$ = $ = $ = $ = $ = $ = $ = $ = $ = $ = $ = $ Intentional Investing Newsletter June\July, 2004 $ = $ = $ = $ = $ = $ = $ = $ = $ = $ = $ = $ IN THIS ISSUE: 1. Note from Your Editor, Lynne 2. Article: Baby Boomers Approaching Retirement: Boom or Bust? 3. Pre-Retirement Resources for the Intentional Investor 4. Intentional Investing Announcements ^`^`^`^`^`^`^`^`^`^`^`^`^`^`^`^`^`^`^`^`^`^`^`^ -=- Note from Lynne -=- Dear Reader, A pivotal event occurred for me this week. I received my official invitation to join AARP. Yes, I'm going to be 50. And, this event influenced the articles that caught my eye as I read my favorite news and financial sources. What did I find myself reading about? "More seniors piling up debt", "retirement worries on the rise globally", "boomers' retirement dreams likely to bust", "boomers' potential for a richer retirement". I think you get the trend. Many of us are in the babyboomer category, born between 1946 - 1964, or have loved ones who are. What is the landscape looking like for us as we focus on our future? In my coaching practice, many clients in their mid-40s to late 50s are asking the question: What do I want to do for the rest of my life? And, do I have the financial means to do it? Our feature article, Part 1 of a 2-part series, presents some of the "external landscape" - current trends in work and wealth - facing us boomers today. Part 2 examines the "internal landscape" - what boomers are considering in our own thoughts and hearts as we look to the future. As always, I'm eager to hear your thoughts and reactions to this topic. Warm regards, Lynne ^`^`^`^`^`^`^`^`^`^`^`^`^`^`^`^`^`^`^`^`^`^`^`^ Lynne Hornyak, Ph.D., Editor e-mail: Lynne@LMHServices.com Coaching successful professionals to greater financial freedom and well-being. ^`^`^`^`^`^`^`^`^`^`^`^`^`^`^`^`^`^`^`^`^`^`^`^ -=- Feature Article: Baby Boomers Approaching Retirement: Boom or Bust? -=- Work and play - two critical dimensions of life. Some of us have found ways to mingle them in the fabric of daily life. Others of us look forward to having more play in our later years as we retire or reduce our involvement in the world of work. The economic events of the last few years, however, has changed the landscape for many of us - often not for the better. It may mean more years of work, cutting back retirement dreams, leaving less to our children. Others have been luckier -- less affected by job cut-backs, stock market losses, corporate scandals that demolished retirement funds. As the economy is improving, how is the landscape shaping up? Here are a few themes from current news reports. 1. The wealth of Americans is tied to more work rather than productivity. A recent Wall Street Journal (WSJ) article (Greg Ip, July 8, 04) reports that, between 1970 and 2002, Americans have grown richer than citizens of other industrialized countries - good news. However, it's because we are working more. Specifically, the annual hours worked per person rose 20% during that time period. So much for integrating leisure into our lives! Americans worked an average of 34.5 hours per week, considering holidays and vacations. Compare that to France and Germany where employees, on the average, work less than 28 hours per week. Hmmm.... 2. Retirement worries are on the rise globally, despite a recovering economy. The WSJ (June 23,04) reported on the Principal Global Financial Well-Being Study. In 8 of 12 regions surveyed (the 8 include the US, Britain, France, Germany, Italy, Brazil, India and Hong Kong), more people in 2004 expect to be worse off in retirement than in 2003. A scary forecast. 3. More seniors are amassing debt. When you hear about excessive credit card debt, who do you picture? Someone in their 20's who is enjoying the "freedoms of adulthood"? Who grew up in a generation more comfortable with "leveraging debt" than our generation? Think again. A recent study called "Retiring in the Red" was released in February, 2004, by Demos, a nonpartisan public-policy group in New York. Analyzing data from about 4,000 households in 1992 and 2001, they found several interesting trends: a) Lower-income seniors are taking on more debt to pay monthly bills while higher-income seniors are reducing their debt burden. b) The percentage of seniors with credit card debt didn't change much over the years, but those who are borrowing are borrowing a lot more. The average balance rose 89% to $4,041 in 2001. The average monthly banlance increased to $4,126, up 38%. c) More seniors are experiencing "debt hardship," meaning their families spend at least 40% of income on debt payments. Debt hardship tripled for seniors with household income of $30K - $49K per year; it declined for seniors with income of $50K or more. Why are many older Americans struggling? Demos researchers site several factors: increased medical costs, eroding pensions, reduced income because of low interest rates; deferring retirement savings because of having children later in life. And, if you are in a lower income bracket, you are more likely to struggle in retirement. The results of the Demos study were reported in the WSJ, February 18, 2004. 