Oct 8, 2013 4 min read

Five years ago this September, the fourth-largest investment bank in the United States collapsed, setting in motion the worst economic downturn since the Great Depression. Lehman Brothers filed Chapter 11 bankruptcy on Sept. 15, 2008, and in less than six months the Dow Jones Industrial Average went from 11,421.99 to 6,547.05. Investors have been through a lot over the last five years, and those who have stayed properly positioned have been rewarded. The Dow Jones Industrial Average has fully recovered from the March 2009 low and is up more than 135 percent, hitting a new intraday high of 15,676.94 on Sept. 18, 2013.

As a financial adviser, I have found that despite this market recovery, many retirees and pre-retirees still feel their financial future is uncertain and challenging to plan for. It is often helpful to identify the primary concerns that individuals are faced with and then begin to address them within the context of that individual or family’s financial situation.

The low interest rate environment is probably the most common concern I hear. The market went up over the past five years, but interest rates have fallen to near record lows. According to bankrate.com, the average interest on a one-year CD fell from over 2 percent in 2008 to less than 0.25 percent in 2013. This is an example of how difficult it is to generate meaningful income to live on from conservative investments in this market.

Market volatility, longevity and inflation are also concerns I hear. The U.S. market has not climbed without periods of uncertainty and panic. Statistics show that people are living longer. A couple turning 65 today has an 18 percent chance that one of the individuals will live to age 95. Inflation has been low, according to the Consumer Price Index, but many economists believe the unprecedented amount of recent fiscal and monetary stimulus will lead to meaningful inflation over the next 10 years.

What is the first step in addressing these challenges? I believe that it is important to first look at your situation from a numbers standpoint. How can you address low rates and inflation without first identifying how much of your portfolio will be needed to meet your needs in year one of retirement? It is important to identify what predictable income streams you can expect at retirement and what assets are available to compliment your income. We also need to identify what amount of annual after-tax income you need to meet living and gifting needs. How your investments need to be used is crucial in determine how your portfolio should be positioned.

The next step is to learn more about your personal goals so that we can make sense of these numbers. Are you only concerned with living a comfortable lifestyle? Do you have the desire to pass an estate on to the next generation? Do you have charitable intentions that are important to you? These conversations ensure that the recommendations are meaningful to your unique situation.

The Hefren-Tillotson MASTERPLAN coordinates the expertise of multiple professionals, both within and outside of our company, to put together a financial plan based on this information. One thing that we do know is that your situation will change and so will the markets. It is just as important to monitor this plan on a periodic basis to ensure the strategy is still reflective of your objectives. If you have found yourself agreeing with the concerns listed above, then it might be a good time to put your own MASTERPLAN into motion. Call to set up a no-cost financial consultation today. n

Ben Montgomery is a financial adviser with Hefren-Tillotson Inc. He is dedicated to comprehensive financial planning and enjoys working closely with individuals to help them reach their financial goals. Ben is a CFP® practitioner, an Investment Adviser Representative, a Registered Representative, a Licensed Agent for Life, Accident and Health Insurance, and a member of the Financial Planning Association (FPA). He can often be heard on NewsRadio 1020 KDKA providing the afternoon stock quote report. Ben, his wife, Courtney, and their children, Anna and Kyle, reside in Mt. Lebanon. He can be reached at 412-633-1562.