imagine what was learned from all this effort. Well, I had ideas, however, I never heard of anything like this before in over two decades helping others make financial decisions.

As we met a few times, I began to understand how weathered rocks forged this man’s money behavior. How he rolled along through retirement remembering back so many years. The cold weather, the dirty hands, the lost treasures formed invaluable habits.

So, what were the lessons learned?

Random Thoughts:

Dig deep into your financial foundation on a regular basis. Lift the rock, move earth, start digging. Get dirty, expose what’s been hidden. Before financial planning, it’s time to expose the deepest fears about retirement. If frozen by fear, your outlook will suffer; you won’t take actions (even small ones) to get you to retirement; you’ll feel hopeless.

The mind has a tendency to head straight for worst-case scenarios which most of the time, are far from reality. I find when people begin exposing what makes them anxious about retirement and progressively talk openly with those they trust, practical habits are started and forged. Stress is reduced. Make a list of what you fear the most about saving for and living in retirement. Move one rock at a time. Work with a financial professional to create a goals-based, fear-minimizing game plan.

Focus on what weighs heavy on your retirement budget. For the majority of people I counsel, fixed expenses are like boulders which press hard on their abilities to enjoy retirement. I’m not going to make it sound easy to lighten up. It isn’t. It takes some tough decisions. It could mean selling a family homestead to downsize, taking inventory of material possessions to gift, sell or donate.

My greatest friend, mentor and best-selling author James Altucher and his wife Claudia recently dug through and discarded almost every physical item they own – family photos, furniture, clothing. Rows of green plastic garbage bags out to the curb for trash pickup (I saw the photos). Ok, I’m not advising to go to this extreme: I was shocked myself. However, the lesson here is to devise a strategy that works for you to minimize overhead expenses; a liquidation and downsizing mindset is empowering. It allows you to take great control over cash flow, relieves the pressure of big fixed costs throughout retirement.

Move mental rocks and check on things. Let’s face it: Many people think of their company retirement plans as dark, mysterious holes. They may salary defer the maximum contribution yet still have little knowledge about available investment choices, how money is currently allocated or they fail to rebalance holdings on a scheduled basis. In other words, to be an active saver is admirable however, once earnings are syphoned into retirement plans, many of us grow passive about digging into them and shifting the location of financial treasure. The money is buried so deep under the rock, it’s forgotten. It might as well be lost.

A company retirement account is most likely your greatest liquid asset, so it makes sense to check on its progress. Make a point to dig under the surface at least annually. Compare your current allocations to choices provided by your employer and examine how investments are divided. Sell down what’s done the best and reallocate proceeds into underperforming asset classes.

For example, in 2014 U.S. or domestic-based large-company stocks and bonds were outperformers. The majority of financial “pundits” were touting how in 2015, domestic-based stocks would continue a winning run. So far, it’s apparent that international stocks are improving due to favorable valuations and aggressive action by the European Central Bank to purchase bonds, much like our Federal Reserve has done in the past.

Get your hands dirty and expose yourself to uncomfortable conditions. I partner with several retirees who refuse to undertake actions that temporarily feel unpleasant. For a few, avoiding proper estate planning (who really wants to deal with their own mortality?), failing to embrace healthy lifestyle choices like annual health physicals, and transferring potential devastating financial risks though the use of insurance, has led to family stress and negative outcomes for retirement portfolios.

A roadmap based on maintenance of health, proper estate planning and use of insurance where it’s needed, can make a tremendous positive impact on the quality of retirement.

Through the years, this gentleman who learned so much from rocks and dirt as a child, started to understand how keeping the location of his buried treasure so secret, was not such a terrific idea. He began to comprehend how secrecy may lead to great loss. He has a trusted partner, his wife, who keeps him accountable for fitness goals, regular meetings with his financial advisor (me), his board-certified estate planner and a physician for annual head-to-toe checkups.

Recently, one of his grandsons, knowing the well-told story of the rocks, began to do some digging at the same location near the homestead (still in the family). After months of work he unearthed a plastic bag. In it was a 1955 Topps Baseball Box made of tin with 10 trading cards inside including one of legendary player Ernie Banks.

There are lessons right in front of all of us. Some we can trip over (literally).

If we dig deep and often, potential dangers can be uncovered, avoided; treasures can be revealed.

The graveled road of retirement can be a blessing or a curse.

A lesson is to unearth early on what concerns you the most and expose them to bright lights from trusted professionals and loved ones.

Your retirement path will be a challenge, but like a rock, you can weather it and remain structurally intact for decades.

And keep rolling…

Five Financial Sanctuaries that Place your Retirement in Jeopardy.

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Posted on December 1, 2014 by Richard M. Rosso, CFP

Originally appeared in MarketWatch’s Retirement Weekly.

In the AMC smash-hit television drama “The Walking Dead,” a group of road-hardened survivors of a zombie apocalypse seek protection from the undead (and the living who pose greater dangers than cannibalistic walking corpses.)

The fifth-season opener finds the weary characters fighting for their lives against a community of cannibals who lured them to a so-called safe zone called “Terminus.”

