Russell Jalbert
RETIREMENT PLANNING: Russell, retirement planning is such a wide topic today, covering so many different areas. We’d like to cover as many of those areas as time permits. Tell me where a successful retirement really starts.
JALBERT: It all starts with the planning. Retirement planning is directed at the future. The idea is to evaluate your current situation, estimate the cost of your lifelong goals, and establish strategies to meet them. A financial plan is the blueprint that evaluates your current assents and liabilities, identifies the things you want (or need) to provide for, and lays out a strategy to pay for them. Developing the plan is one thing, sticking to it is quite another.
RETIREMENT PLANNING: We have all heard the stories about people spending more time planning their next vacation than they do planning their retirement. Any truth to that?
JALBERT: Actually, more than you think. It's hard to imagine any¬one who couldn't benefit from thinking about where they want to go financially, and how they are going to get there. There is nothing magical about acquiring wealth, and it does not require great luck or skill. It does, however, require planning and discipline. It does require that you give up the notion that you can get rich quickly. But you can, if you choose to, build wealth slowly.
When individuals get into trouble investing, it generally can be traced back to the fact that one or more of the fundamental rules of successful investing has been broken.
RETIREMENT PLANNING:
Give me an example.
JALBERT: Well, there are typically four major enemies of wealth accu¬mulation. They are hope, boredom, greed, and fear. Most get into trou¬ble in areas revolving around one of these four areas.
On the other hand, I have found that successful investors take a different approach. They continuously moni¬tor their investments, not by fretting over the day-to-day ups and downs, but by monitoring the larger con¬text of their investment portfolio. Performance must be measured in comparison with market trends. The key to successful portfolio monitoring is to inspect what you expect, to see that you are reaching your goals.
RETIREMENT PLANNING: So where does one start in this process of planning for a successful retirement?
JALBERT: Any plan for a success¬ful retirement starts with where you want to be 5, 10 and 20 years from now. You should also consider the things you want to do between now and then: buy a house, send your children to college, support your parents, start a business, etc.
The next step is to put a number on the costs of the various goals you have select¬ed. Then you need to get a clear, accurate picture of where you are right now.
RETIREMENT PLANNING: You said there were a few general rules of thumb and figures to use in the planning process to come up with some reasonable estimates.
JALBERT: Yes, here are just a few. College costs are increasing at 6% a year for private institutions and 10% a year for public institutions. Inflation is running around 3% a year, but 4% is a pretty good number to use for projections. On average, stocks have earned about 10% a year since 1926. Bonds have returned 4.8%. When estimating investment returns, these are much bet¬ter figures to use than how the market has done over the past 5 or 10 years. Equities are the only financial assets to consistently outperform infla¬tion over the long haul.
RETIREMENT PLANNING:
What about Social Security?
JALBERT: Personally, I think it depends on your age but I don't think one should count on Social Security in the plan¬ning process. I think you should look at Social Security as an inheritance:
RETIREMENT PLANNING: We hear a lot today about asset allocation. What is it?
JALBERT: Asset allocation is the per¬centage of your portfolio invested in three different categories, typically, cash (CDs and money market funds), equities (stocks and stock mutual funds), and fixed income (bonds and bond funds).
RETIREMENT PLANNING: Why is that so important?
JALBERT: The most important decision an investor can make is the decision about asset allocation. How do I allocate my portfolio among stocks, bonds, and cash? The asset alloca¬tion decision should be made before any actual investment. This decision is a critical one because it's been shown that how an investor allocates portfolio assets has a far greater impact on investment return than market timing or security selection. Look at the chart above to see the difference.
RETIREMENT PLANNING: You mentioned mutual funds. What role do they play in a successful retirement?
JALBERT: Mutual funds were originally designed to simplify investing, but mutual funds are making it more complex these days. There are now some 4,300 mutual funds available to investors today, compared to roughly 2,532 stocks listed on the New York Stock Exchange. To complicate mat¬ters, investors are inundated with reams of mutual fund data: yields vs. total returns; load vs. no-load; one-year performance vs. ten-year performance;
RETIREMENT PLANNING: You're right. It seems more complicated now than ever before. How is the average investor to sort through it all?
JALBERT: The answer isn't as compli¬cated as you might think. It boils down to just one factor. Why are you investing in the first place? Are you saving for a down payment on a new house? To pay for col¬lege educations? For your retirement? That answer is the starting point in find¬ing the right fund for you.
RETIREMENT PLANNING: Isn't diversification one of the benefits of mutual funds?
JALBERT: You bet. In fact, diversifica¬
RETIREMENT PLANNING: How about inflation?
JALBERT: Inflation is just a fact of life. It has been your constant companion since the day you were born, and from all indications it will continue to be with you for the remainder of your life. There are many nice aspects to a low-inflation, low-interest-
Russell K. Jalbert is one of the nation's leading financial professionals, and has advised successful individuals in the management and distribution of their wealth for more than 35 years. An early leader in the financial planning movement, he co-founded the National Financial Counseling Board in 1975 and has twice been named as one of the Outstanding Young Businessmen of America. Russ holds a bachelor’s from Ferris State University and has been admitted to the prestigious Registry of Financial Planning Practitioners – an accomplishment achieved by less than five percent of all financial planning professionals. In 2002, he was the number-one registered broker-dealer representative in the United States and has remained one of the most successful people in his industry. Russ has appeared in publications as Business Week, Nation's Business and The New York Post and has authored three texts on professional financial planning and on consumer financial independence. He appears in local radio markets hosting "The Jalbert Financial Hour.” Jalbert is the Founder/President of the Jalbert Financial Group in Southfield, MI.
Photo:
http://www.prlog.org/
