Ryan P. Zacharczyk

Article / Updated 06-27-2016

The biggest challenge most retirees are facing lately is how to draw down their retirement nest eggs without letting them run out. Here is a common sense approach that will protect your portfolio even during the worst of market environments. Stick to your budget. Once you determine what your monthly expense needs are for 2010, stick to it. One big portfolio killer is drawing too much, especially during market downturns Keep your withdrawals to 4-5%. Limiting your withdrawals to these percentages will give you the best chance at avoiding running out of money later in your retirement, and increasing your withdrawal every year to keep pace with inflation. Diversify, Diversify, Diversify. Ensure that your portfolio is not only protected against a market decline, but also protected against the long term purchasing power erosion of inflation through diversification. A 50/50 split in your portfolio between both stocks and bonds will provide you with the return you need to outpace inflation and give you the protection against those major market skids. Make sure that you diversify not only between stocks and bonds, but also among those asset classes. Your stock portion should contain small-cap stocks, large cap stocks (both growth and value) as well as international. As for bonds, most of the bond investments should be in guaranteed U.S. Treasuries, but a small percentage should be held in corporate bonds. Don’t panic during down markets and don’t get greedy during great markets. Don’t get too caught up in what your portfolio has done in the last 6 months or year. Don’t panic and sell everything when the market heads south; this is a sure strategy to run out of money. Maintain your 50/50 balance. If you are so panicked you feel you have to do something, cut your living expenses to keep more money in the portfolio for when the turnaround comes . . . and it always comes. The day always follows the night. Reevaluate and rebalance. Every year, reevaluate your portfolio and the holdings in it. Make sure that you are properly diversified and that the investments you originally chose are still appropriate for your age and risk tolerance. It is vital to the long-term growth of your portfolio that you rebalance it every year. Rebalance means selling some of what has done well and purchasing some of what has done poorly. This ensures that you keep your stock to bond percentage at 50/50. This will also give you the freedom to buy low and sell high.

Article / Updated 04-25-2016

Medicare Part B is the supplemental program to Part A. Where Medicare Part A covers most of your emergency medical care, Part B is designed to handle more of your day-to-day medical needs. Part B is an elective program that requires a monthly premium, so it's important to understand if Medicare Part B is right for you. What Part B covers While Part B is not a 100% cover plan, it does tend to cover most people’s needs. Therefore, Part B is one of the more commonly elected aspects of the Medicare service. Medicare Part B will typically cover Hospital, doctors and home health care Preventative shots Screenings, labs and tests Part A typically will not cover you for tests and lab fees. However, tests are usually needed before you can be treated for a problem. So, if you need more extensive cover, Part B is likely to be for you. Preventative shots include flu shots once per year. The plan also includes mammograms, dialysis, limited prescription drugs, and physical therapy. If you need home care, you can claim part-time necessary help from a skilled home care worker. Also, if you end up in hospital for broken bones, physical therapy fees will be included. One pair of glasses is included in the coverage, too. So, if anything happens to your eyeglasses, you can get them repaired or replaced. What does Medicare Part B cost and when should I enroll? The monthly premium for Part B for 2011 is $96.40 for most individuals. There may be a slightly higher fee if you have a higher income. You also may have a slightly higher charge if you elect the premium not be withheld from your Social Security check. Expect an annual deductible of $162 per year, meaning that you will spend $162 out of your pocket before Part B kicks in. Those people who are eligible for Part B must enroll during their general enrollment period or face potential penalties (unlike Part A, which is free for those 65 and older and offers enrollment at any time). With Part B, all eligible participants may enroll up to three months before and three months after their 65th birthdays. If you fail to enroll during this enrollment period, you'll incur a surcharge on your monthly premium for each year you failed to enroll, with a few exceptions.

