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| Adrian Mastracci, president
of KCM Wealth Management, says “Making
appropriate choices for the golden years requires
full assessment of the long haul prospects.
The financial independence analysis sheds
light on the roadway." |
For Immediate Release
Vancouver, BC (September 12,
2003): Charting the path to the comforts
of retirement has changed considerably since we
cheered the arrival of the new millennium.
Adrian Mastracci, investment
counsel & financial advisor with Vancouver
based KCM Wealth Management
comments; “There is no shortage of challenges
faced by investors in mapping their appropriate
retirement roadway. Preferably, a road map that
withstands the tests of time.”
“The road to the golden patch was happily
touted as Freedom 55,” notes Mastracci,
“Today, the Freedom 75 version is not so
amusing. Perhaps, reality lives between those
two goalposts.”
“Investing for the retirement years is
a journey,” remarks Mastracci, “A
long haul journey, not a sprint. Arguably, today’s
most difficult task facing investors. And it is
on the minds of many.”
“Investors work hard and save diligently
to accumulate the retirement nest egg”,
says Mastracci, “The good news is that many
have attained that desirable position.”
Mastracci points to the three primary goals of
retirement:
- Establish the stream of reliable income,
- Safeguard the income and capital from the
havoc of risks, and
- Distribute the remaining estate to loved
ones.
“Planning the retirement is about setting
the long haul course of action to achieve a specific
personal return,” observes Mastracci, “The
course is much more than selecting stocks and
funds. Some are in need of a total redesign.”
“Decisions about retirement planning have
significant implications. First, during the accumulation
years and then throughout the retirement years.
Some are not reversible,” declares Mastracci.
“For most investors, the accumulation begins
to receive serious attention when they reach the
magic 40’s,” points out Mastracci,
“Sometimes even the 30's.”
“However, concerns have arisen for those
approaching retirement and those in the midst
of it,” continues Mastracci, “Investment
markets have affected several retirement nest
eggs, some in a serious way. Pension plans have
also been affected.”
Mastracci points to some of the affects:
- Declining interest rates have reduced yields
from fixed income vehicles.
- Some investors embraced the bandwagons of
the day.
- Worse yet, once on the bandwagon, investors
may have missed the exits.
- Others welcomed the treadmill of nearly 100%
equities.
- Many changed course during the last year onto
nearly 100% bonds.
- It begins to feel like a double exposure.
“Making appropriate choices for the golden
years requires full assessment of the long haul
prospects,” states Mastracci, “The
financial independence analysis sheds light on
the roadway.
“At age 60, the retirement plan can easily
span 25 to 30 years, possibly more. A longer life
expectancy requires a bigger nest egg, especially
for women,” explains Mastracci, “I
add 5 to 10 years to life expectancy, depending
on client’s health perceptions and family
longevity.”
Mastracci illustrates the implications of one
retirement example:
- A woman, age 50, wanting to retire at age
60 with an annual income of $60,000, in today's
dollars, needs to accumulate a notably larger
investment portfolio than a man of the same
age.
- The man needs approximately $1,450,000 by
age 60, whereas the woman needs to accumulate
over $150,000 more to provide the same income
throughout her expected lifetime.
“Take command of charting the roadway.
Become the retirement architect,” declares
Mastracci, “Start fresh with the number
crunching. Professional help may be invaluable.”
Mastracci suggests these number crunching tasks
to get started:
- Figure out the expectations for the retirement
plan.
- Estimate the size of nest egg required to
reach or sustain the retirement goal.
- Calculate the rate of investment return to
reach or sustain the same retirement goal.
- Take a long hard look at the prospects of
the employer pension plan where applicable.
- Determine the amount of money that can safely
be withdrawn from the portfolio.
- Contemplate how long the portfolio can provide
this rate of withdrawal.
“This exercise provides initial guidance
as to whether investors are on track for their
retirement ballpark,” concludes Mastracci,
“I refer to it as the financial independence
analysis.”
“The analysis is a must for proper retirement
planning,” recommends Mastracci, “It
calculates the size of nest egg investors require
to reach and sustain the golden goals. The appropriate
strategies can then be set in motion with more
confidence.”
“Redesigning the retirement plan gets underway
with some blank pieces of paper and a few good
ideas. A little math rounds out part one of the
exercise,” summarizes Mastracci, “Is
the retirement architect still up for the job?”
Continue to Part 2
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