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News and Quarterly Updates


Tuesday, June 11th


Preparing For Retirement

A few weeks ago, the Texas state high school track meet was held in Austin.  Near the end of the meet something remarkable happened. 

Matthew Boling, a high school senior who runs for Houston Strake Jesuit, did something on the track that night that no one in the history of track and field has ever done.  After his own record-setting individual events, Boling was running the 4×400 relay with his team.  This race consists of each runner running one lap of the track before handing the baton to their teammate.  When Matthew Boling grabbed the baton to run the last leg of the relay, his team was 3 seconds behind the team in the lead, trailing nearly 25 meters behind. 

Three seconds is an eternity to make up even over the course of a long race, but it even harder when then distance is shorter.  In the history of track and field, no runner has ever made up three seconds over the short distance of just one lap of track. 

However, in this race Matthew Boling made up the three seconds, crossed the line in first place, and secured a victory for his team.  He ran so fast his time around the track was only .05 hundredths off the world record for the fastest the 400 meter that has ever been run in an individual event.  In other words, Matthew Boling did the impossible.  In making up that three-second deficit, he did something that no human being has ever done before.

The fact that Matthew Boling didn’t just assume the race was over, but gave an all-out effort to catch up to the lead runner is impressive and instructive.  For each of us that might feel a little “behind” in our race towards retirement, it’s a valuable lesson to remember.  You still have time, but it’s also imperative to get moving!  Wishing your position of preparation was different than it is won’t get you any closer to your goal; it’s time to act.

In a recent study by the U.S. Government Accountability Office (GAO), it was reported that about half of all households, 55 and older, have no retirement savings at all.

Now while it is likely that you probably have a little more saved than nothing, you may nevertheless be feeling behind in your goals towards your retirement savings.  In this article we will address a few things that you can do right now to start to catch up and close the distance between you and your goal.  Though the distance to retirement might be shorter than ever, there are still steps you can take that will help you prepare

Set Aggressive Savings Goals – Many people who feel like they have waited too long to prepare, assume that it’s “too late now.”  We always advise our clients to save as much as possible for as long as possible.  If your window is short, this is even more important advice.

We recommend that you save your money in both tax-deferred and tax-free accounts in order to have the ability to withdraw your money the most tax advantageous way possible when the time comes.  If you have money in both kinds of accounts, then you can withdraw your money in such a way as to stay in the lowest tax bracket possible. 

Always take advantage of an employer’s 401(k) matching program.  This can often increase your personal savings efforts by 50%.  Remember that while 401(k) contributions have yearly limits, the federal government allows catch-up contributions after age 50, meaning that you can contribute an additional $6,000 a year.  They also allow an additional $1000 in contributions to both Roth IRA and Traditional IRAs after age 50.

Vigilantly Eliminate Debt – In addition to ramping up your savings goals, you should simultaneously be working to eliminate any debt you have including student loans and your mortgage where possible. 

Remember that without a regular income, you won’t want to be spending any of your investment account distributions on interest from debt.  Determine exactly how much debt you have and how far away retirement is.  Then create a plan so that you are paying enough every month towards any remaining debts so that the amount you owe is $0 when retirement arrives.  You will have so much more peace of mind and disposable income when you have eliminated your debts before you have eliminated your pay check.

Create a Concrete Income Strategy – Too many people just assume that when they get to retirement, then they will figure it out.  It might be surprising for someone who is accustomed to getting a regular paycheck every two or four weeks, to suddenly become aware that no one is depositing anything into their account.

Before that day arrives, it is important that you do a thorough assessment to understand your exact income sources every month.  What will you be receiving from Social Security?  What can you plan to safely withdraw from your investment accounts?  Many sources now suggest that withdrawing 4% is too high and you should expect to withdraw closer to 3.1%.  A well thought-out financial plan will incorporate strategies to maximize the income that can be generated throughout retirement.

Assertively Reduce Investment Fees – Just as Matthew Boling had no energy to waste catching the runner ahead of him, you have no money to waste on unnecessary fees. 

In some cases, fees are negating many of the gains you are making in the market.  Make sure to have the fees on your investment accounts assessed so that you know what you paying for.  Every dollar you invest is a dollar that goes to work for you.  Make sure that as many dollars as possible are working for you and not disappearing into a nebulous “fee category” on your balance sheet. 

Keep in mind that multiple studies have shown that the amount you pay in fees is inversely related to fund performance, meaning that the more you pay in fees, often the worse the fund performs.  This hurts you twice; once in extra fees and then again in returns.

Work Longer than Planned – As difficult as this may seem, if you find that the time until retirement is just too short, you may need to consider working longer in order to be prepared to live without a regular paycheck. 

This strategy might also allow you to delay taking your Social Security benefits until a later age, which will produce more income for you throughout your lifetime.  The longer you can work without having to receive your benefits, the more money you will receive long term.

No matter what you situation or your level of preparedness, ignoring the reality of retirement is not going to help you reach your goal.  The best thing to do is to get honest with yourself and begin where you are.  Ground can be made up if you begin right now to create a plan and then work towards your goals.

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Damon Roberts