Daily Gains Letter

retirement planning


Retirement Post Recession: Why It’s No Longer the Golden Years

By for Daily Gains Letter | Jun 14, 2013

Retirement Post RecessionWill your retirement mantra be, “save, save, save,” or “work, work, work?” That depends on how close to retirement you are—at least, according to a recent study published by The Pew Charitable Trusts. (Source: “Are Americans Prepared for their Golden Years?,” The Pew Charitable Trusts web site, May 16, 2013, last accessed June 13, 2013.)

When the Great Recession hit in 2007, the oldest baby boomers were just a few short years away from retirement. And, after a lifetime of economic expansion and planning for retirement, they faced the real possibility of losing a significant portion of their savings. The economic downturn also heightened retirement planning concerns facing virtually everyone else.

Many Americans who had held off saving for retirement saw their situations exacerbated by unemployment and a bleak job market. Many more also found themselves saddled to homes that were worth a lot less than they were just a few years before—though that’s a better predicament than those who discovered their houses were worth less than the mortgages they were carrying.

According to the report, early baby boomers (those born between 1946 and 1955) were heading toward retirement with enough savings to maintain their financial security. And thanks to both the “Dot-Com” boom and housing bubble, early baby boomers had higher overall wealth, net worth, and home equity than the Great Depression babies (those born between 1926 and 1935) or war babies (born between 1936 and 1945) had at the same ages.

But that doesn’t mean their retirement plans didn’t take a hit. Between 2007 and 2010, every age group experienced a significant loss of wealth. Early boomers lost … Read More


U.S. Retirement Confidence Way Down as Investors Flock to Products, Services That Reduce Risk

By for Daily Gains Letter | May 29, 2013

U.S. Retirement Confidence Way Down as Investors FlockRetirement confidence seems to follow the trends of the global economy. At least, that’s according to one recent survey that looked at 12,000 workers and retirees in 12 European, North American, and Asian countries, including France, Germany, Hungary, Japan, the Netherlands, Poland, Spain, Sweden, China, the United Kingdom, the United States, and Canada—making this one of the largest studies of its kind.

The study found that 65% of the participants believe future generations will be worse off in retirement than they are today; more than half of the American workers (55%) feel that way, while 80% of the workers from France and Hungary expect future generations to be worse off. The Chinese are the least pessimistic, with roughly one in five participants feeling the same way. Only nine percent of respondents believe future generations will be better off in retirement than those in retirement today.

Thanks to government cutbacks, 63% of employees think their government retirement benefits will be less reliable or helpful; American workers come in near the top at 65%. America’s retirement pessimism continues, with just 12% saying their personal retirement planning is “very well-developed.”

A further 37% of Americans don’t know if they can achieve their desired retirement income. Only 12% are very optimistic that they will have enough money to live on, and only another 12% are very optimistic that they will be able to choose when they retire.

Not surprisingly, you have to have a handle on what it takes to retire to actually be able to plan for a comfortable retirement. The current retirement-related risks have increased on the backs of “financial illiteracy”—with only … Read More


Are You Programmed to Be a Successful Investor?

By for Daily Gains Letter | Apr 24, 2013

Are You Programmed to Be a Successful Investor?

When it comes to investing, our retirement planning rests in our ability to make sound economic judgments based on mathematically quantifiable numbers. We weigh the financial risks and rewards, and then make our decision.

Fortunately, or perhaps unfortunately, we are a little more complex when it comes to making decisions. For one thing, our emotions, developed after a lifetime of experiences, play a large part in how we act.

This fight-or-flight tendency helps us make good (some might argue “safe”) decisions; it prevents us from swimming with sharks or walking barefoot on lava flows. Granted, some aspects of nature can be somewhat predictable, but interacting with unpredictable investors on Wall Street is entirely different.

Despite our best intentions of trying to make rational decisions on something as black-and-white as finances and quarterly results, our plans are complicated by having to work with others who are attempting to interpret the same information—and coming out with different conclusions.

Too much avoidance of risk and/or fear can get in the way of making some really good investing decisions. We distrust our own conclusions and end up following the herd to financial mediocrity, or even ruin.

By better understanding who we are, where we come from, and what our fears and risk tolerances are, the better we can be at creating a solid, well-diversified retirement portfolio.