4. Boomers' retirement dreams are likely to go bust. Jonathan Clements (WSJ, July 9, 03) roots his pessimism in three developments: a) Stock, bond and real estate returns won't match the gains of the '80s and '90s, which were in the double digits. We're seeing this even as the economy is currently improving. b) Retirees will shoulder the load of government cutbacks, and consequently will need a bigger nest egg to retire. There is also the looming problem that, in a few years, the Medicare and Social Security trust funds will be paying out more than they collect. c) The typical boomer's retirement nest egg may come up short. Retirees are living longer, and many face rising medical costs and expensive nursing home care. It is essential for us to keep our eye on these developments and others -- paying particular attention to how they affect us personally. Before you get depressed at these findings and stop reading, here's the fifth theme: 5. The headline of a May 10, 04 article in the WSJ proclaims "Boomers Have Potential for a Richer Retirement." Journalist Kelly Greene reports on new research from the Urban Institute, a think tank for AARP. The findings suggest that baby boomers have the potential to do better than their parents in retirement -- depending on their ability to rein in their spending. Young boomers, born from 1956-1965 are likely to retire with $609,000 in assets (that's the median value) compared to current retirees who have a median wealth of $448,000. That's 36% more. Note that these retirement figures don't take into account inflation in health-care costs during retirement and that about 1/4 of people at age 67 still have work earnings and their spouses may still be working (John Rother, AARP lobbyist quoted in the article). The Urban Institute also conducted a study of boomers' attitudes toward retirement. The bottom line? More boomers are concerned about making their money last, and at least express a willingness to scale back their plans. 80% plan to work into their 70s, and fewer view retirement as a time to indulge themselves or do all those things they didn't do during their working years. At least we all aren't sticking our heads in the sand! What can you take away from these trends and themes about our retirement future? 1. It's never too early to get a handle on your net worth and earning potential. 2. It's never too early to envision your retirement dreams, and determine how much it will take to fund those dreams. There are good retirement calculators on the Web for this purpose (see resource section). 3. Take a hard look at your spending. Think through carefully where you invest large sums. For example, many near-retirement age couples are realizing that they can't afford to retire because they invested their money in their children's education. Talk to your financial planner about your financial goals; it may make more sense to fund your retirement and help your son or daughter pursue alternate sources of funding for college and advanced degrees. 4. Take a hard look at your spending on a daily basis. I have clients who drop $25+ dollars a day on "little indulgences" -- specialty coffees, cigarettes, snacks. Assuming a 5-day work week, and 50 work weeks per year, that comes to $6,250. Just imagine how much that would be worth to you in 20 years at 8% interest! 5. Review your health insurance policies. Are you adequately covered for a major illness or accident? What kind of services does your policy cover, and at what percentage? What is your prescription benefit coverage? If you are approaching the age for Medicare, begin reading up on recent developments in Medicare benefits. 6. Since double-digit investment gains aren't likely, make your wealth grow by holding down investment costs, avoiding foolish investment mistakes and saving as much as possible (Clements, WSJ). Talk to a financial professional or take a course on investing if you currently don't have the investment knowledge that you need. 7. Make no assumptions about your expected Social Security and Medicare benefits. Who knows, regulations may change so that you have to wait to a later age to get full benefits. And, the definition of "full benefits" could change as well. 8. Think actively about your work life. What if you have to work into your 70s to financially survive? For more about this topic, read Part 2 of this series. Or, consider hiring a career coach to partner with you. A coach can help you to "push the envelope" and make career shifts now to ensure a satisfying future, whether you are on the golf course or in the workplace. ^`^`^`^`^`^`^`^`^`^`^`^`^`^`^`^`^`^`^`^`^`^`^`^ Like what you're reading? Then send this newsletter to friends, family, and colleagues who are interested in moving toward greater financial freedom and well-being. They can subscribe at www.lmhservices.com, or by sending an e-mail to Lynne@WLMHServices with "subscribe newsletter" in the subject line. ^`^`^`^`^`^`^`^`^`^`^`^`^`^`^`^`^`^`^`^`^`^`^`^`^`^ -=- Pre-Retirement Resources for the Intentional Investor -=- Retirement Calculators and Other Financial Tools. In the feature article, I suggest using retirement and other financial calculators that are free on the Web. Check out