Handwritten signs and maps along roads and rails of rural Georgia guided the crew to a final destination, sanctuary was promised for all who arrived.

On the surface, it appeared to be a dream come true. Warm smiles, comforting words, hot food.

Underneath, Terminus was nothing as promised or perceived. Victims were lured in to be placed in rail cars like cattle and eventually slaughtered.

As there is a fine line between fact and fiction, this harrowing situation got me thinking about portfolios in retirement.

Stay with me.

Think sanctuary and think safety. A false tranquility can disarm and open the gates to great risks without your awareness. What lurks underneath your financial safe havens may eventually place your money and retirement lifestyle in jeopardy.

When making financial decisions and monitoring progress based on those decisions, you need to accept when the environment changes; make a move when safe havens turn to Terminus.

Here are five financial sanctuaries that can place a secure retirement at risk right now.

Random Thoughts:

1). Stocks. Market sanctuaries can turn unrecognizable and hostile very fast. As the stock market reaches new highs there’s an ominous feeling of complacency among investors. It’s been over three years since the S&P 500 hit an official correction or greater than a 10% drop from a previous closing high.

Consider October’s volatility a wake-up call as early in the month, the S&P 500 was rapidly moving into correction, small-company stocks and international stocks were officially there and bond yields moved lower (100% of economists predicted that bond yields would be higher by fourth quarter 2014). October concluded much different than it started – with domestic markets headed to new highs.

Underneath the surface of stocks it looks nothing like a sanctuary – Large and mega-cap indexes have outperformed, a sign of a late-stage bull market phase, small-company stocks are recovering but underperforming, which points to risk abatement. It shouldn’t be ignored how cyclical stocks like energy, or those considered beneficiaries of economic expansion, are lagging defensive stocks (think utilities, consumer staples), currently. The outperformance in defensive sectors is usually indicative of market tops and economic peaks.

The Federal Reserve’s conclusion of quantitative easing (bond purchase) program in October signifies a reduction of central bank liquidity that can increase volatility as investors and traders seek to figure out what the next tailwind for stocks is going to be.

The S&P 500 is 24.5% above its three-year moving average (36 months) -one of the widest dispersions from the moving average since fourth quarter 2007. Like a rubber band, over time market returns will stretch far above and below long-term moving averages. Although it’s impossible to know when the band will snap back to the moving average, historical downside going back to 2000 shows when the market does contract, the process is damaging. The worst contractions were 38% and 40% in 2002 and 2009, respectively.

Stocks are protection against inflation until they’re not and you’ve lost 5 years making back what you lost and inflation becomes the least of your problems. By then, you’ll feel trapped and look to re-pave the path of retirement. Whether it’s returning to work, reducing household expenses, cutting how much you withdraw from investment accounts – you’ll be prepared to do whatever’s necessary to preserve capital and slow the bleeding of investment assets.

Create an allocation to stocks that won’t cause you to panic when the bear market arrives (and it will). Don’t be overconfident. Remain vigilant and make sure to follow rules-based rebalancing where you trim gains on a periodic basis. The fourth quarter of the year is a good time to tax harvest – sell positions with capital losses in brokerage accounts to offset capital gains.

2). Index funds. It appears that index fund enthusiasts will stand strong and proudly absorb the blow as their stock sanctuary turns against them. Indexers believe that losses are temporary because in the long-term, stock markets always recover; paper losses aren’t real, they’re perceived as a bump along the path, par for the course. Like the befallen travelers who arrive at Terminus, they are not in touch with the reality of the situation they’re up against.

A sequence of anemic returns or losses in the face of periodic withdrawals can dramatically decrease the longevity of a retirement portfolio. In other words, index funds are no protection against increased drawdown and market risks. At least fees make the losses less painful (or do they?).

The battle among “passive” indexers and “active” fund advocates is growing more heated as the fourth longest bull market in history continues. I consider most of the discussion noise; the headlines are a distraction from the real perspective investors in retirement should maintain:

No matter what you hear out of most financial professionals, stock index funds are not passive. Every investment should be treated as active as soon as it is added to a portfolio.

Look beyond the attributes of stock index funds (and there are quite a few) like low fees, wide industry and company representation, tax efficiencies, and face the traps that will eventually put you in a position to fight or perish.

For example, index funds will experience the full brunt of a bear market attack (because generally they represent the market) which means you as the manager must decide the degree of loss you’re willing to accept. Staying invested is an action; reducing exposure to a losing index investment is an active decision. You are always in control, you always have a choice.

The preachers of passive seem willing to stand by and hope for the best. After all, you can’t control or predict the direction markets. That’s true. However, the amount of capital destruction you’re willing to absorb, is in your control. Consider the potential damage and recovery rate. Your back is against the wall. Are you ready to fight? If your portfolio suffers a 20% drawdown you’ll require 33.33% to break even.

Specific purchase and sell rules must be attached to each investment under consideration. Risk management never ensures against all portfolio losses, it minimizes the damage so you can come back and fight another day. It’s all about survival when it comes to the end of world (and your money).

Also, when you invest, depending on stock market valuations, is extremely relevant to future returns.

