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As you get closer to retiring, the amount you safeguard will be what you need to rely on for your retirement income. (DREAMSTIME.COM)

BY STEPHEN NG

NEW YORK DAILY NEWS

Thursday, May 5, 2016, 3:43 PM

People have homeowners insurance to protect against fires and floods. They buy insurance to replace their car if it gets wrecked and they buy health insurance to protect themselves from medical costs.

But for many people, their biggest material asset is their retirement portfolio. When I look at a new client's portfolio and ask, "Where's your insurance?" they look at me like I'm crazy.

The way you reduce risk with your retirement savings is to take steps to safeguard at least a portion of it with insurance products. As you get closer to retiring, the amount you safeguard will be what you need to rely on for your retirement income.

Your retirement income should be derived from guaranteed sources, such as Social Security benefits and your pension plan, if you have one. It's the amount you need to pay the bills and do the other things you hope to do in retirement, so your retirement income needs to be a guaranteed source of income.

Then you look for your "play checks." That's the money you don't absolutely have to have, so you can still try to grow it, and take risks with it, in the market.

Let me offer a few tips on how you may be able to insure your retirement income:

* Invest a portion of your portfolio in fixed annuities.

Fixed annuities are long-term insurance products issued by insurance companies that guarantee you payments over a certain amount of time, which could be the rest of your life or the life of your spouse or other survivor.

Note: There are many different types of annuities as well as payment options available. The guarantee is subject to the financial strength and claims-paying ability of the issuing insurance company. 

* If you leave your job, consider rolling your employer-sponsored 401(k) into an IRA.

While 401(k)s are a great tool for saving, particularly if your employer is providing matching funds, if you were to die, the taxes your survivors would pay on your 401(k) would be much higher than on an IRA.

That's because they would have to inherit the money in a lump sum, which could easily take 35% right off the top. The lump-sum rule does not apply to IRAs.

While your spouse would have the option to inherit your 401(k) as an IRA, your children would not. So, take advantage of your employer-sponsored 401(k), but if you leave the company, consider converting to an IRA or Roth IRA.

You can also begin transferring your 401(k) funds to an IRA at age 59½. However, it's worth noting that IRAs may have higher fees. Individual situations vary, which is why it's important to consult your tax professional.

* Consider converting your IRA to a Roth IRA.

For protection from future income tax rate increases, you should consider slowly converting your tax-deferred IRA funds into a Roth IRA.

Yes, you'll have to pay the taxes now on the money you transfer, but that will guarantee that withdrawals in your retirement are not taxed — even as the money grows.

If you plan to leave at least part of your IRA to your children, they'll benefit from a fund that continues to grow tax-free.

Stephen Ng, founder and president of Stephen Ng Financial Group, is author of "10 Financial Mistakes You Should Avoid: Strategies Designed to Help Keep Your Money Safe and Growing." Ng is a Chartered Life Underwriter, Chartered Financial Consultant and a Certified Estate Planner. He is also an Investment Advisor Representative with SagePoint Financial, Inc., member FINRA/SIPC.

(Securities and investment advisory services offered through SagePoint Financial, Inc., member FINRA/SIPC and a registered investment advisor. Stephen NG Financial Group, LLC is not affiliated with SagePoint Financial, Inc. or registered as a broker-dealer or Investment advisor.

[The content provided through this article and www.nydailynews.com should be used for informational purposes only and is not intended to be a substitute for professional advice. Always seek the advice of a relevant professional with any questions about any financial decision you are seeking to make.]

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May 13, 2016

Robo-advisors have made a big name for themselves over the last few years. The name robo-advisor refers to automated systems relying on software and complex computer algorithms to offer investment guidance and portfolio management at low costs. Their portfolios are often comprised largely of exchange-traded funds.

The success of “independent” robo-advisors — or those marketed by independent companies — has helped convince industry giants such as Charles Schwab and Vanguard to jump in with their own robo-advisor products.

Robo-advisors have found their greatest fans among Millennials, who are often just starting on the investing path. But are they right for older adults, whose financial circumstances and more immediate horizons often call for more tailored solutions?

To be sure, not everyone is a fan. Noting that robo-advisors represent a “very small sliver of the overall financial industry,” Jeff Powell, managing partner and chief investment officer with Polaris Greystone in San Rafael, California, says robo-advisors are an approximately $30 billion dot within the $25 trillion financial industry.

“It’s being listed as the next best thing for the financial industry, but I don’t see that,” he says, observing that without a human advisor to rein in their emotions, most investors make all the wrong moves. “Human nature is to invest when you feel comfortable, and put money to work when the market is not doing much. Then people lose money, jump out of the market, and only get back in when they feel comfortable again. It’s a vicious circle of buying high and selling low.”

Many observers say robo-advisors will be disruptive to the industry. “But they also said that about online investing and that didn’t prove correct,” Powell says.