For example, at the most basic level, we know that the better we feel, the more apt we are to rush into something—and possibly make mistakes. A large number of optimistic investors—those who didn’t think revenues or earnings were important—saw their retirement fund take a beating at the … Read More


Two Wealth Management Retirement Strategies to Reconsider

By for Daily Gains Letter | Mar 26, 2013

260313_DL_whitefoot

From home repairs, to fixing cars, to crafts, publishing, and decorating—in a do-it-yourself culture, nothing is out of bounds. Thanks to low interest rates and underperforming assets with terrible returns, many who are on the cusp of retirement are looking after their own retirement plans in an effort to boost their retirement income. Meanwhile, those already in retirement are looking for ways to sustain their savings.

Self-directed retirement investing is a great way to manage a retirement nest-egg. And there is a wide array of resources and tools available to help retirees going it alone to make informed decisions, including: online calculators (which help determine how much you need to save for retirement), articles, webinars (instructional seminars conducted online), and online videos.

While the Internet is the easiest place to turn to for self-directed wealth management and retirement planning advice, you have to be discerning. Making the wrong decisions can be costly, and it could significantly undermine how comfortably you enjoy retirement.

What follows are two popular wealth management retirement strategies that are commonly offered to those entering their golden years—but that investors need to seriously reconsider.

 

1. Postpone Retirement to Increase Savings

Whether you’re retired or near retirement, your time is still worth something. You just have to decide how financially set you are and what your time in retirement is actually worth in dollars and cents.

A lot of people nearing retirement are at the peak of their earnings potential. And in some cases, they may not want to quit—even if they are in their late 60s and financially prepared for retirement. The reason many want to … Read More


Build a Solid Retirement Portfolio in Less Than 60 Minutes

By for Daily Gains Letter | Mar 25, 2013

250313_DL_clarkGood investing doesn’t have to be complicated. If you want to save for retirement using the stock market, most individual investors would likely choose a selection of mutual funds or exchange-traded funds (ETFs).

Going forward, a lot of people are viewing the stock market as very vulnerable; unless there is another war or the euro currency really does come apart, the next big pullback is likely to be an attractive buying opportunity for those able to put away some savings for retirement.

A portfolio investment strategy is always crucial, and over the years, I’ve learned to be very conservative with equities. There’s always room for a few highfliers, but I don’t bet the farm on anything.

Putting together a stock market portfolio is easy, and you can just write it down on paper in anticipation of the next big correction.

In retirement planning, it’s highly likely that capital preservation is a top priority, so a stock like The Southern Company (NYSE/SO) or another utility stock might be a good pick. The Georgia-based electric utility has a history of paying increasing dividends to shareholders and capital appreciation on the stock market.

For me, an important group to include in any retirement portfolio with equities is consumer staples. Companies like The Procter & Gamble Company (NYSE/PG), Wal-Mart Stores, Inc. (NYSE/WMT), and PepsiCo, Inc. (NYSE/PEP), to name just a few, are well-managed dividend paying stocks that are highly likely to survive any major shocks in the global economy, and they will certainly benefit from population growth.

A pharmaceutical stock is often a good idea. There are a number of blue chips in this … Read More


What Retirees Wary of U.S. Banks Need to Know

By for Daily Gains Letter | Mar 22, 2013

Piggy Bank and canadian dollarsThose on the cusp of retirement are an untrusting lot. Apparently, you’re not getting the message that you need to save more for retirement. At least, that’s according to the financial services industry.

In 2011, U.S. financial services firms spent over $1.0 billion advertising investment and retirement services. Despite the advertising blitz imploring us to entrust them with our retirement funds, roughly 58% of investors are turning a blind eye and don’t have a retirement plan. A full 39% don’t think investment returns will be high enough to provide decent retirement income regardless of how much they sock away. (Source: “Meeting the Retirement Challenge: New Approaches and Solutions for the Financial Services Industry,” Deloitte Center for Financial Services web site, March 7, 2013.)

According to a report by the Deloitte Center for Financial Services, pre-retirees either don’t want to think or they don’t believe that they’ll need professional advice with retirement planning. For many, the report contends, “This might be a short-sighted decision, given the complexity of retirement finances and the potential value an advisor could offer.”

Maybe; maybe not.

While it’s astounding to learn that 58% of investors don’t have a retirement plan, it’s not hard to see why so many distrust banks and other financial service providers. It’s tough to have faith in a system that was, by and large, responsible for the Great Recession.

It’s also tough to think that a sector that helped bring the nation to its knees can have the foresight to provide objective retirement planning advice and deliver on their promise to serve an individual’s retirement planning needs.