Article / Updated 03-26-2016

Reducing portfolio risk is often one of an investor’s greatest concerns. Diversifying your assets allows you to reduce your investment risk while often providing a higher return. Diversification means simply not owning enough of any one asset to make a killing at it or to get killed by it. Choosing numerous asset classes that fluctuate independently of each other (one may zig while another zags) can reduce the volatility of your overall portfolio. You can not only avoid those sleepless nights, but also put more money in your pocket at retirement time. The asset classes you should expect to have in our investment portfolio include Large cap stocks Small cap stocks International stocks Bonds Real estate investment trusts Commodities Cash Just how much of each of these asset classes is appropriate for your portfolio depends on your age and risk tolerance. If you are young, comfortable with market fluctuations, and have ten or more years until you need the money, you would want the majority of your portfolio to consist of stocks with only a small portion of each of the remaining asset classes. If you are an investor on the verge of retirement with a moderate to low risk tolerance, you would be better suited with a portfolio balanced between stocks and bonds and a small percentage of each of the remaining asset classes. Each of these asset classes can be invested in via your 401k, IRA, or company-sponsored plan, depending on the investment choices offered by your particular plan. If you would like to invest outside of a company sponsored retirement account, your best options are either index mutual funds or, ideally, ETFs (Exchange Traded Funds). No matter what your allocation is, keep your expenses low to increase your return. The higher the expenses, traditionally, the worse the performance. Finally, don’t forget to rebalance regularly. Rebalancing is the act of moving your portfolio back to the original allocation. If you originally wanted to be 50% stocks and 50% bonds, what would happen if the stock market increased 20% and your bonds did not change in value? The portfolio would now be almost 55% stocks and only 45% bonds — very different from your original allocation. Sell 5% of your stocks and purchase back 5% of your bonds. This accomplishes two things, it keeps the risk of your portfolio where it should be, and it allows you to regularly sell something that has done well and buy something that has done poorly. Buy low and sell high, what a concept! Rebalance at least once a year to help improve your overall return and reduce your risk.

Article / Updated 03-26-2016

Managing your finances in retirement can be tricky business. High inflation, market crashes, and economic uncertainty can create discomfort and even panic for the retiree who is not prepared to withstand these financial forces. Diversification can provide you with a comfort level in retirement that will allow you to not only sleep at night, but also ride out difficult times without jumping from investment to investment trying to chase the latest “hot sector.” A concept called “pools of money” can provide retirees with the level of income they expect without having to be concerned about market volatility. Pools of money means essentially having three types or “pools” of money on three different levels. Here's how the concept works. Think of a lake that flows to a pond that then flows to a well. The large body of water is constantly feeding the smaller. We then get our drinking water from the well. So, too, can this flow be accomplished with our money. The large lake, which is money that we do not need for 10 years or more, is a mixture of stocks, real estate, and commodities. These are all assets that have large fluctuations but also high returns over time. This pool pays dividends and provides us growth that historically outpaces inflation. As dividends are paid from this pool, the money is placed in a pool of bonds. Bonds, like stocks, fluctuate in value, but are much less volatile and provide consistent interest payments. More importantly, high quality bonds tend to perform very well when stocks and the economy are performing poorly. This is the stable pool of the portfolio that will provide a consistent income, but will be subject to the pressure of inflation. The last pool is cash. This pool contains assets that are safe and liquid. Cash provides complete principle protection of the account, but will almost certainly lose ground each year to inflation. Each of these pools has its place. It is important for a retiree to know what his or her expenses will be. Assume a retiree has a need for $60,000 per year, but Social Security and their pension will cover half, or $30,000. The remaining $30,000 will need to be made up through the investment portfolio. Using the pools of money concept, we want to make sure that the “well,” or first pool, has $60,000 in liquid accessible cash. This ensures that if the market or economy is experiencing rough times, we have enough guaranteed cash for two years. The next pool, our pond, contains bonds. We want to maintain at least 8 years worth of living expenses in our bond pool. This means that $240,000 worth of bonds will provide us with the security of knowing that if the economy collapsed and the market fell, we would now have 10 years of income in very safe secure assets, not only providing us with a good night’s sleep, but also performing very well during the difficult period. The final pool, our lake, has our much more volatile assets. These assets are purchased with the knowledge that we have bonds and cash to live off of if they decline dramatically in a protracted bear market. However, if these assets are performing well (which we expect most of the time) the money from this pool can be used to refill your cash and bond pool. This system for financing retirement lets the majority of assets grow without the interference of panic. The retiree can sleep well at night knowing that he or she is shielded from market sell offs. Income is drawn first from the well which is then replenished by dividends and interest from the other two pools. As the well is depleted, the money is replaced by selling assets from either the pond or the lake, depending on which has performed best, stocks or bonds. Sell into strength! You want to ensure that you are selling assets that have done well to build your cash reserve. This will provide you with the diversification and safety you require during retirement.