In a sense, robo-advisors have existed ever since there were computers. But instead of being used by individual investors, they were the “back office” software used by financial services professionals to help them make decisions for clients, says Michael Herndon, vice president, financial resilience program with AARP in Washington, D.C.

Similar software underpins today’s robo-advisors, but now the interface is far more consumer friendly. It’s not unlike the fact that consumers can book their airline reservations online, using software once the sole province of travel agents.

“If you look at board minutes of the large financial planning companies in the 1980s, they were exploring how to grow the availability of sound advice to the masses,” Herndon says. ”People have been thinking about this for a long time. There are dreams of what the technology might do, and then it comes true.”

Pros of robo-advisors

Among the pros of robo-advisors are the following:

• Robo-advisors save money by reducing costs. The cost of a financial advisor can be 1 to 3 percent of managed assets, says Stephen Ng, founder and president, Stephen Ng Financial Group in Short Hills, New Jersey. Robo-advisors can cost as little as 15 basis points (.15 of one percent), he says.

• Robo-advisors can be ideal for the do-it-yourselfer who doesn‘t want a professional advisor, says Craig Lemoine, professor of financial planning at The American College in Bryn Mawr, Pennsylvania. These people are somewhat knowledgeable about markets, stocks and bonds, but for instance may want more sophisticated asset allocation assistance, he says. “If I’m a DIYer, I’m drawn to the value proposition of robo-advisors,” he adds.

• While many professional financial advisors demand clients invest a certain high minimum amount to get started — some of them $100,000 or more — robo-advisors often require very low minimum balances, Ng says. They can be accessed by those with $5,000 or less to invest, he adds.

Cons of robo-advisors

These are among the downsides of robo-advisors.

• Human financial advisors can customize a plan to an individual’s specific circumstances. That’s less possible using a robo-advisor. “You get a template answer,” Herndon says. “A custom-made suit fits beautifully, but they’re very expensive. How willing are you to pay for advice custom tailored to you?”

• They don’t allow for conversations, says Donna Skeels Cygan, owner of Sage Future Financial, LLC in Albuquerque, New Mexico, and author of “The Joy of Financial Security.” “Much of the value I provide to my clients is based upon our conversations on many financial topics, not just a model portfolio,” Cygan says. “My clients tend to be older and many are retired. The financial issues are often complex.”

• Human professionals can ferret out answers from clients that robo-advisors cannot. “A computer is not going to be able to gauge the answer ‘a lot’ to ‘How much risk tolerance do you have?’” Herndon says. “But a human advisor would be able to read that.”

Future of robo-advisors

The future of robo-advising will likely be built on a hybrid model in which the initial investing steps are handled through a robo-advisor. Waiting to take the investor beyond those steps is a human professional able to oversee the client’s financial situation as it grows more complex, Herndon says.

“With the rise of defined contribution plans, and many people’s retirements based heavily on proceeds from defined contribution plans, there will be growth of robo-advisors,” Herndon says. “It’s not just about building your portfolio; it’s about distributing your portfolio. I think it’s in the distribution phase that people 50-plus may start relying more on technology for solutions.”

To act in clients’ best interests, robo-advisors will have to be able to learn more about clients, Lemoine says.

“The robo-advisors will have to make sure they have a good understanding of your spending, your income, your expenses and your household wealth in order to provide fiduciary advice,” he says. “They will have to become more holistic. Once you take distributions out of your IRA, the robo-advisor will need to have a better understanding of your holistic financial picture. We will have to ensure suggestions for distributions are prudent and integrated with overall financial goals. That’s where we’re headed.”

Copyright © 2016, Chicago Tribune



By MARTHA C. WHITE

Monday, April 18 2017, 7:25 AM ET

Despite economic and geopolitical upheaval from Brexit to the Syrian civil war to provocations by North Korea, investing experts say it would be a mistake to bail out of international and emerging markets. In fact, some say these assets are actually a better value right now than the high-flying American stock market.

"Right now, the international and emerging markets valuation — the price of the stocks — is much lower than the stock prices in America. So it's a buying opportunity," said Stephen Ng, owner of an eponymous financial advisory firm and author of 10 Financial Mistakes You Should Avoid: Strategies Designed to Help Keep Your Money Safe and Growing.

"Although emerging markets are more volatile in terms of day to day swings, Europe and emerging markets are significantly underperforming the U.S. markets," said David Frisch, owner of Frisch Financial Group, Inc. "Just because of how much they've underperformed, I would not necessarily run away from these," he said.

"Specifically to emerging markets, the geopolitical risks are always there," said Steven Elwell, partner and vice president at Level Financial Advisors. "Those risks are always there and those risks are, in an efficient stock market, priced into the risk you're taking and the returns you should receive."

Diversification Still the Best Rule

Pros say they're not fazed by the prospect of volatility, and neither should average investors.

