A ‘Safe and Secure’ Retirement Takes Diligent Planning

Larry Swedroe, acclaimed financial author and Principal and Director of Research for Buckingham Strategic Wealth, provides expert tips on being prepared for your financial future.

Swedroe has worked in the financial space for over four decades, and his sage advice and commitment to help others makes him a trailblazer in his industry. He relays:

“I’ve been at the right place at the right time for four of the biggest revolutions in finance. You learn a thing – or twenty – from managing all sorts of different types of risk and investments through big crises in the U.S. over 45 years in finance.”

A zealous character who, as a senior at Baruch College in 1972, won the ‘Most Likely to Succeed in the field of Finance and Investing’ award from the Wall Street Journal, Swedroe has always had a knack for finance. Today, he is using his talents to educate and help Americans proactively plan their finances and professes that “his way of giving back is to help people.”

Preparing for 30+ Years of Retirement Takes Careful Planning

When it comes to saving enough for your retirement, Swedroe notes that even though his observations are anecdotal as many of his clients are diligently preparing, the “vast majority of America is not prepared, and they’ll have to rely on Social Security – which is not ideal.”

The reality is that because of medical and technological advances, people are living much longer. In fact, it’s not rare for someone to live into their 90s these days. Swedroe points out that the only way to make a portfolio last thirty years is to prepare and have enough funds in that account. Many Americans have not saved enough and are relying too much on Social Security. He discusses:

“It’s important to focus on having a retirement plan separate from your Social Security benefits. Social Security will be unable to meet its full obligations in about fifteen years or so. Thus, it will only be able to pay out about 75% of what is committed – unless action is taken to correct the deficit.”

Here are the actions Swedroe proposes to correct the problem:

• Raise taxes rates on employers and employees alike, perhaps by 1 to 1.5%
• Raise the amount of income that is subject to Social Security taxes
• Extent retirement age to 70

He discusses further, “The ‘Coming Generational Storm’ problem is so big that there’s no way to solve it with just any one of those three. Medicaid and Medicare are also running out of funds, so people need to be proactive to prepare for retirement themselves.”

A Retirement Planning Paradigm Shift: 6 Things to Do

To prepare for a successful retirement, you need to figure out your goals and your individual ‘retirement mentality’ – Basically, what you enjoy in life so that you can plan on an enjoyable retirement as well as prepare financially. Many people get depressed and lose their meaning and their purpose. Swedroe discusses. “It’s important to get prepared to tackle and integrate an investment plan that works for your unique spending and lifestyle needs.”

Having a plan that covers all aspects of retirement is important. Here are a few tips Swedroe recommends:

1. Save as much as you can as early as you can.

Compound interest works miracles over a long period of time. If you start saving and investing early, that amount will increase exponentially over time giving you the most return to enjoy in your retirement.

2. Build a low-cost diversified portfolio

Low-cost investments (such as index funds) in a globally diversified portfolio to help you minimize risk is a financial strategy that will help you succeed long-term. An expert financial advisor can help determine which investments work for your unique situation over time and also how to most efficiently rebalance and tax manage your portfolio over time.

3. Build a financial and spending plan and stick to it.

Set goals and create a budget and spending plan that makes sense for your income. Swedroe notes that Americans are consumerists so it’s important to “defer consumption.” He discusses:

“Experiences matter more than things. Even if you get a pay raise, don’t raise your spending up to that level. Take at least some portion of that extra income and invest it in your financial plan.”

4. Make sure your paperwork is in order.

Getting your financial ducks in a row is important for your future, and that includes essential legal documents for retirement planning. Durable Powers of Attorney for both financial and medical needs are important and Swedroe notes it’s “cheap, easy to do and needs to be mandatory.” Making sure beneficiaries are correct is crucial as he has heard “horror stories about people who get divorced who haven’t updated beneficiary information.”

5. Get both life insurance and disability insurance.

Having coverage for life’s unknowns is important. “People need both life insurance and disability insurance. And an umbrella policy is virtually a must as well. We live in a litigious society,” according to Swedroe.

6. Hire a fiduciary advisor.

About “two percent of people have the emotional and financial skills to do their finances on their own,” notes Swedroe. “If you’re going to hire a financial advisor, the most important thing to consider is that the advisor is a fiduciary as they are legally and ethically bound to serve in your best interest.”

Swedroe further notes that you should insist the fiduciary advisor “show you they are personally invested in the same vehicles they’re recommending to you and that their advice is not based on opinions, but rather fact-based evidence from peer reviewed academic journal.”

Get Financially Educated

Larry has many books on retirement and investment and has a new book, “Your Complete Guide to a Safe and Secure Retirement” that he believes will be the most comprehensive in the industry. Due out in January 2019, he notes:

“Most of the books in retirement are focused on specifics, but none of them tackle the whole broad area of what I refer to as an ‘integrative financial plan.’ This is what I did with my new book. From estate, tax and risk management, to asset allocation, withdrawal rate – there are chapters that address financial issues in retirement. I wrote seven of the 20 chapters and have internal experts for other areas, such as elder abuse, women’s issues, and healthcare.”

Financial education and expert advisement are two steps toward better finances but getting your spending under control is a big piece of retirement security. Some sage advice from Swedroe is to enjoy the simple things in life – the experiences you may take for granted that cost nothing.

“One of the greatest joys in my life is reading a book to my grandkids or going on a walk with my beautiful wife. The knowledge that you have enough, without spending a ton of money, makes all the difference when it comes to your net worth and financial well-being.”

About Larry Swedroe

Larry Swedroe is a principal and the director of research for Buckingham Strategic Wealth, an independent member of the BAM Alliance. Previously, he was vice chairman of Prudential Home Mortgage.

Since joining Buckingham in 1996, Swedroe has spent his time, talent and energy educating investors on the benefits of evidence-based investing. He was among the first authors to publish a book that explained the science of investing in layman’s terms, “The Only Guide to a Winning Investment Strategy You’ll Ever Need.” He has since authored 15 additional financial and investing books.

In his role as director of research and as a member of the firm’s Investment Policy Committee and Board of Directors, Larry regularly reviews the findings published in dozens of peer-reviewed financial journals, evaluates the outcomes and uses the result to inform the firm’s formal investment strategy recommendations. He has had his own articles published in the Journal of Accountancy, Journal of Investing, AAII Journal, Personal Financial Planning Monthly and Journal of Indexing.

Larry’s dedication to helping others has made him a sought-after national speaker. He has made appearances on national television shows airing on NBC, CNBC, CNN and Bloomberg Personal Finance. Larry is a prolific writer, contributing regularly to multiple outlets, including Advisor Perspectives and ETF.com. He holds an MBA in finance and investment from New York University, and a bachelor’s degree in finance from Baruch College in New York.