Preparing for the Golden Years In Ridgewood

Seminar Focuses On Retirement And Health Care Planning

The Ridgewood Property Owners and Civic Association (RPOCA) discussed financial issues along with retirement and estate planning during their monthly meeting at the Ridgewood Older Adult Center last Thursday, Oct. 2.

Financial planner Michael Terry (center) is flanked by Ridgewood Property Owners and Civic Association President Charles Ober (at left) and the group’s counsel and former president, Paul Kerzner.

RPOCA President Charles Ober opened the meeting with some troubling facts. According to Ober, nearly half of all American workers have no money set aside for retirement, and no retirement plans provided by their employers.

“Almost 60 percent of American workers do not believe they have enough money to retire,” Ober explained, citing a recent Gallup poll on the subject.

For Ober, the main issue is not about the money itself, but rather what people aim to do in retirement and how they wish to live. The average life expectancy has risen due in part to advances in medicine and positive lifestyle changes.

“Now that people are living longer lives,” Ober said, “how can they make sure they will be comfortable financially later in life?”

Certified financial planner Michael Terry was on hand to address these questions and concerns regarding investing for retirement. Terry’s financial knowledge and experience is extensive, having served as an editor of Money magazine as well as the former president of the Maspeth Chamber of Commerce. He cited three main components of retirement planning: income, savings and spending.

For most retirees, income is often comprised of payments from pension plans, annuities and Social Security benefits. These sources of income, however, are often not enough for most retirees to live on or fulfill certain retirement goals such as travel and hobbies.

Pension plans, a type of annuity, pay a monthly lump sum for the rest of the beneficiary’s life. However, these annuities do not increase in value according to inflation. Because annuities do not provide for cost of living increases, Terry cautions that they should only be one part of a retirement plan and not the whole nest egg. It is for this reason that other two components of saving and spending are crucial.

Savings consist of retirement investments, such as funds set aside in IRA, Roth IRA and 401K accounts. Real estate assets, such as a privately owned home or income producing properties, are also considered very beneficial under the savings umbrella.

For Terry, however, spending is the most important part of planning for retirement.

According to Terry, monthly and yearly spending is key because it will determine how long the money earned from both income and investments will last. Terry also considers spending important because it is the most controllable factor in financial planning.

When carving out a budget and retirement plan, Terry stressed the importance of considering inflation and taxes. Money in savings plans such as IRAs and 401(k)s are subject to tax, as well as up to 10 percent in penalty fees if funds are withdrawn early.

Terry explained that retirees often end up having to take out more money from these accounts than initially expected in order to cover tax costs.

“Inflation and taxes can eat into your nest egg,” he cautioned. When planning for retirement, retirees must consider the cost of inflation when determining their future living expenses and financial needs.

Terry advised against investing money in the average savings bank or CD account as a retirement plan. According to Terry, banks and CDs do not pay much in interest and do not keep up with inflation rates, currently at a 3 percent average or 4.5 percent historically. Instead, Terry advocated a 60/40 approach to investing over a 10-year period, with 60 percent of investments in equities or stocks, and 40 percent in bonds. He urged prospective retirees to take reasonable risks and enter the stock market.

“Markets don’t go in straight lines,” Terry explained, “They go in waves.”

With smart, advanced planning, investors can compensate for changes or downturns in the market. Terry cited the economic collapse of 2008 as one example.

Terry favors breaking up investments into one year’s worth of cash to compensate for unexpected needs, with additional funds going toward two-year, short-term bonds. The remainder should be invested in stocks and bonds. By reallocating investments and diversifying portfolios, retirees can afford to wait out potential market downturns with minimal risk or impact.

As part of an investment plan, Terry favored Roth IRAs, which are not taxed when money is withdrawn. Terry also urged those still working to take advantage of company retirement plans like 401(k)s, especially if the employer or company will match investments.

Planning for the worst

Another important aspect of retirement is estate planning. Former RPOCA President Paul Kerzner, an attorney, stressed the need for certain important legal documents, specifically a health care proxy and living will.

According to Kerzner, a health care proxy is the only way in which a family member can intervene should you become incapacitated or unconscious. He urged residents to select a representative capable of carrying out their wishes, and suggested having an in-depth discussion with a potential proxy prior to appointing him or her.

In addition to the proxy, Kerzner urged residents to create a living will, which expresses in writing one’s desire not to be resuscitated or kept alive by artificial means. Kerzner advised residents to get at least four originals of the document and give one set to their doctor, one to their proxy, and the other two to keep on their person.

In the event of a trip to the hospital, Kerzner urged residents to give the hospital a copy along with any insurance information upon admittance.

Kerzner also cited the importance of having a standard will, especially for young parents as a means of designating who would obtain custody of their children in the event of accidental death or untimely demise. With regard to property distribution, Kerzner spoke of “will substitutes” such as deeds, titles, bank accounts and life insurance policies. In many cases, these documents can supersede the power of a will.

Kerzner advised residents to know who their beneficiaries are, as the names on each individual document, not the will itself, determine who receives which assets. He also urged couples to appoint contingent beneficiaries on these documents in the event of dual or “simultaneous” deaths.

Kerzner cautioned against irrevocable trusts, which he called a “straitjacket approach” to investing as they provide for zero flexibility. He also advised against appointing a power of attorney.

“People can become intoxicated with power and can cause problems within the family,” warned Kerzner. “It is a toxic document.”

Lawmaker on economics

In keeping with the theme of savings and finances, State Sen. Joseph Addabbo was also on hand to speak about the local economy and job creation.

“As elected officials, it is our obligation to help people find work,” Addabbo explained. Part of this plan includes an upcoming hiring event slated for Thursday, Oct. 16, at the Greater Ridgewood Youth Council located at 59-03 Summerfield St. The event will be held from 10 a.m. to 2 p.m. Addabbo invited residents to attend and bring their resumes.

He also urged voters to vote ‘yes’ on three ballot referendums in the upcoming Nov. 4th election, including questions on independent redistricting, electronic bill filing (which would allow for electronic versions of bills rather than requiring paper copies) and the Smart School Bond Act, which authorizes $2 billion in state bonds to fund technology upgrades in schools.

The next Ridgewood Property Owners and Civic Association meeting is scheduled to take place on Thursday night, Nov. 6, at 7 p.m. at the Ridgewood Older Adult Center, located at 59-14 70th Ave.