Article / Updated 03-26-2016

Most of us look forward to the time when we can retire. Retirement often comes with a steady paycheck from the government in the form of Social Security. Collecting Social Security may seem as easy as filling out a few forms. But without planning and careful consideration, you could be missing out on some big bucks in retirement. Here are a few things to keep in mind when you're determining the best time to start collecting Social Security benefits: The longer you wait, the more you get: Every person who is eligible for Social Security can begin collecting a reduced benefit at age 62. Just how reduced depends on the year you were born. Go to www.socialsecurity.gov for details. Your benefit increases each month that you wait past 62 until you reach age 70. Once you hit 70, the benefit increase stops. So the question becomes: Do you take your benefit at 62, 70, or somewhere in between? Penalty for workers: If you plan to take your benefit before your Full Retirement Age (see www.socialsecurity.gov), you will be penalized $1 in benefits for every $2 in earnings over $14,160 for 2010. If you earn more than $37,680 in 2010 and that is the same year you hit full retirement age, your penalty will then be $1 for every $3 in earnings. If you are under your full retirement age, you will want to make sure that you are not earning more than these thresholds or your benefit can be greatly reduced. Maximize your benefit: The theory for Social Security used to be that it made sense to start collecting benefits as soon as you are eligible. After all, it is free money. However, that may not be your best option. Social Security really is the best stream of income you will receive in retirement. Why? The money is as guaranteed as we can get in this world (backed by the federal government), it increases each year with inflation (a trait most annuities or pensions do not have), and it is tax efficient. If you have the ability and the means to put off collecting your benefit, it can be beneficial to your late retirement years to have a larger, inflation adjusted stream of income coming in every year — no matter what happens to the economy. Consider Social Security planning: Understand the rules and nuances of Social Security. If you don’t have the time or patience to learn them, work with an expert to help you decide your best personal strategy. It may be best for one spouse to collect and one to wait, both spouses to wait, or to collect as early as possible. There is no one right answer for everyone. Your individual situation must be reviewed to determine the best course of action for you.

Article / Updated 03-26-2016

Many women seem comfortable leaving their long-term finances and retirement planning to their husbands. If in the past you've taken a backseat to your husband in terms of your family's finances, it's time to get in the driver's seat. Here are four areas women should focus on. Budgeting and Savings — There is no easier way to move yourself and your family toward financial freedom than tracking your expenses. Living on a budget is the best way to make sure that you are living within or below your means. Financial success comes simply from spending less than you earn. One of the main reasons most people overspend is because they do not keep track. Tracking your spending makes you not only enter each cost into your budget, you then have to reconcile them at the end of the month when your spending was higher than your income. Budgeting begins with savings. Set your savings goals first. Pay yourself first. Set a savings goal of 5% to 15% of income per month, then plan your spending around the balance. As difficult as it may seem, this strategy can and does work. Investing — Once you’ve saved some money, you will want to put that money to work for you. Train your money to go forth and multiply. First, set up an emergency reserve account. This is a savings or money market account that is easily accessible and holds three to six months of expenses. It is important to remember that this emergency fund is not for growing wealth. It is more of an insurance policy to protect your wealth. After you’ve established your emergency fund and as you are working to build it, look toward retirement. Save as much as you can in tax-sheltered accounts like a 401(k). Diversify these accounts using mutual funds offered in the plan across broad sectors. Look to invest in large-cap growth, large-cap value, small-cap, international, and bonds. Focus on keeping the expense ratio of your fund as low as possible and invest in index funds, if they are offered. Insurance — Insurance, although not always exciting, is a necessary part of any good financial plan. Few of us would think of driving without auto insurance or purchasing a house without fire insurance, but many will happily avoid life insurance or long-term care insurance. How comfortable would you be financially if your husband passed away tomorrow? Get involved and insist that their husband have some form of life insurance to help you if the worst were to occur. It is also important to make sure there is a long-term disability policy covering the breadwinner of the family. Disability is twice as likely as death. Taxes and Fees — How would you like to get a tax-free raise of $5,000 this year? You can. Spend some time learning about ways to save on your taxes and cut your investment fees. It’s like putting money right in your pocket . . . tax free. A study done at Wisconsin University showed that the average person paid more than $5,000 a year in additional taxes and investment fees that they could reduce simply by becoming a bit more educated. Reduce your mutual fund fees to no more than .30%, avoid loaded funds, and avoid trading in and out of the markets and incurring huge trading costs. Eliminating these fees alone can significantly pump up your investment returns. Get involved in your family's finances and, if you are already involved, learn as much as you can to maximize your results. Don’t be afraid to seek help from a professional when the need arises.

