If you’ve played your financial cards right, you already may be on the glide path to a carefree retirement. If you haven’t-well, there’s still time. But it’s later than you think, so listen up.

HAPPY BIRTHDAY! ONE MONTH INTO THE NEW YEAR AND WE’VE had some milestones: The very first baby boomers are hitting the big 5-0. Those 77 million Americans born from 1946 through 1964 are getting old whether they like it or not. (News flash: Most don’t.) And that means…Retirement. Ready or not, the Big Ris looming. After decades of enduring traffic jams and office politics in exchange for 2.5 weeks of vacation a year, you’re casting a longing eye toward stress-free schedules and a weekend retreat at Lake Texoma. And, living by the wisdom of the Beatles song, “When I’m 64,” you have already prepared for the inevitable years, perhaps decades of pre-senescent leisure time. Right?

What’s that? You’re still humming that old Grass Roots song, “Let’s Live for Today”? Uh-oh. That made sense back when you weren’t trusting anybody over 30. Not now.

Retire? How? There’s the mortgage, the cars, auto insurance, taxes, private school or college tuition. You have to eat; heck, you have to go to the gym; you will mentally collapse if you don’t get a week in at Deer Valley or Vail; you have a $25,000 credit limit on your VISA (but after all, you do earn frequent flier miles); and your aging parents may need help. Sometimes it seems like you got the pink slip the morning after the office party-having already spent the raise you thought you were getting, but didn’t.

“Boomers have turned out to be an unlucky generation financially,” says Stephen Pollan, a financial advisor and author of the book Surviving the Squeeze. Local financial planners and investment experts agree there are many forces out there working against us. It will be tougher for us to retire well, retire at 55, or retire at all. We will finally have to learn to take care of ourselves, and we may have to re-define the word “retire.” But the good news is that we can do it with professional advice, fiscal planning, and (that hated word) discipline.

Some say we are going to be even better off than our parents were because we bave more knowledge at our fingertips. True, but our parents for the most part made a killing in real estate. We will not have the luxury of buying a family home for $20,000 and selling it 45 years later for $250.000. We will not have fat pensions, unless we work for the government. We may not even have Social Security.

But we are more entrepreneurial than our parents were. We have the luxury of discount brokerage firms and an entire industry that did not exist for our parents-financial planning. Mutual funds have grown from S100 billion in assets in 1980 to a $2 trillion-plus industry, Our parents didn’t have money market funds. They were children of the Great Depression, stuffing money under the mattress. The stock market made them shudder. We had massive stock and bond rallies in the ’80s, and some say we ain’t seen nothin’ yet. With everyone out there investing, some believe the stock market is going to hit 20,000 as the boomers invest their inheritance-some $7 trillion over the next 20 years!

Better not depend on mom and dad too much, though: They may use those funds for health care in their senior years, and unless they have done major estate planning, Uncle Sam will get his fingers on the majority of the bucks. The key to financial security, according to experts: Wealth accumulation comes from continuously squirreling away money and constantly monitoring your fiscal health. No one takes better care of you than yourself.

“Retirement is going to be squarely on our backs,” says Richard Rogers, vice president of investments and a senior financial consultant with the Dallas office of Chase Manhattan Investment Services, Inc. “Take stock, pardon the pun, of where you are financially and start investing immediately. That’s what can give you the freedom to walk out that corporate door!”

The 10 Barriers to a Good Retirement

It s definitely a different ballgame from the one our parents played. Many forces out there make retirement seem unattainable. The first step is to know the problems. Then stay tuned-we also have the solutions.

1. Job security is a thing of the past. The downsizing of American corporations has changed the American middle class forever. More than 12.2 million white-collar workers lost their jobs between 1987 and 1991, millions more since then. And those who round new jobs earned, on average, 30 to 40 percent less than in their previous position. Middle managers were hit the hardest-72 percent of companies surveyed by The Conference Board, an industrial research organization, report employing fewer middle managers than just five years ago. For the first time in America, there are now more unemployed and underemployed white-collar workers than blue-collar workers, says Dr. Bernard L. Weinstein, director of the Center for Economic Development and Research at the University of North Texas. This is the price we pay for technological innovation, corporate restructuring, and a global economy. On top of that, inflation-adjusted wages for the American worker have not risen in the last 20 years.