"Our feeling is you're going to have something at all times in your portfolio that's just not doing well," said Scott Cole, founder and principal of Cole Financial Planning and Wealth Management.

"When we get nervous is when everything's going up," he said — because that means it's only a matter of time before something turns negative, and it can be harder to pinpoint that and respond on the fly than to manage expected underperformance.

"What we always try to educate retail investors on is the power of diversification," Sameer Samana, global quantitative strategist at the Wells Fargo Investment Institute. "It's really hard to predict which region of the world will outperform or underperform."

Since even overexposure to U.S. equities can be risky, international stocks in a portfolio can provide a counterbalancing force to a domestic dip.

"Approximately half of the world's stocks available to invest in are outside the United States," Elwell said. "To categorically say, 'I'm not going to invest there' — you're taking an enormous piece of the overall universe off the table."

Don't Gamble with Your Retirement

Above all, don't try to time the market. "The average investor is notorious for getting the timing wrong," Elwell told NBC News.

Especially if your retirement nest egg is riding on the line, it's just not worth the risk.

"You might think you have geopolitics figured out — you think the market's going to zig, and then it zags on you," Samana said, pointing to recent events like Britain's voting to leave the European Union and the U.S. presidential election. In both cases, the market priced in an expectation that was the opposite of what actually happened.

"What usually happens with any major negative event is the market falls very quickly very hard and it tends to recover," Frisch said. "There's frequently significant reactions, and usually overreactions, followed by a recovery over some period of time."

This means bailing out when a sector is at a trough is a mistake, since it deprives your portfolio of the opportunity to make back those losses — and perhaps then some — when the pendulum swings the other way.

"Logically, we know one thing cannot outperform everything else," Elwell said. "You might as well stick around for the somewhat eventuality of their outperforming."



By Matthias Rieker

April 16, 2014 9:21 AM ET

For three years, a retired client of financial adviser Stephen Ng kept himself busy with grandchildren and hobbies while his wife kept working.

That arrangement didn't make the retiree happy. He wanted to travel with his wife at his side. But the wife loved her job in the insurance industry.

"They have the health to climb the Great Wall of China," says Mr. Ng, founder and president of Stephen Ng Financial Group, which specializes in retirees. "They have the wealth, but time was missing."

The adviser, however, eventually persuaded the wife to join her husband in retirement, resolving tension that had little to do with the couple's finances but rather their life plan.

"We did all the financials, and I showed them they were able to both retire. So finally, she decided her last day of work would be May 31," Mr. Ng says.

When one spouse retires before the other, advisers can be left with emotional conflicts to work out. The solution can range from the early retirement for the working spouse to divorce--with all the financial strings attached.

"My advice, before anyone retires, is: Try to retire at the same time," says Mr. Ng, whose firm in Short Hills, N.J., manages about $125 million. Plans for mutual retirement should start early, ideally when the couple is in their mid-50s.

Most of Mr. Ng clients are retirees or approaching retirement, and most have their retirement plans well established. "When I see them, for annual or semiannual reviews, it's basically talking about nonfinancial issues in life," he says.

One common issue is the frustration of the retired partner who wants to spend more time with the working partner. "I would encourage the working spouse to as quickly as possible retire." Mr. Ng says.

To nudge hesitant clients to retire, the adviser puts together a financial plan that may include an investment portfolio, retirement assets, and other income sources--which usually prompts clients to realize they don't have to keep working to fund their lifestyles.

If the finances don't allow for full retirement or the working spouse just doesn't want to retire, Mr. Ng recommends that the working spouse at least cut back on the hours or find a part-time job. In some cases, the answer is for the retiring spouse to postpone retirement until both retire together.

Sometimes emotional issues result in unfounded financial worries, says Howard Hook, a principal of EKS Associates, with over $300 million in assets, in Princeton, N.J. Most couples are in better financial shape than they think and "will not outlive their money," he says, adding that "couples have very different opinions about whether they think they can retire."

Mr. Hook, for example, had to convince his own parents that their concerns about being retired together could be addressed via a financial solution.

His father retired first. When his mother retired as well, she worried about spending every minute with her husband. So they decided to move to Florida from Rockland County, N.Y., so Dad would have his own hobby: Golf.

But his father fretted over whether they could afford it because they had never expected to move to Florida. Mr. Hook changed the financial plan to make the math work.


Mr. Hook told his father they could always sell one of their homes if money got tight. "I said, 'your net worth hasn't changed the day after you buy the house' in Florida," he recalls. "You are just a little less liquid."

"To him, that did it," he says. "They love it. He never played golf before they moved."

For couples nearing retirement who fuss and fight and don't really enjoy spending time alone together, an adviser might suggest the opposite--simply keep working.

Otherwise, advisers can be left drawing up a financial plan for divorce.

"I am not a marriage counselor," Mr. Ng says.


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