In this tough economic climate, … Read More


It’s Never Too Late to Save for Retirement: Four Easy Retirement Steps for Late Planners

By for Daily Gains Letter | Mar 5, 2013

050313_DL_whitefootWhether you’re on the precipice of retirement or still a few years away, it’s never too late to start saving. That said, the longer you wait, the harder it’ll be to meet your retirement goals.

What’s the best way to increase retirement wealth? While many may think the key is picking the best investments, the truth of the matter is that the best place to start is by simply saving. Regardless of where you’re at, if you start saving now and stay diligent, you can significantly improve your retirement prospects.

Savings that can have a positive impact on your retirement plans can only come from choices that affect your day-to-day life. And by saving, I don’t mean giving up your daily coffee; I mean changing your lifestyle—saving 10% of your gross income right off the top, or more if possible.

Granted, there isn’t one single path to fulfilling your retirement planning goals. However, there are certain steps everyone can take to help prepare financially for retirement.

A Little Goes a Long Way

How much of your salary should you put aside? There is no definite equation, but some experts recommend 10%–15% of your annual income, or more if you’re closer to retirement and haven’t started saving.

By living off of 70% of your salary or working a few more years, you can cut the savings levels you must reach by 10%–25%, or by even more if you save and work past the average retirement age.

How can you set aside that much from each paycheck? Again, it comes down to lifestyle choices. Cut back on everyday expenses where possible: the … Read More


Make the Fed’s Monetary Policy Work for You

By for Daily Gains Letter | Mar 4, 2013

040313_DL_zulfiqarDuring the financial crisis, when the banking system was on the verge of collapse, the Federal Reserve came to the rescue. As a result, the central bank ended up reducing interest rates in the U.S. economy to the historical low level.

The reasoning behind this was very simple: the financial system needed liquidity—and the banks weren’t lending to anyone.

On one hand, the argument for these actions by the Federal Reserve was that when interest rates go down, businesses and consumers alike will be more prone to borrowing, because it simply costs them less to owe money. This phenomenon has its own implication—when businesses and consumers borrow, they spend money, and from there, economic growth kicks in and so on and so forth.

On the other hand, these activities by the Federal Reserve were not well received. Those who opposed the Fed’s policies reasoned that it was a short-term fix, which doesn’t do much in the long haul. In addition, they argued that the banks were the only ones who took advantage of this.

While both arguments have their backing, in the midst of it all, these actions had—and, as a matter of fact, they still have—a silver lining for those who are planning for retirement or simply looking for ways to save more money or cut expenses. One way you can take advantage of the Federal Reserve policy is to refinance your mortgage.

Refinancing Your Mortgage

As the Federal Reserve slashed interest rates to boost economic growth, the mortgage rates offered by the banks also decreased. In January of 2013, the conventional 30-year fixed-rate mortgage in the U.S. economy … Read More


No Dividends Here, but Smartphone Companies Are Where the Future Is

By for Daily Gains Letter | Mar 1, 2013

010313_DL_zulfiqarSmartphones and personal gadgets have gained some extra attention these days. With that said, many investors only focus on the makers of these phones, and not on the other things associated with them—such as accessories.

A report by ABI Research, a market intelligence firm, indicated that the market for mobile device accessories will grow at a 10.5% compounded annual growth rate from 2012 through 2017, due to the growth in smartphone sales. (Source: “Aftermarket Mobile Accessory Revenues to Reach $62 Billion by 2017 as Market Value Moves to Smart Accessories,” ABI Research web site, November 14, 2012, last accessed February 28, 2013.) The firm expects revenues for mobile device accessories to reach $62.0 billion by 2017.

The report also indicated that products like protective cases and stereo-wired headsets are predicted to show the highest growth rates of 18.2% and 15.6%, respectively. ABI Research tracks 13 accessory product segments.

As I have been saying in these pages, when there is a gold rush, a person selling the shovel can make the most money.

In that case, look at companies like ZAGG Inc. (NASDAQ/ZAGG). Please note: this is not a specific buy recommendation; rather the following information is meant to serve as an example of the type of opportunity you should look for.

ZAGG designs, manufactures, and distributes protective coverings and other products for electronic devices. Its flagship product, “invisibleSHIELD,” is a thin, scratch-resistant covering that’s custom-cut to fit invisibly on the screens and displays of Apple “iPhones” and other smartphones, laptops, GPS devices, and so on. The company also offers additional accessories, including headphones for “iPods” and MP3 players, and decorative … Read More