According to market historian and writer Doug Short, $1,000 invested at the peak of the market in the S&P 500 on March 24, 2000 would be worth $1,248 (adjusted for inflation) as of November 2, 2014, which equates to a 1.53% annualized real return.

Despite the mainstream marketing message (especially among indexers) designed to convince you that “time in the market” is a sanctuary, there have been many periods in history where you simply “ran out of time.” When adjusted for inflation, there are several 20-year periods in history where market returns have resulted in either low or negative outcomes.

Index funds have most likely outperformed your managed investments on the upside during this bull market; that doesn’t mean they’ll hold up better through market declines. And when you buy, based on market price/earnings, has a significant impact on future returns. At nearly 26 times earnings based on the cyclically-adjusted P/E ratio, “time in the market” may not be as beneficial over the next 20-years. It just may be a Terminus for your portfolio.

3). Retirement account withdrawals. The 4% withdrawal strategy is too generic to be effective yet it’s treated like a universal rule and preached in mass to new retirees seeking comfort after a long journey of employment. It’s as worn as the warped, wooden signs guiding The Walking Dead survivors to a place they perceive as refuge, but really is a trap.

Based on work by Sam Pittman Ph.D. and Rod Greenshields, CFA of Russell Investments, the first step to creating a retirement withdrawal that protects against longevity risk, is to calculate the ratio of current assets to the present value of forecasted retirement spending. This is called your current funded ratio. It’s a popular method pension administrators use to determine the fiscal health of their expected payouts for participants. Few advisers will consider this method and go straight to a withdrawal rate calculation that doesn’t account for an individual’s overall financial situation or household balance sheet.

The current-funded ratio method requires matching assets to liabilities to determine whether there’s adequate coverage over living expenses and inflation throughout retirement. A ratio of 100% or greater, especially during the first decade of retirement, is indicative of a greater chance of avoiding outliving a nest egg. If the present-value funded ratio is estimated to be less than 100% in ten years, adjustments to withdrawal rates or living expenses can be made before withdrawals occur. The ratio should be calculated every three years or after a sequence of below-average portfolio returns.

The strategy is called adaptive investing. Ask your financial partner about it to see if makes sense as part of your retirement planning process.

4). Company stock concentration at the beginning of retirement. Many retirees are hesitant to manage their net worth tied up in company stock, especially in the early years of retirement. Their human capital may have left the company and enjoyed the retirement party but the emotional attachment to the stock continues strong, and is possibly dangerous.

More than 25% of liquid net worth in company stock, leaves a retiree either “the butcher or the cattle,” a philosophy the tenured residents of Terminus believe. It’s a great tailwind to net worth and retiree psychology when an overconcentration to company stock is performing well hence the butcher. When the investment is performing poorly, a vulnerability to the retirement plan arises which becomes an emotional and financial drain to the retiree and others in the household.

A formal plan should include an exit strategy for company stock within 5 years of retirement. Work down to a 10% allocation which will satisfy your attachment need but won’t derail the early years of retirement. In addition, it can allow you greater diversification potential and liquidity to meet living expenses.

5). Your broker. Someone asked me once – “Are you a broker?” I replied – “No. I’m not here to break anything, I’m here to help.” Joking aside, you may be very comfortable with your current financial relationship; consider if you have an understanding of the motives behind your adviser’s employer. Perhaps you never gave it a thought.

Ask this question: “What is your sales goal and how do I fit in?”

Yes, most in the financial services business are salespeople. Nothing wrong with it as long as your needs are met and full disclosures are made. However, maybe you’re looking for something more. I believe this question gets to the heart of a financial firm’s true motivation. Then ask: “How do you feel about your sales goals?” Are they perceived as fair by your financial partner? Ask another: “How much time will you spend with me, my planning needs and investment accounts?”

Get specifics. Ponder the answers, then consider: Are you a one-time sale or an ongoing relationship, or a bit of both?

In a recent podcast interview with self-help author and investor James Altucher, success coach Anthony Robbins shared candid insights from the experiences writing his new book, “MONEY Master the Game: 7 Simple Steps to Financial Freedom.” He explains how the financial system is designed to prosper the needs of shareholders, not investors. My take: A key is to know what questions to ask and seek answers that are simple and transparent.

“There are 312 names for brokers, today,” Tony mentions. “I’m so supportive of people that are fiduciaries, people that are trained and who are legally required to look out for you. I’m looking for people who are fiduciaries and sophisticated.”

I believe disclosure of sales goals is important. Understanding if your adviser is a fiduciary and focuses on your interests first, or a broker that has his or her employer’s objectives as a primary focus, will help you find the right long-term partner or clarify a relationship you currently enjoy (or question).

The investing climate for retirees can be scarier than fleeing from flesh-eating zombies.

Even worse are times you believe you’re safe; conditions change, you fail to acknowledge the shifting environment or realize that a financial sanctuary has turned hostile.

It’s always better to be the butcher than the cattle.

Perhaps that fiendish Terminus crew were on to something after all.

Random Thoughts of a Money Muse

Stories of Life. And Money. On the Fringe.

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