The oracle in the capital


By Randy Neumann

In April, I took the Acela train from the Metropark station in Woodbridge to Washington, D.C. The high-speed train uses tilting technology that, by lowering lateral centrifugal forces, allows it to travel at higher speeds on the sharply curved rail lines without disturbing passengers.  It provided a quiet, comfortable two-hour ride.  The train has a top speed of 150 mph, but obviously it did not maintain that, because the distance to Washington is 183 miles.
Because of what they do there, I didn’t really want to go to the nation’s capital.  Remember the old saw about making sausage? If you saw it being made, you would never eat it?  Most of all, I didn’t want to go there because of the epiphany I had the week prior.
I was in Orlando, Fla., at a conference of financial advisers and during a dinner, the subject of the richest counties in the country came up.  I rattled off the usual suspects – Bergen in New Jersey, Westchester in New York and Orange County in California.  Somebody told me, crudely, that I didn’t know what I was talking about.
He then whipped out his BlackBerry and demonstrated to the crowd that the six richest counties in the country lie on the outskirts of Washington.  I was devastated.  Wall Street used to drive Bergen and Westchester to the top of the heap.  No more.
Well, at the Renaissance Hotel, surrounded by the NPR building, the beautiful old library and Samuel Gompers Memorial Park, I had my second epiphany in two weeks.
I attended Epiphany School as a child in Cliffside Park and I knew that the school was named for the holiday on Jan. 6 commemorating the manifestation of Christ to the Gentiles. However, I didn’t learn the more secular meaning of the word until later in life when I read in a dictionary that an epiphany was “a sudden, intuitive perception of or insight into reality or the essential meaning of something, often initiated by some simple, commonplace occurrence.”
Nick Murray, a very popular speaker amongst financial advisers, was one of the speakers at a “coaching” forum hosted by an insurance company.  He has 44 years experience in the industry and provides some keen insights.
Murray began his talk with the following, “My baby sister was born in 1946.  She is 65 years old and is retiring this year.  She has lots of company, since 2011 is the year of the first baby boomer turning 65.  Beginning this year, there will be 10,000 baby boomers hitting age 65 every day, which comes to 3 million per year and 30 million between 2011 and 2020.”
Murray next provided the following admonition, “Don’t bother talking to your clients about the fate of Portugal or the condition of the rods in the Japanese nuclear reactor, because neither are long-range concerns.  Talk to them about the important question which is, ‘Are you going to outlive your money or is your money going to outlive you?’ ”
Well, that simplifies things and puts the right question on the table for a client instead of worrying about the minutia that comes out of the media.  How would you know if you’re going to outlive your money or if your money will outlive you?
You begin by running some numbers.  What will your income needs be over your lifetime?  Let’s begin with: How long is your lifetime?  If two people are retiring at age 62 and they don’t smoke, somebody will probably live to age 90.  So, we could be talking about a 30-year retirement.
How much money will you need?  Well, since World War II, inflation has averaged around 3%, so using a 3% inflation factor over the next 30 years sounds reasonable.  Remember, if things change, you can always adjust.  Retirement planning is not a one-time event when you retire; rather it’s a lifetime, hands-on work in progress.
Okay, everything will surely cost more.  The $100 you are spending at the grocery store this week will require $116 in five years, $134 in 10 years and $243 in 30 years.  So, in order to provide a retirement with dignity and independence, you need to have steady growth in your investment portfolio.
Nick then posed the following questions, “Where do you think this return will come from?”  “Who knows where the Dow was when my baby sister was born in 1946?”  Some of the answers shouted out by the 400 advisers at the seminar were 50, 100 and 300.  And the answer is: 190!  The next question was, “Where is the Dow now?”  The answer was 1,300.
Murray went on to say that although people (baby boomers) need to be in the stock market, they are not comfortable doing so because of the scars left on their parents by the Great Depression.  He said that the 1920s were a time of great hope.  People had cars and washing machines for the first time, but then the door of doom slammed shut in 1929.  He quipped, “Norman Bates had left the room and Mrs. Bates had taken over.”

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for the individual.  Randy Neumann CFP® is a registered representative with securities and insurance offered through LPL Financial.  Member FINRA/SIPC.  He can be reached at 12 Route 17N, Suite 115, Paramus, 201-291-9000.

Learn more about the writer ...