Save enough for the long run

Published 11:02 pm Thursday, August 27, 2015

By Arie J. Korving

There’s a retirement crisis in this country, even as the economy appears to be moving slowly upward.

Workers are losing confidence that they will have enough money in retirement. The number of men who are “not at all confident” has grown from 10 percent in 2007 to 28 percent in 2013. Only 13 percent are “very confident” today.

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New data show that powerful financial and demographic forces are combining to squeeze individuals and companies trying to save for the future and make their money last.

If you have more than $25,000 in total savings you are better off than 57 percent of your fellow workers, according to a report by the Employee Benefit Research Institute.

Savings don’t include the value of pensions. But the last decade has seen many companies that once offered pensions terminating their plans and substituting other plans. Most of these, like the 401(k), shift the responsibility for retirement income to the employee. State and local governments are finding their pension obligations threaten to bankrupt them.

Is there an answer? Yes, but it requires individuals to take action. The first step is to realize that it’s now up to each individual and family to make a plan. The second step is to realize that you probably need help.

People graduate from high school and even college unable to prepare a budget, much less understand the complexity of investing. Millions found that the investment choices they made in their 401(k) plans lost money (or failed to make any) during the last decade.

One of the biggest mistakes many investors made after the market dropped in 2008 was moving to cash and never knowing how or when to get back in. The market has doubled since the bottom in early 2009, and people who got out are afraid to get back in.

There are three key benefits you get from working with a financial adviser. The first is that a good adviser will keep you from bailing out at the wrong time and will give you the courage to come back into the market if you did get out.

An adviser will also create a portfolio that’s appropriate for you and your goals. Third, an adviser will reduce your stress level. A study by Franklin Templeton Investments proved that those who have never worked with a financial advisor are more than three times as likely to indicate a significant degree of stress and anxiety about their retirement savings as those who currently work with an adviser.

What can you expect from an adviser? It depends. Some are just financial planners who create a road map to help you meet your long-term financial goals. Some combine planning and asset management. They will create a plan and manage your portfolio for you. Pick someone with the right credentials, such as a CFP professional. And find out how the person you are working with is paid. Some will charge by the hour. Many charge an annual fee equal to a percentage of your portfolio. Check for conflicts of interest.

Finally, you and your financial adviser should have a long-term relationship, so make sure that you and your adviser are compatible. It’s a lot like a marriage; you should like and trust each other.

Arie Korving is a financial adviser and the founding principal of Korving & Co., Suffolk. Visit his website at