2. We (and our folks) are living longer, healthier lives. Great news, but longevity requires more money to live on. If you retire at age 55, experts say to plan for 30 years of income-enough to keep you going until 85. Back when Congress created Social Security, a small percentage of the population lived long enough to collect at age 65. At the turn of the century, women had a life expectancy of 50 years. If they didn’t die in childbirth, they would be gone about the time menopause set in. The good news is that all our aerobics, high-fiber diets, and clean living have kept us around longer than any other generation. The bad news is we spend so much keeping healthy that we have no financial cushion.

3. We spend like there’s no tomorrow. What else would you expect from the pampered children of the ’50s? How do you live without car phones, two computers, at least two $40,000 cars, and a couple of purchases per month from the Sharper Image? In Texas, we dine out, on average, four nights of the week. Nationally, consumer debt as a percentage of personal income is nearing 20 percent. According to Stone and McCarthy Research Associates in Princeton, N.J., debt is growing to dangerous highs last: seen in the mid-’80s.

4. Many of us are having children later, which can mean paying for college tuition about the time you want to save for retirement. In 1950, the average age tor a first U.S. marriage was 22 tor men, 20 for women. By 1990 it was 26 for men, 24 for women. Couples are starting families later-age24 in 1990 compared to 21.8 back in 1 %0. More women are waiting until they are 40 for a first baby. It is hard to set aside investment savings when you have to feed, clothe, educate, and buy diapers, antibiotics, and toys lor your little one. The average child’s birthday party in North Dallas costs $300 by one mother’s estimate- and that one’s not catered!

5. Some of us have two sets of families. Those divorces and trophy wives cost money. In 1994, there were 17.670 marriages and 11,265 divorces in Dallas County, according to M-PF Research of Dallas. The typical Dallas divorce can wipe out any retirement savings in the average Dallas estate, says Larry Hance, a family law attorney and partner with McShane, Davis, and Hance. His retainer fee is about $5,000. and like most divorce attorneys, Hance charges $200 to $250 per hour, Costs go up even more if there is a child custody dispute.

“I have a client, a physician, who is 70 years old and cannot afford to retire,” says David Disraeli, an investment advisor and president of Disraeli and Associates in Dallas. “He’s made a lot of money in 30 years but it was eaten up by bad investments and bad marriages. “

6. Corporate pension plans are shrinkingand disappearing. At one point, IBM had one of the best pension plans in the world, Employees made as much in retirement as they did while working. Those days are gone, says Ellen Matthews of the Pension Rights Center in Washington, D,C. “Many companies are dropping the defined benefits pension plans for the 401 (k)s, which are not as secure,” she says. “Plus the employers do not have to contribute to the 401(k) unless they want to.” Chase’s Richard Rogers notes that a major U.S. corporation recently froze its pension benefit program. “To maintain profitability, many corporations simply can no longer afford those generous benefits,” he says.

7. We are uneducated about investing, saving, and managing money. “Americans are economic illiterates when it comes to understanding Washington’s fiscal policies or managing their own finances,” says Dr. Bernard Weinstein.

Americans are also dismal savers-we save less than one-fifth of what the Japanese save. Dr. Weinstein, C.P.A.s, and financial planners blame government policy: We are punished for saving, rewarded for spending. Instead of providing savings and investment incentives, we pay taxes on savings and capital gains. From 1950 to 1970, the national savings rate averaged 8 percent or more; in 1995, the Treasury Department reported the average American savings rate at about 4.6 percent and falling.

Equitable Life Insurance surveyed middle-income baby boomers earning around $69,000 last year. The boomershoped to have $830,000 saved by retirement. But the41-year-olds in the group actually had less than one year’s salary saved up. And that was invested conservatively, producing about 6 percent a year. Scary statistics, says Richard Rogers, who adds that almost 40 percent of people who do invest in 401{k) retirement plans are looking for the safe, conservative return or GIC (guaranteed investment contract.) of 6 to 7 percent. It could be a costly mistake, he says, to invest retirement money so conservatively.

