Blog
Aging Baby Boomers Need A Bucket Brigade
January 29th, 2010 - 10:38am
Filed under Economy
For decades, financial planners helped baby boomers build their nest eggs. Now, as those same folks age, advisers are increasingly preoccupied with plotting how to distribute that wealth in retirement.
That's a whole new ball game. "Managing distribution is much harder than managing accumulation," says Todd Rustman, GN Member and founder of Newport Beach Calif.-based GR Capital Management. For one thing, he says, there are more variables, primarily the addition of mortality to infamous unknowables such as market conditions.
"Longevity risk is the new buzzword," says Rustman, referring to the problem of clients outliving their money.
As more Americans head into their sunset years, Rustman believes the job skills for managing wealth need to adjust significantly. "What I've seen in 16 years in this business is that a lot of advisers take all the [retiree's] money, assume a 3% or 4% return rate, and invest it all that way."
But 2008 showed how badly that calculation can fail. To mitigate that potential, Rustman divides a retiree's money into five-year buckets, and invests each bucket as a separate nest egg based on analytics that factor in longevity, gains and average inflation. "We end up with very little risk for the next five or 10 years, and more exposure to equities over the long term," he says.
To demonstrate, he cites the example of a 63-year-old client with a wife and two grown children. "He was an executive who is now worth about $7 million," says Rustman. "He's not living high on the hog, but he also has a pension of about $6,000 a month. He's super-healthy and a non-smoker." Actuarial tables say that, on average, he'll live another 17.5 years, and his wife two years longer. Of course, no one is average. They could both live to be 100.
So first, Rustman set aside about $1.5 million of the estate plus a paid-for home, which are earmarked as an inheritance for the children. Then he took the remaining money and divided it into five five-year buckets. Bucket One would contain 27% of the remaining nest egg and assumes just a 2% rate of return because 95% of the money is in fixed-income investments like laddered CDs. "We're planning to deplete that bucket entirely," says Rustman.
The next bucket holds another 26% of the total nest egg and is marked for a 4% return, with a bit more risk exposure. It now becomes the new Bucket One after five years, converting to the safer fixed-income funds. But over the first five years when it was Bucket Two it has presumably increased in value, so distributions will be notched up to counter inflation.
The third, fourth and fifth buckets have consecutively less in total funds and larger allocations of equities; each is expected to grow at faster rates as the time horizon expands. The total equity exposure comes to about half the portfolio, but it's mostly loaded onto the back end, years away from now.
"The $1.5 million inheritance for his kids gives him a huge cushion," says Rustman. "So even if I'm wrong on a lot of things, he has a lot of cash to chew through." - WSJ
Haiti Earthquake: GN Members Respond
January 25th, 2010 - 2:02pm
Filed under Miscellaneous
We Have We Need is a place where relief organizations can quickly post their most urgent needs and have them matched by generous donors during a time of crisis. This site was built by a group of geeky do-gooders, also Members of Gen Next, who saw this as an opportunity to use technology to help bring people and donations together in the aftermath of a devastating earthquake in Haiti. More.
Alliance of Youth Movements To Participate In Secretary Clinton’s Internet Freedom Address
January 20th, 2010 - 11:34am
Filed under International Security
Secretary Hillary Rodham Clinton will deliver a major policy address on Internet freedom on Thursday, January 21 at 9:30 a.m. at the Newseum in Washington, D.C. Secretary Clinton's policy address will lay out the Administration's strategy for protecting freedom in the networked age of the 21st century. The speech will underscore the importance of technology as a tool to connect populations around the world to information, to each other and entities, and to actual resources be they financial, judicial, health, or educational. Four fellows representing Alliance of Youth Movements will be featured prominently in Thursday's program. The Alliance of Youth Movements (AYM) is a nonprofit organization that empowers leaders to affect nonviolent change in the world by creating and promoting the use of 21st century tools to safeguard human rights, promote good governance and foster unprecedented civic empowerment.
AYM Fellows on Thursday's panel include::
- Oscar Morales, A Million Voices Against the Farc (Colombia)
- Shubham Kanodie, In Memory of Those Who Died in the November 26th-27th Mumbai Massacre (India)
- Natalia Morari, ThinkMoldova
- Ceren Kenar, Young Civilians (Turkey)
David Nassar, Executive Director of AYM will also be participating in a panel discussion following the Secretary's remarks moderated by Anne Marie Slaughter, the Director of Policy Planning at the State Department.
AYM is the world's leading network of online and mobile social movements for change. The organization has hosted two successful which brought together some of the worlds most innovate social entrepreneurs with some of the world's most exciting technology companies. AYM supporters include Causecast.org, Facebook, Gen Next, Google, Hi5, Howcast Media, MTV, MySpace, Pepsi, Univision Interactive Media, Inc., WordPress.com and YouTube.
"Online technology has unprecedented potential to help us work together to address some of the world's most urgent problems," said Megan J. Smith, vice president of new business development and general manager of Google.org. "We are proud to support the Alliance of Youth Movements and share its vision to empower citizens and communities to influence positive change through the use of today's technology."
"Today we have the power to communicate and connect in real-time through online tools like Twitter," said Jack Dorsey, chairman and co-founder of Twitter. "Traditional social movements can now take advantage of these revolutionary technologies to spread their messages more rapidly and effectively," continued Dorsey.
U.S. Sees An Opportunity To Press Iran On Nuclear Fuel
January 11th, 2010 - 4:13pm
Filed under International Security
Domestic unrest and unexpected problems in Tehran's nuclear programs have made Iranian leadership susceptible to new U.S. imposed sanctions. These sanctions would suspend financial transactions with front companies for the Islamic Revolutionary Guard, the military force believed to run the nuclear weapons effort. "For now, the Iranians don't have a credible breakdown option, and we don't think they will have one for at least 18 months, maybe two or three years." Although sanctions have failed to detour Iranian nuclear efforts in the past, the Obama administration hopes that this extended time frame will allow the sanctions to have an effect and convince Iranians that their nuclear programs are not worth the price tag. - NY Times
The War Against the Wanna Be Rich
January 11th, 2010 - 4:12pm
Filed under Economy
A war was declared on the wannabe rich when the Obama administration announced that people earning over $200,000 a year will pay higher income taxes. Professionals and small-business owners are among the hardest hit. The new law has only furthered the recession causing small business owners to retrench rather than expand by hiring new employees. Business owners fear that the proposed new income, payroll and health-care tax rates along with increased state and local taxes will put up to 70 percent of their income in the government's hands. "[If we] continue to punish and demonize [the productive class], the country will grind to a halt - as we are seeing now." - Real Clear Politics
Public Sector Unions Are Killing California
January 11th, 2010 - 4:11pm
Filed under Economy
More Americans are fleeing California as the public sector unions diminish willingness to fulfill promises to taxpayers. As unions take control of the Democratic majorities in the state legislature, the "net internal migration" fluctuates.The union's ability to produce effective campaigns that have a track record of making or breaking political careers has caused politicians to submit to the will of the public sectors in order to receive a higher compensation. "For the first time in history most union members work for the government... [and] depend on the government for their livelihood." This change has devastated American taxpayers as the increase in union member voters results in more dollars for campaigns to elect politicians who will support higher taxes to compensate for the upward arc of government spending on workers. According to a City Journal writer, the reciprocity existing between compliant politicians and influential public sector unions has left California with higher taxes, poor services and a disappearing middle class. - The Foundry