How to Handle Recession During Retirement

Ken Dolan: Hi everybody. Those of you who are regular at Dolans.com or is or in fact at listen to our national radio show, now I know you don’t like me to praise you but I don’t care. You don’t mind praise? Go ahead okay. Daria Dolan: Come on. Ken Dolan: Daria was one of the first. Daria Dolan: Bring it on baby. Ken Dolan: Alright, Daria is one of the first people on the national media who in fact called a recession many months ago and she took a lot of heat for it. So we are in a recession now. Daria Dolan: Yeah nobody really admitting it. Ken Dolan: However Daria, because we are in a recession on a difficult times doesn’t mean that it has to ruin our retirement portfolio, put it so far back, with ten years behind. So those are some things we want to discuss which you could be doing now even during difficult times. Daria Dolan: And let me tell you its going to stay difficult for a while and the reason I know that it’s going to stay difficult longer than it’s currently being predicted is because I’m starting to get things from brokerage firms, they just saying, “This quarter, it should all be over” Ken Dolan: Hold on you don’t think— Daria Dolan: They this it should be getting better. Ken Dolan: Well, I shouldn’t be doing— Daria Dolan: When the brokers are saying that they are scared. Ken Dolan: Daria you don’t know something, this is unbelievable. This is not a theater, I put in your desk before we left— Daria Dolan: Now that’s what drives me insane? Ken Dolan: Oh did you see it? Daria Dolan: I saw it. Ken Dolan: Okay, it was a big brokers’ firm that send us something, “We have turned the corner.” Did you see that? All right okay. Daria Dolan: That is usually when you want to put your head between your knees and kiss your—you know what, goodbye. Ken Dolan: This is a family show, do you understand? Daria Dolan: I know. Ken Dolan: Alright there are three let’s go. There are three big threats to your portfolio during sort of a recessionary period. Number one potential steep inflation, number two extended—we’re living longer, we’re living longer and we need to have more money. Daria Dolan: I don’t like to think of a longer life as a threat to anything. Ken Dolan: Alright okay. And number three in light of the above or the preceding bad investing, I think one thing we have to realize Daria that food and gas prizes are not going to go down but lets be—even you will admit Daria, that our economy has been resilient over the years and it will be back. We just want to make sure we’ve got something in our little kiddy when it comes back. Daria Dolan: Well that’s it, because you know if you are in retirement, you don’t have the ware result or the desire to go back and recreate nor do you want to find that you go through because of the rising expenses for gas and food and property taxes and everything else. Then, all of a sudden you know its just costing you more of your retirement dollars and by the way, you are living longer so that money is going to run out faster, I anticipate. Ken Dolan: Pay down your debt, pay down debt. Talk to your tax advisor about pre-paying a mortgage. We don’t like it generally, we don’t like that as a good use of funds. Check with the — Daria Dolan: In retirement? In retirement. Ken Dolan: We are talking of retirement portfolio. Daria Dolan: Yeah, exactly. Ken Dolan: Maybe just coming into— Daria Dolan: Young people who might be tuned into this, hey break down your mortgage, get out of debt. That’s all part of getting out. Ken Dolan: No doubt about it. You may want to consider from an investing standpoint, don’t forget one of the threats of that investing maybe switching from growth to dividend paying stocks. Again we are talking being somewhat, somewhat more conservative. Don’t think a way of 15% top capital gains tax rate on dividends stocks are worth looking at. Daria Dolan: Which is probably going to change next year—don’t get fat and happy with that. Ken Dolan: One of the couples of down, sort of a down economy set through, give me a couple. Daria Dolan: Your healthcare is always a good one. Utilities because as much as we may be turning down thermostat in the winter and turning it up on the summer and shutting off more lights than ever before—we still need electricity to run our homes. Ken Dolan: We are in the 28% tax bracket or more and sometimes even less than that depending on your situation. Take a look at some AA and AAA municipal bonds absolutely worth looking at and the treasury security is also. The rights are not real, real great in them but worth taking a look at. Daria Dolan: Absolutely. Ken Dolan: How about overseas? Daria Dolan: Well you know, overseas makes me very nervous because as weak as we may seem to ourselves right now economically, we are still sort of a strong sister of the world and although only 42% percent of the world stock market capitalization is based here in the United States. Ken Dolan: 42 percent? Daria Dolan: Yeah, international markets aren’t looking all that much better right now. So, I think you have to be very careful. Last year sending your money overseas was a real genius move to make, this year if you are in retirement, you need to really scale back any sort of risk. I don’t want you losing a nickel during this recession. Ken Dolan: You may want to consider getting a Home Equity Line of Credit called HELOC, when you don’t need it. When you do not need it which is hopefully now because in fact you may need it and if in fact your income drops or your pre retirement and your working and you lose your job, it is going to be hard to get it. Daria Dolan: Now if you are continuing to invest in stocks which I think is very dicey for a retirees this year and potentially for the beginning part of next year, then make sure that you are diversified because that is absolutely critical during a recession. Ken Dolan: Also take a look at—we are talking about the money not running out assumingly, take a look at a fixed annuity, you can take a look at median annuities, we are writing an article about that in the coming weeks and I think to be careful of this, if you are in retirement, watch that reasonable rate of withdrawal. Generally anything over four or five percent in here that’s go out in a limb by using any figure but don’t over withdraw that account. In fact there is a couple of calculators you can go to see exactly how long your money will last at a specific amount of money at a specific amount withdrawal with their reasonable rate of return every year. Daria Dolan: Exactly and you know at the end of the day, if you don’t cut back on spending now, when will you cut back on spending? Watch where you’re shipping your money, take a good look at your utility bills you know, we just moved. And I went to change the phone service with the phone company and they said “Oh, do you want to move it back the same program over there?” I said “You know what are we getting right now? It’s expensive.” He ordered it for the house we just sold. We are paying a lot less now that I took control. Ken Dolan: Check your bills. And last couple of things is build up your cash reserves. Cash is always gained. And last but not least, whether you are in bond buyer or certainly a CD buyer, be sure to look at laddering your securities to talking different maturities. We are writing a piece now for Dolans.com on laddering your CD investments and later we will talk about laddering your bond investments so take a look at that. Yes recession don’t go under a rock, there’s still things you can do. Daria Dolan: Absolutely.