Article / Updated 03-26-2016

Real estate has certainly seen some ups and downs over the past ten years. Anyone who purchased property five years ago knows the painful lessons of investing in an up market. However, investing in real estate when prices are low can be very rewarding for the patient investor. Here are a few tips to keep in mind when purchasing real estate in a down market: Be patient: Patience is certainly a virtue when you are buying while everyone else is selling. Remember, you have the upper hand. Look at many properties in order to get a good sense of exactly what you are looking for and exactly what price you would like to pay for it. You have no pressure to buy anything. You are in the driver’s seat and should use that advantage to wait for the perfect deal for you. Negotiate aggressively: In this economic environment, the buyer has the upper hand; don’t be afraid to use it. Negotiate in an aggressive manner. Realize that the seller almost certainly needs to sell their property far more than you need to buy it. This could save you tens of thousands of dollars on the purchase price. Look for profitable rentals: The key to real estate investing in any market is strong positive cash flow and profitability. Understand what you will be laying out monthly to not only finance, but also maintain the property. Make sure your income from the property will be sufficient to cover these costs. During a slow real estate market, you should be looking for positive cash flow as your No. 1 rule. If real estate prices pick up, you will benefit from higher rents. Don’t overspend on repairs: Although granite countertops and wet bars may have been a big seller in 2005, the name of the game today is practicality. Pick inexpensive yet quality materials that will be aesthetically pleasing and functional. Forget the WOW factor. Keep your costs low and you will attract the right renters or buyers. Keep your leverage in check: A tremendous problem that leads to real estate troubles is overleveraging. A mortgage that is too large cannot be sustained by rental income. Keeping your leverage to no more than 80% of the property’s value will help provide you with the financial latitude to weather a period of vacancy or declining rents. Keep your costs low and your profit will grow.

Article / Updated 03-26-2016

A bear market (a term to describe a period when the stock market is off 20% or more from its highs) is an inevitable part of investing. On average, a bear market can be expected once every three years. A bear market may seem troubling at the time, but by keeping a cool head you can use a down turn in the market to your advantage. Here are four things to do in order to prepare for our next inevitable bear market: Accept that a bear market is part of investing: The stock market, like anything in life, must come with both good and bad. The market does not go straight up, consistently furnishing a return of 11% per year. Averages calculated over a long period of time usually include dramatic shorter-term swings. These swings are just a part of investing, and you can take advantage of the downturns when they occur. De-leverage: Leverage is the borrowing of money at any level. Leverage could be used to buy a car, buy a home, or buy investments. The problem with leverage is that debt can be a crushing burden during a challenging economic period. Remove as much leverage from both your investing and your life to avoid major financial problems during a bear market or poor economic periods. Diversify: This is the old, “Don’t put all of your eggs in one basket” lesson. Diversification is the one strategy for your portfolio that will provide you with flexibility during the bear market. If you have a portion of your money in cash, bonds, real estate, commodities, and stocks, you will have assets that are most likely performing well while the market is going lower. You will then have the ability to sell some of what is doing well and purchase what is doing poorly. Diversification also will protect the principal of your portfolio. The increase in value of some of your investments will help offset any losses and provide the portfolio with a better total return than the market. There is perhaps no more important strategy to help you withstand a bear market than diversification. Rebalance regularly: Rebalancing your portfolio means simply selling some of what has done well and buying some of what has done not so well. Buy low and sell high, it seems so obvious. However, most investors do the opposite. They purchase what is already very expensive because it has gone up recently and sell what is cheap, because it has gone down. Assume you start with a simple diversification of 50% stocks and 50% bonds. Say the stock market goes up dramatically this year and bonds perform poorly. The increase in value in stocks, coupled with the decreasing value in bonds, creates a portfolio that is made up of 65% stocks and 35% bonds. If next year happens to be a bad year for stocks, your portfolio will lose a lot more value than you had originally intended. To remedy this overweighting in stocks, at the end of the year, sell enough stocks and buy enough bonds to bring you back to your 50/50 allocation. The investment rebalance not only protects you from a bear market, but also allows you to sell stocks that are high and buy bonds that are low.

