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22 Long Beach Business Journal

July 7-20, 2015


Financial Services: Roadblocks To Retirement ■ By THYDA DUONG Contributing Writer t’s no secret that the road to retirement Ithosecan be a difficult one, particularly for whose journeys may be littered with road signs pointing them in many directions – with no clear destination in sight. According to recent findings from the Wells Fargo/Gallup Investor and Retirement Optimism Index, a survey of 1,005 U.S. investors conducted May 22 through May 31, 2015, only 36 percent of all non-retired investors have a written plan for reaching their retirement and investment goals. Part of the problem, experts say, lies in the sheer volume of information available in the marketplace that could steer individuals in the wrong direction. “People feel overwhelmed by the need to plan for retirement because they’re confused,” said accredited financial fiduciary Karen Codman. “Wherever you go, everyone’s giving you advice . . . People aren’t sure what to do, so they don’t do anything.” A key, experts say, is differentiating information from education. “It can be pretty daunting for someone to take their hard-earned money and put it somewhere they don’t understand,” said Trent Bryson, CEO of Bryson Financial,

For instance, 96 percent of those surveyed by the Wells Fargo/Gallup Investor and Retirement Optimism Index noted that living comfortably in retirement is a part of their “American Dream.” Yet, roughly 92 percent of working households aren’t meeting the savings targets that they should be meeting based on their age and income for working until age 67, according to Elizabeth Jensen, wealth planning strategist at Wells Fargo Private Bank. “Americans, generally across the board, just aren’t very good at saving,” Jensen told the Business Journal, noting that 38 million working age households don’t have any retirement account assets, which translates into a median retirement account balance of $3,000 for a working age American and only $12,000 for near-retirement households. “There’s a bit of a disconnect in what we’re seeing people do and where they say they want to be,” Jensen added. “It doesn’t mean they’re going to necessarily be destitute; it just means they’re not going to be able to afford the lifestyle they’re envisioning.” Part of the challenge of retirement planning, experts say, is establishing a realistic vision of what retirement might look like, including preparing for potentially longer life spans while taking into account the variability of supplemental incomes. “One of the challenges is that many people don’t fully understand social security,” Codman said. “For most people, social security will provide between one-third and one-half of their living expenses, so it’s a very important part of your retirement planning, but it’s not all there is . . . You have to be diversified. You can’t just plan on one thing.”

“I hear people say, ‘Oh I’ll wait until I get a raise or a new job,’ but they would’ve been better off putting in less money and letting the money go to work for them over time.” Trent Bryson, CEO Long Beach-based Bryson Financial

(Photograph by the Business Journal’s Evan Patrick Kelly)

who added that individuals should seek out guidance that’s educationally driven rather than product-driven. “Education creates the confidence to invest,” he said. “Unfortunately, the only time people learn about what’s happening is when the economy’s crashing and they hear all the horror stories – not all the feel-good stories about somebody who started working at 21, took advantage of compound interest and dollar cost averaging, and was able to retire on time.” For some, too much information and too little education may create critical gaps that could lead to even greater disparities in later life, experts caution.

This is especially important for business owners, Codman noted, noting that some may tend to overestimate the value of their business. “A lot of business owners tell me, ‘I don’t need a retirement plan because my business is my retirement plan,’” she said. “What they’re going to find out, when push comes to shove, is that their business may not be worth what they think it is, especially if they don’t have a coherent exit strategy.” Industry experts agree that planning appropriately for the future requires trade-offs in the present – which isn’t always easy. Financial and circumstantial challenges to saving for retirement run the gamut from heavy debt loads and unplanned expenses

to unexpected layoffs, job losses and stagnant income levels. “Life is becoming a little more dynamic,” said J.C. Abusaid, president and chief operating officer of Halbert Hargrove. “We’re finding some clients are getting caught in the sandwich generation, so they’re not only having to care for their kids, but also their parents, and then on top of that they’re supposed to take care of themselves and save for retirement.”

