Financial Planning
By Ruth A. Forsyth, MS, CFP, CLTC, CSA

Ruth Forsyth is a Certified Financial Planner and Principal with The Advisors Group of Pittsburgh and holds a Master of Science degree in Financial Planning. For more information, visit www.advisorsgroup-pgh.com or call 412-539-0055.

You’re Never too Old for “New Math”
As baby boomers age and enter retirement, they need to adjust their thinking about many things. Among them are what to do with their free time (no more 9-5 grind) and how they should view their investment returns.When it comes to retirement assets, the strategies that worked while accumulating for retirement may not necessarily be as effective in providing income.

Historically, traditional defined benefit pension plans and Social Security have provided the primary sources of income and security for retirees. Given Social Security’s uncertain future and the fact that many employers have switched from traditional pension plans to 401k’s, today’s worker entering retirement needs to rely much more heavily on personal investments as a source of income.This places the two primary risks of retirement – investment risk and longevity risk – directly on the shoulders of the individual.

Outliving their money is a fear of many investors entering retirement. According to a recent study by Milevsky and Abaimova, a 65-year-old couple has a 50.3 percent chance that at least one of them will live to age 90! Additionally, unexpected expenses and rising healthcare costs have left many underestimating their needs in retirement.

Rising income needs, inflation and taxes make it imperative that retirement assets are not invested too conservatively. Returns need to be sufficient to provide for today’s expenses while also providing a rising stream of income for tomorrow.

When accumulating assets, it is all about long term returns. Volatility and sequence of returns are not as important as the end result. However, investing for an increasing income requires additional considerations. Average rates of return are not as meaningful. In essence, the “math” changes. Volatility in a retirement income portfolio can be much more damaging and systematic withdrawals only worsen the losses.

The “arithmetic of loss”means that an investor needs a greater positive return to recoup from a negative year. Consider the following data: An investor suffering a loss of 15 percent in their portfolio needs a return of 17.6 percent the following year to get back to even. If that same investor is withdrawing 5 percent per year from their assets, they would need a 25 percent return to recoup their loss.

Securities and advisory services offered solely through Ameritas Investment Corp. (AIC).Member FINRA/SIPC. AIC and The Advisors Group of Pittsburgh are not affiliated.

Remembering My Lai
A Vietnam veteran visits Chartiers Valley high school to recount one of the darkest chapters in U.S. military history.

Unlikely Friendships
A trip to one of Africa’s most desperate countries teaches a CV student that people aren’t so different after all.

Officer of the Year
Scott Township’s Police Department unanimously names Alan Ballo its top cop.

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