Article / Updated 03-26-2016

Although fluctuations in economics markets are extremely difficult to predict, good times always follow the bad. How can you take advantage of personal investing opportunities when economic recovery arrives? Follow these five steps to make the most of an economic turnaround when you invest. Don’t wait for confirmation of economic recovery before you invest: Historically, markets have recovered long before the economy. So, if you were to wait for the economy to recover before you began to make your investments, you would be too late. The time to invest is always when fear is running rampant in the marketplace and value is at its greatest. Look for periods when dividends are at very high levels and prices are at multi-year lows. As long as you remain diversified in your investment portfolio, the right timing — and patience — could reward you handsomely. Look for value: The recent price movement of the asset is far less important than its value. The time to invest is not when the market going up, it's when value is at its greatest. Look for asset classes that have very high value from a historical measure in the areas of price, dividends, and earnings. These are the asset classes that have traditionally performed best when the market recovers. Pick the asset classes that have a good track record during a recovery: When investing in anticipation of a recovery, know that certain asset classes tend to perform far better than others at the beginning of a recovery. These asset classes are obviously riskier, especially during a down market; however, they tend to lead the charge in the recovery. If you anticipate or are in the midst of a recovery, the following assets will give you the best bang for your buck. Small cap stocks Growth stocks High yield bonds Don’t put all of your financial eggs in one basket: Even though it may seem like things can’t get worse or the market recovery is in full swing, never put all your investment dollars in only one or two asset classes. The history of economics attests to a compelling inability, even by experts, to predict cycles. If you invest with an eye to value and position yourself for the recovery, do it with only a percentage of your portfolio. Keep your cash, treasuries, and commodities in place as protections against a downturn that is longer than anticipated. Be patient: Do not expect that you will predict the bottom in the market. When a full blown recovery comes, markets move up aggressively. Even if your investment in the recovery was 6 months premature, you will see tremendous returns over a 2–5 year period.

Article / Updated 03-26-2016

Investing a portion of your income while in your 20s can reap tremendous benefits when you are older, if you plan properly. Here are five things you can do to maximize your investments in your 20s. Save as much as possible — Although you may not earn as much as you’d like in your 20s, time — more than large sums of money — is your greatest ally. Even if you can only set aside 5–10% of every paycheck, that small amount can grow into a large sum in retirement due to the key component in growing wealth — time. Invest in your 401k or an IRA — It is important to take advantage of tax-deferred growth at all times, but it is even more so when you’re young. If your employer offers a 401k, participate in it, contributing as much as you comfortably can. At the very least, take advantage of every dollar of company match available to you. This is free money. If there is no 401k offered through your job, open an IRA and make regular contributions. The average 20-year-old contributing to her 401k has a sizable advantage over a 30-year-old contributing twice as much. Don’t worry if your savings doesn’t seem like much; something is far better than nothing. Be aggressive — No, this does not mean loan $1,500 to your friend who promises to double it by the end of the week. Pick mutual funds and Exchange-Traded Funds (ETFs) that contain more stocks. These could be foreign emerging market stocks, small cap stocks, or even domestic growth stocks. Ideally, pick some combination of all three. Although you may (and almost certainly will) experience short-term market fluctuations, over a 10-, 15-, and 20-year period, you are far more likely to be highly rewarded for a more aggressive investing style. Plus, you'll have lots of time to wait out fluctuations. Pay off high-interest debt — Make sure you are using some of your discretionary funds to pay aggressively any high interest credit cards or car loans. It is all too common for someone in their 20s to be saddled with lots of high interest debt. Don’t let the revolving debt trap capture you. Live within your means and pay off all high interest debt. Save for an emergency — Perhaps the biggest challenge the average 20-something faces is saving. Putting aside emergency cash reserve so if an unexpected expense comes up, you will not need to tap your credit cards or worse, your 401k. The fees and taxes on withdrawing money from your 401k and IRA can be daunting. Save a little bit of cash every month to accumulate 3-6 months worth of living expenses in a safe and accessible savings vehicle, such as a money market account or CDs.