www3.troweprice.com/ric/RIC/. A Wall Street Journal review (11/03) voted this site to be the top pick for retirement planning. The second pick was ING group's calculator: www.ing.com/us/tools_calcs/retire/ that allows you to run different trade-off scenarios. it doesn't use Monte Carlo simulations (which TRowePrice does) that is a preferred type of probability analysis. On the TRowePrice site, click on Tools & Calculators. They also have tools for investments, college planning, taxes, and estate planning. Also, don't forget to check out the website of your bank. For example, I use Fidelity Investments, and they have a number of useful caculators. **Please note that mention of specific products in this newsletter does not constitute an endorsement of the products. Career Considerations Anticipating Part 2 of this series, I want to share one of my favorite books: Po Bronson's "What Should I Do with My Life?" (Random House, 2002). It's a fascinating read. Bronson traveled the States to interview individuals who struggled to find their true calling. What is so engaging about the 55 interviews is their raw honesty, the diversity of people and situations, the different questions the interviewees asked themselves - or Bronson asked of them or himself. Some individuals found true happiness and success. Others didn't. Read it if you are considering the question "What should I do with (the rest of) my life? You'll be inspired, even if you don't find the answer. In fact, the book isn't written to give you answers - it's about the journey to find it for yourself. Many coaching clients cite it as one of the most influential books they have read. So do I. ^`^`^`^`^`^`^`^`^`^`^`^`^`^`^`^`^`^`^`^`^`^`^`^`^`^ If you are interested in coaching, contact me for a free half-hour consultation at Lynne@LMHServices.com. or (202) 387-5923. Please include your name, e-mail address, phone number and brief description of your interest in being coached. ^`^`^`^`^`^`^`^`^`^`^`^`^`^`^`^`^`^`^`^`^`^`^`^`^`^ -=- Intentional Investing Announcements -=- Have you been to the Intentional Investing webpage lately? Go to www.lmhservices.com and click on "Changing your Relationship to Money." On the Intentional Investing webpage, you can take a self-quiz on Your Relationship to Money, participate in a survey on gender and money, access articles written by Lynne as well read previous editions of this newsletter! ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ Teleclasses Don't miss Wednesday, July 21, 8 pm Eastern. Kathryn Lord, Romance Coach, and I are back from an early summer lull. Join us for "New Honeys and Old Monies: Liabilities or Assets?" And, it's FREE. What is the teleclass about? If you are starting a new relationship, sooner or later you'll have to talk about money -- yours and your Sweetheart's. If you are embarrassed, terrified, or haven't a clue on where to start this critical discussion, join us for a free-wheeling Q and A about dollars and cents. Here are some questions that we talk about, and maybe you do, too: $ How do I establish my own financial worth? $ What’s a normal financial position for a person my age? $ What if I am not where I should be financially? $ How can I protect my finances in a new relationship? $ When should I talk to a new sweetheart about money? $ How can I trust him/her with the information? $ When or what should one not tell? $ What can I tell from how my partner reacts to money discussions? $ Is it better to talk about money sooner or later in a new relationship? If talking about money has been a minor worry or a major stumbling block, here's your chance to tackle your worries and be better prepared for that "cents-ible" chat. To register: Send an email with "July 21 Teleclass" in the Subject line to Lynne@LMHServices.com In the body of the email, put your first name, and any additional money questions or issues you might have for the call. Once we receive your registration, we will send you the call-in phone number. **If you can't make this teleclass, let me know. Kathryn and I will be repeating it and running related topics in the Fall. ^`^`^`^`^`^`^`^`^`^`^`^`^`^`^`^`^`^`^`^`^`^`^`^`^`^ PLEASE NOTE: Intentional Investing [TM] is intended for informational and educational purposes only. It is not a substitute for financial, legal, accounting, psychotherapeutic, or other professional advice and consultation. ^`^`^`^`^`^`^`^`^`^`^`^`^`^`^`^`^`^`^`^`^`^`^`^`^`^ Copyright 2000-2003 Lynne Hornyak. All rights reserved. The above material is copyrighted but you may retransmit or distribute it to whomever you wish as long as not a single word is changed, added or deleted, including the contact information. However, you may not copy it to a website without my permission. Reprint permission will be freely granted upon request. Advance written permission must be obtained for any reprinting of this material in modified or altered form. ^`^`^`^`^`^`^`^`^`^`^`^`^`^`^`^`^`^`^`^`^`^`^`^`^`^ $=$ CONTACT INFORMATION $=$ Lynne Hornyak, Ph.D. LMH Services Coaching and Consulting 3818 Klingle Place, NW Washington, DC 20016 Phone: (202) 387-5923 Fax: (202) 244-3373 e-mail: Lynne@LMHServices.com Web: www.LMHServices.com