Getting On Track While the challenges to saving can be difficult, industry experts generally agree that individuals should start saving as soon as possible – with a clear roadmap of where they’re going and how to get there. “When you’re young, you’re either trying to pay off college debt or you’re trying to buy your first house,” Bryson said. “As you get a little bit older, you’re now paying for children and sports programs. And then when you get toward retirement you’re starting to have healthcare expenses. “The sooner you start the savings habits in life, I think the much higher chance you have of retiring on time, more so than making more money even,” he added. “I hear people say, ‘Oh I’ll wait until I get a raise or a new job,’ but they would’ve been better off putting in less money and letting the money go to work for them over time.” Similarly, Abusaid stressed taking advantage of time, while cautioning against relying on the potential for high short-term market returns to build adequate retirement assets. “The returns that the market can provide are not going to be the big doubledigit returns of the ’90s,” he noted. “The market’s not going to make up for what you didn’t save. You’re going to have to actually put the money away. You can’t expect the market to make up the difference.” “If you start in a very methodical but slow, incremental process, that’s probably the best way,” Abusaid said. “Because once you start it, there’s momentum that starts building . . . and eventually you’ll be able to get to the right [savings] rate.” Jensen recommended maxing out qualified plan contributions when possible (the current annual maximum 401K contribution limit for an employee is $18,000), but to balance building retirement savings with establishing a sufficient emergency fund of at least six to nine months of income. “It may make sense to build both at the same time – contribute enough to get the employer match, for instance,” she said, “but it definitely does not make sense to fully fund your retirement plan when you have nothing set aside for emergencies and unexpected needs.” Taking a comprehensive look at your financial situation, Codman added, is essential when developing a savings plan – and is especially important when seeking out a financial advisor. “You want to find someone you can trust who’s knowledgeable, and who will take into account your entire situation and give you very personalized advice,” she said. “You want someone who will take time with you to really delve into everything – your tax situation, your estate planning, for instance – and put together a plan that’s right for you.” With a plan in place and a destination in mind, individuals also need one more thing when it comes to saving – patience. “There’s no silver bullet,” Abusaid said.

“There’s no magic to get it done. Saving for retirement is a process that requires constant attention. It requires discipline [and] for sure it requires perseverance and sacrifice. So . . . if anything contradicts that, meaning if it’s supposedly an easy formula [and] if it violates those rules, then people should be aware that whatever they’re basing their decisions on is probably off . . . “You have to balance the short term with the long term,” he stressed. “There’s a tradeoff between having a nice lifestyle today versus having a secure future.” ■

The Invisible Infrastructure: Utilities That You Count On ■ By MICHAEL GOUGIS Contributing Writer magine, for a moment, what a 21st cenIlooktury Southern California home would like to a visitor from 200 years ago. Water just shows up from metal fixtures; waste disappears down a hole and is gone forever. Light emanates from glowing objects in the ceiling, a box in a cabinet uses something called “radiation” to heat food, and neither of these creates any heat, smoke, or uses any visible flame. We take this stuff for granted nowadays. But it’s not just the technology that makes these devices and processes so impressive. It is the reliability of the systems that deliver the energy and raw materials that makes the technology usable. No one is going to develop a microwave oven if there is no electricity, and no one is going to buy a microwave if you can't rely on being able to power it every time you want to use it. Utilities make up an invisible skeleton that supports every facet of daily life for those of us fortunate enough to live in Southern California. We admire the artwork that adorns the walls of our homes and rarely, if ever, think of the beams within those walls that make it possible to hang that artwork. Similarly, we marvel at our newest smart phones but rarely think of the miracle allowing millions to power those devices, simultaneously, whenever we want, for remarkably little money and with increasingly minimal environmental impact. That is, we don't think of it until the battery warning light starts flashing . . . “The system has delivered throughout our history. There have been no major interruptions. That’s been one of the characteristics of our type of utility infrastructure,” said B. Anatole Falagan, assistant general manager of the Long Beach Water Department, which recently celebrated more than a century of operations. “It is that silent infrastructure that delivers service to the customers day in, day out, and they many times are unaware of the reliability of using it,” Falagan said. “Whether that’s turning a switch on for your electricity, or turning the faucet on to get your water, or simply flushing the toilet or letting the water go down the drain to the sewer, what happens after that or before (Please Continue To Page 24)

Profile for Long Beach Business Journal

July 7-20, 2015  

The Business Journal presents the Mid-year Economic Outlook special report and a focus on Going Green.

July 7-20, 2015  

The Business Journal presents the Mid-year Economic Outlook special report and a focus on Going Green.