RAA 2.0

Recent events have brought to our attention that we should take this opportunity to give you a quick refresher of the services available at RAA.

As always, the foundation that our company is built on is quality education, unbiased advice and building lasting relationships.

We are proud to be able to offer a full-service experience not typically available with a local independent advisor.  From Financial Coaching to Money Manager; Financial Planner to Personal CFO; Insurance Consultant to Real Estate IRA expert...we offer it all to our clients.  Many of our clients are concerned about market volatility, longevity and ways to generate reliable income in retirement.  Others are focused on "saving as much as they can for as long as they can", college planning and life insurance strategies.  Regardless, we are here to help!.  A sampling of our customized solutions include Retirement Savings Planning, Income Allocation Planning, Managed Accounts, Fixed Annuities, Life Insurance, Budget Planning, Monetizing Concentrated Stock Positions, Employee Benefit Plan Consulting and last but not least, Educational Workshops and Adult Education classes.  

Yes, we have begun hosting local Retirement Table Talk events at our office in Woodstock. In addition, we are excited to announce that we will be teaching our first adult education class, Retirement Planning Today, in October at the Alpharetta Technology Commission Innovation Center.

We want to make sure that all of our clients are taking full advantage of what we have to offer.  If we have touched on anything that you would like more help with, please call us today to set up a meeting. 

Thank you all for your loyalty!  We truly appreciate your choice to have RAA as your Financial Advisor.

Financial Planning Tip of the Month

Sequence of Returns

Thank You Black Rock for the slides below >>>

This is one of our favorite topics to teach and incredibly important to understand.  We will be brief but promise to get into this further either in our next meeting or in future newsletters.  When it comes to financial planning, it is an ever changing and ongoing battle of what we can and cannot control.  The most obvious thing we cannot control is the performance of a portfolio invested in the stock market.  Some may claim that they can predict the direction of the market but we all know the saying...it is impossible to time the market.  

OK, so here is what you need to know for today.  

The closer you are to retirement, the more important this is.  Ready?...

Average returns DO NOT MATTER.  Actual returns DO MATTER.  

Please make note that in the first slide below Mrs. Jones, Mr. Smith and Mr. Brown all had the same 7% average return over their 25 years of investing for retirement.   No money was added or subtracted and they all started and ended up with the same nest egg at the end.  

But didn't I say average returns do not matter?  Yes, I did.  

Please move on to the second slide.  Please note that Mrs. Jones, Mr. Smith and Mr. Brown all had $1,000,000 when they retired at 65.  Not too shabby, right?  All 3 again had an average return of 7% during their 25 years in retirement.  Sounds good doesn't it?  Next, (and this one is very important) they all withdrew $60,000 per year adjusted each year for modest inflation.  So, lets recap...they averaged 7% per year and took out 6% per year so they must be good to go.  Right?  Wrong!  This is where SEQUENCE OF RETURNS is so incredibly important to be aware of.  Poor Mr. Smith (no pun intended) retired and had 2 negative years of performance right off the bat.  Most would say...it's only 2 years out of 25 so he should be OK.  Take a look at the bottom of the chart.  Those 2 negative years right at the beginning of retirement wiped out Mr. Smith's savings while Mrs. Jones passes her $1,000,000 to her heirs.  Again, the only difference was the SEQUENCE OF RETURNS (to be specific Mrs. Jones and Mr. Smith had the exact opposite chronology of returns and Mr. Brown had 7% each and every year.

This is a major focus in our practice.  We are committed to helping our clients gain more control and do whatever they can to avoid the ugly outcome that can come from simply bad retirement timing.  Stay tuned for more sometime soon.

Economic and Market Commentary

 We sent out a quick survey on our Facebook page this week.  Thanks to all that responded.  The question was:  Do you think the Dow Jones Industrial Average will be higher or lower than it is today at the end of the year?  As expected, we received a mixed bag of answers.  Our favorite was "if I knew that I would not need you".  Anyway, this goes into the things we can't control section of financial planning.  Nobody knows what the market will do over short periods of time. 

Our message today is that the stock market still appears to be the best way to grow money over long periods of time.  In the short term almost anything can happen.  Although we have seen numerous record highs for the stock market "averages", there have been some really significant moves in certain sectors.  Energy has seen a very large decline...enough to peak our interest and convince us to invest earlier this month.  Retail has been a bloodbath.  Is Amazon going to take over the world?  Is you ask JC Penney or Sears, the answer is yes.  Foot Locker and Under Armour have lost more than half their value this year.  On the flip side, banks and technology have done very well.  We expect that to continue.  

We fear the fact that there is a lot of complacency today.  Consumer confidence is high and a lot seems to be riding on political policy.  We are not saying it is time to sell everything.  What we are saying is that we should not be surprised to see a correction (10% drop) or even a bear market (20% drop) sometime in the near future.  

Lastly, we are still waiting for interest rates to rise.  Famed bond manager, Jeffrey Gundlach, warned us earlier this month that rising interest rates will be driving bond prices down soon.  We fear that too many investors are not prepared for this to happen.  Fear not, we are prepared and have been for some time...owning floating rate bonds, convertible bonds and emerging markets bonds have worked well this year.

As the markets get more volatile, we will be looking for ways to reduce risk and potential investment opportunities as well. 

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