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Rising Tide

by Bill Donahue

The U.S. economy looks unstoppable: Unemployment remains remarkably low; the stock market seems to soar to new heights by the day; and the bullish Federal Reserve intends to raise interest rates this year on the belief that the already vigorous economy will get a boost from the tax cuts enacted by the Republican Congress.

But better bold on tight, because there’s a reckoning on the way, right? Maybe not, says Dan Hernandez, CFP®, a financial advisor with Lincoln Investment, headquartered in Fort Washington.

“There’s a lot of positive sentiment out there right now,” says Hernandez, who works primarily out of Voorhees, N.J. “The stock market has been ridiculously good—almost alarmingly good—and every time it goes up, people get more scared. We’re indoctrinated to think that there’s a correction coming. I’m not sure I’m buying into that. The market is up for a lot of good reasons; unemployment is at a 17-year low, for example.”

Right now, there’s virtually no incentive to keep money out of the market.

“There’s always going to be volatility, but I think the country is moving in a positive direction,” he says. “That gives the average person more money in their pocket, which they can then funnel toward retirement.”

After all, a comfortable retirement is no longer a sure thing. Perhaps rightfully so, many Americans now eye Social Security with uncertainty—wondering if the retirement program will even exist by the time they retire. In other words, the burden of building a nest egg now rests solely on the shoulders of the individual. For those who are behind in their quest to save, there’s no bad time to start.

“The New Year is upon us,” Hernandez says. “This is the time when people will look at parts of their life they’ll want to improve, including their financial well-being. What’s the first step? They should contact an advisor, because you’re more apt to hit your target if you set measurable goals and follow a plan than if you’re just mentally saying, ‘I need to save more.’

“People should get planning and goal setting from an advisor, but their employer plan—401(k), 403(b)—is their best source of putting their money away,” he continues. “For people without an employer plan, there are vehicles like Roth IRAs. People do forgo those opportunities, because there’s always something to spend money on. But if you wait for a time when you have a few hundred dollars lying around, it will never come. You have to make it a priority.”

Where to Begin
While a good financial advisor should be able to steer an investor into investment vehicles designed to multiply his or her funds, it may not be a realistic option for all. Some people believe the country could benefit from earlier interventions to help all Americans start out on surer financial footing.

“What is the root of the problem? Education,” says Crystal Evans, author of the book Money Talks: Entrepreneurial Hardships & Triumphs. “I didn’t learn certain things in high school that maybe I should have learned. No one is educating children about money. That’s why I think financial literacy should be part of the curriculum. It’s something that should be learned right away, even before you enter the work force.”

That’s one reason why Evans has lobbied members of Congress to pass legislation that would introduce financial literacy into schools. She also regularly hosts conferences and meetings locally so attendees can “walk away with useful information to improve their everyday lives,” she says.

She believes doing so would help those in the Greater Philadelphia Area—particularly those battling the socioeconomic and economic adversities of urban communities— make more informed decisions that can affect their financial future.

Such education seems in high demand. Eighteen percent of Americans say retiring without having enough money set aside is their chief worry associated with personal finance, according to the 2017 Consumer Financial Literacy Survey. Conducted on behalf of the National Foundation for Credit Counseling, the survey aims to shed light on consumers’ financial knowledge, as well as their behaviors and attitudes toward personal finance. Alarmingly, the survey suggests 27 percent of U.S. adults do not save anything for retirement.

“Anymore, people are retired for a long time, so the money has to last them for 20 years or even longer,” says Hernandez. “That’s especially true after what we saw in 2008-09. If the market takes a 30 percent hit, you could be sitting on a 401(k) worth $1 million and then all of a sudden the $1 million is worth $700,000 and you’re not retiring when you want to retire. People have recovered from that, but they didn’t forget, and that’s making them more cautious.”

What might that cautiousness look like? Investors may decide to reduce stocks in a portfolio in favor of bonds, cash or precious metals—in other words, investment vehicles that should “hold up” if the stock market takes an unexpected turn.

The survey shares some encouraging insights, too: Millennials (ages 18 to 34) are more likely to be saving more than adults age 35 and older. Hernandez believes they may have seen what happened to their parents during the so-called Great Recession and are now taking the bull by the horns.

Time to Get Serious
Most of Hernandez’s clients are in pre-retirement age—45 to 50—and beginning to think seriously about how and where they want to spend their retirement.

“These are people who have gotten their children through college and are saying, ‘OK, now it’s time to focus on me,’” he says. “In many cases, people are looking at the last 10 years prior to retirement and realizing it’s time to hit it hard. I always say you should plan earlier, but the serious saving often starts during those last 10 years of pre-retirement.

“Twenty-five years ago, you could buy a 10-year CD and get 6 percent; now you can’t do that,” he continues. “So in order to make 4 to 5 percent, you have to expose yourself to some risk. Volatility makes people nervous. When you’re 40 and you have those big swings, it’s not as much of a problem, but when you’re 65 and seeing those big swings, it can have an emotional effect.”

In a 24-7 culture, investors have immediate access to information. Although such access can be incredibly helpful, it also has the potential to cause trouble.

“It also gives you a way to act out on your emotions, and money and emotions don’t mix too well,” he says. “I always tell people that the market doesn’t go up by itself.”

Being smart with one’s money is essential, but investors should also plan for worstcase scenarios. That means not only having enough saved—and in a diversity of different vehicles—to weather any downturns in the market but also pondering the question, “What if …?”

“Nothing screws up a person’s financial plan more than poor health,” says Hernandez. “That’s why I often tell people they should take a look at the different types of longterm- care insurance policies. Some people think everything’s set, but when someone gets sick, things change. Some of these long-term care facilities could take $7,000 to $9,000 a month. Even if you have hundreds of thousands in a nest-egg account, it could go quickly.”

Published (and copyrighted) in Suburban Life Magazine, January, 2018. 


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