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Spending Your Future

By Julie Anderson


The world is changing. Do you have any idea how different the next two decades will be? According to a top state official, Baby Boomers will not be coasting into a gentle retirement. The road will be rocky. Are you ready?
At you will get information from top experts. Information you can use whether you're the

youngest of Boomers at age 47 or the peak at age 65. Take what they say and think about it. Nothing is absolute and no two people have the same situation but one thing's for sure, we Boomers can't assume we will have anything approaching the retirement our parents had unless we get informed and inspired.


State demographer Tom Gillaspy says Minnesota, like the rest of the United States, is aging and that means all the old rules of thumb about how the world normally operates have gone out the window. In a report prepared for the state of Minnesota, Gillaspy and others write, "The next two decades will be unlike any in recorded history. The biggest change will be the aging of the world population. The 2010's will see Minnesota transform from a young state to an old state, from a work-based economy to a retirement-based, entitlement economy." In a recent interview, Gillaspy said, "There are fundamental changes occurring that will affect how we save our money, what our investment portfolio looks like and where we might live." Gillaspy says Baby Boomers as a whole have not done a very good job of saving money and there are fewer young people to pay taxes which sustain government programs - the safety nets we've become so accustomed to during our lifetime.


So what do you do? For starters how about taking a good look at your investments and savings programs, especially those earmarked for post-retirement. There is no one size solution for all, but for some common sense advice we turn to Bob Carrillo. He's been at the helm of Financial Independents of Minnesota for 32 years. He is conservative in his retirement bound investment/savings approach but he believes ultimately the tortoise will beat the hare in the race toward retirement and beyond.

Let's start with some basic questions that take into account market risk, longevity risk, and interest rate risk.


How much of your money should be at direct 'market risk' in the stock/bond market or other investment baskets and how much should be kept safe in bank CD's, fixed or indexed annuities, or other fixed accounts? Carrillo believes in the time tested rule of 100. Subtract your current age from 100. It's easy if you're 50-years-old. Fifty percent of your money might be at risk, 50% should be kept in a safe harbor situation, barring any mitigating circumstances. If you're 65-years-old perhaps only 35% of your money should be at risk. If you can't afford to lose it, you can't afford to gamble with it either, Carrillo says. With longer life expectancies, 'longevity risk', you can't afford to run out of money before you run out of life.


So examine your 401k or other work related investment/savings plan. Many Baby Boomers believe if they contribute faithfully to their 401k plan and have a nice mix of medium and high risk stocks and bonds, they are doing the right thing to diversify and will be able to retire with enough money to live on as they age. But once a worker has reached his or her early to mid- fifties, Carrillo advises they look for the safe harbor accounts in their 401k plans for a portion of their retirement asset mix. The safe harbor accounts are the fixed ones or cash.


Another tip he has shared can be found in the Stock Traders' Almanac. He says historically there is a wealth of information to demonstrate that April through October is traditionally a more volatile time period in the market so consider moving your 'old' 401k money to a safe harbor position from April through October. Your ongoing new 401k contributions and company match may continue to be placed into your current stock/bond mix. Moving your 'old' money or existing investments during this time period may keep you from losing ground during the more traditionally volatile months. You may move your 'old' money back into your investment mix in October until the following spring. This is referred to as the "seasonal trend" movement of the market, not to be confused with "market timing." Carrillo knows it will be tempting to avoid this time tested suggestion if the stock market is doing well, but again his general approach is the tortoise not the hare ultimately will win the race to the post-retirement finish line. He says this is not a hard and fast rule by any means and is just one tool of many but history has proved that caution and discipline is always an appropriate tact to take in this specialized area of post-retirement planning.


Research shows many Baby Boomers have saved only about $100,000 for retirement. Of course it depends on your lifestyle but Carrillo believes you need to have $500,000 saved at age 65 just to be able to live on a modest $35,000 a year. And he says, "please know the $500,000 net asset picture should not include your home, or other real property, as part of the post-retirement equation and planning."


State Demographer Tom Gillaspy says many older people have told him they will just work longer to make up for a lack of savings. But as he points out, life can interfere with that strategy. An illness, injury or a premature pink slip can derail that plan in a heartbeat.

So, the experts say, stop putting off a real examination of what you spend, what you save and what you expect your future will look like. There is still time to prepare but not as much as you might think.


To read the entire report from Tom Gillaspy and others go to and look for "The Long Run Has Become the Short Run."

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