Financial Perspectives – Fall 2009

Rethinking Retirement

Turbulence in the housing and financial markets, the possibility of rising inflation, and increasing life spans are just a few of the reasons you must be confident that your retirement portfolio can generate the income you will need for as long as you need it.

However, an increasing number of Americans are not persuaded that they will be able to retire – or, if retired, that they will be able to continue living – as they had planned. In fact, only 13% of workers are “very confident” they will have the money they need to retire, according to a 2009 study by the Employee Benefit Research Institute (EBRI).

Similarly, an increasing number of workers who once planned to retire at 62 now expect to work until at least 65, according to AARP’s Public Policy Institute. In addition, many retired individuals are seeking a return to the workforce, either full- or part-time. In June 2009, for example, 430,000 people age 65 and over were actively looking for work, a dramatic 46% increase from a year earlier, according to the Bureau of Labor Statistics.

Not surprisingly, many Americans still in the workforce and concerned about their abilities to retire comfortably are taking steps to help safeguard their futures, the EBRI study found. For example:

• 81% have reduced their expenses,
• 43% are changing how they invest their money,
• 38% are working more hours or holding second jobs, and
• 25% are saving more money.

If you’re not sure whether the retirement you had anticipated is still within reach, your advisor can help. Together, you can assess your financial assets, evaluate your overall retirement plan and analyze your situation to help identify any shortfalls and develop strategies to resolve them.

Determining whether your retirement portfolio is appropriately balanced between assets that provide needed potential for growth and those that generate consistent, reliable income is critical. You and your advisor should also explore your investment timeframe and examine whether your portfolio is robust enough to accommodate the unexpected – in the financial markets, the economy and your personal life. Should you determine that reallocating your portfolio will not fully address any shortfall in what you’ll likely need in retirement, the next step is to identify your core needs, as well as those goals that are less essential.

For example, you may need to consider modifying the lifestyle you had envisioned – perhaps by moving into a smaller home, forgoing travel plans or keeping your current car a few years longer than you’d initially planned. The key is to maintain focus on the basics, including healthcare, and work to ensure they can be met throughout your retirement years.

In addition, if you have not yet begun accessing your Social Security benefits, make sure you understand the benefits and disadvantages of taking income earlier as opposed to deferring withdrawals until later. Similarly, if you are withdrawing – or considering withdrawing – income from other retirement assets, talk to your advisor about which accounts to use and when to use them. Your decisions may not only have tax implications, they could affect your portfolio’s growth potential.

After reviewing your needs, goals and portfolio, you and your financial advisor may still conclude that your assets cannot generate the income you need. Should that be the case, you may want to consider delaying your retirement if you’re still employed, or returning to the workforce – whether part- or full-time – if you’re already retired.

Managing Your Retirement Assets

To help manage your spending, reduce fees and save time, consider consolidating your accounts through an integrated cash management system such as Raymond James Capital Access.

Online access to your account allows you to check your spending and your balance whenever you like. In addition, you can download your information to leading financial software programs, schedule automatic bill payments and keep track of bills using your personal online calendar.

An effective cash management system can help you organize, monitor and track your expenses. For example, it can help you identify whether:

• You have sufficient cash reserves for an emergency,
• You have enough money on hand for large, but anticipated, obligations – such as a tax bill or an insurance premium,
• You should consider reducing your use of credit,
• You’re using “extra” cash such as raises, tax refunds and bonuses effectively, and
• You need to curtail impulse buying.

In addition, by employing Capital Access in conjunction with Investor Access (see related story), you can view your linked accounts, whenever you want, in as little or as much detail as you choose.

And, of course, to help safeguard your account from identity theft and fraud, Capital Access employs industry-leading fraud protection services, while detailed monthly and annual summary statements allow you to see at a glance how much you’re spending – and what you’re spending it on.

Raymond James & Associates, Inc. and Raymond James Financial Services, Inc. are wholly owned subsidiaries of Raymond James Financial, Inc. (NYSE-RJF).

The information contained in this newsletter has been obtained from sources considered to be reliable, but we do not guarantee that the foregoing material is accurate or complete. We may, from time to time, have a position in the securities mentioned and may buy or sell such securities in the course of regular business.

This information is not a complete summary or statement of all available data necessary for making an investment decision. Investing involves risk and investors may incur a profit or a loss. You should discuss any tax matters with the appropriate professional.