8. We are going to have to handle our own health care insurance. The budget mess in Washington, D.C. is a glaring reminder that the government cannot take care of us. Less than half of all companies with 500 or more employees offer medical insurance to retirees who are under age 65. Face the facts-medical expenses increase as you age. So does the cost of health cure insurance.

A healthy couple in their late 50s must pay $5,000 to $10,000 for an annual policy with a $500 deductible. You say you have paid FICA taxes for 10 years and plan on using Medicare? Reality check: Medicare pays a fraction of what most physicians and hospitals charge. You’ll need additional insurance to pick up that difference, or you’ll have to pay it yourself.

9. We cannot depend on Social Security. You know how it was supposed to work-we paid for our parent’s Social Security, the next generation will pay for ours. So much for theory. Here’s the reality: At the current rate, Social Security reserves will run out in the year 2029, says Richard Rogers. We baby boomers had fewer children- so that’s fewer employees to pick up our Social Security tab. In 1956, 16 workers contributed to Social Security for every one retiree drawing benefits. Today the ratio is 3.3 to 1, and 40 years from now it will be 2 for 1. Generation X workers are also making lower wages than boomers were at their age, getting fewer raises. It is likely, say experts, that Congress will have to raise the age at which citizens can begin receiving benefits to 70, cut out the cost-of-living increases, and maybe eliminate this “benefit” altogether for upper-income retirees.

10. Taxes and tax compliance are eating us alive. An American family earning $53,354 annually fin 1995) will pay 40.1 percent in federal, state, and local taxes. That leaves $34,728 to live on, to spend, to save. In 1945, says the National Taxpayers’ Union, the aver age American worked 1 hour and 59 minutes of each 8-hour workday to pay his total taxes; in 1995, the average Texan works 2 hours and 41 minutes each day to pay taxes-an hour and 47 minutes for Uncle Sam, another 54 minutes for state and local taxes. Compounding that is a greater cost to the consumer in time and money to figure out his or her own taxes, says Mart Thomas of Judd, Thomas, Smith, and Company in Dallas. “What’s becoming burdensome is the cost of compliance and the complexity of the law, ” he says. “It’s almost impossible now for the average person to complete their own tax return.”

Nine Steps to a Happy Retirement

DISCOURAGED? DON’T CALL DR. KEVORKIAM yet-there’s still hope. Let’s say you are 42 years old (the average age when people start thinking about retirement), earning about $75,000 a year, have no pension plan, and you haven’t saved a dime.

“Three things to consider,” says David Disraeli. “How long do you have to invest, how much, and how aggressive do you want to be?”

“Anyone with 10 years of employment left can still retire early.” says Mark Schupbach, a chartered financial consultant and president of Dallas-based The Center For Personal Finance. “But it will take discipline.”

You absolutely must get your financial and investment act together, and you may have to retire into a part-time job. Not a bad option, says Schupbach, who encourages people to re-think their definition of retirement.

But part-time employment won’t cover all the bills nor support an affluent lifestyle. We have choices, says Schupbach, and one of those choices early on should be to save and invest carefully.

“I see it time and time again with baby boomers,” says Bill Gleavy, a discount broker at Charles Schwab. “You’ve got to make retirement investing as routine as paying the mortgage and the insurance. It’s every bit as important as making a house payment, and should be considered a fixed payment before you buy non-essentials.”

If stashing money is painful, think of the investment process as a diet in reverse. You’ll have to resist temptation along the way, but think how great you’ll feel when you’ve gained, say, $92,400. Sounds like a lot, but you can get it by saving $500 a month for ten years at 8.4 percent interest. With luck and some professional help, you could obtain even better returns.

Here’s our prescription for a happy, worry-free retirement:

STEP ONE: PUT ASIDE 10 TO 20 PERCENT OF YOUR ANNUAL INCOME STARTING NOW. From whence cometh die funds? Your paycheck, or any income. Make a budget and stick to it. Think before you spend-do you really need a $100 coffee maker? Manicures every week? A red Porsche?

“The difference between a luxury car and a car that is just “nice” is about a million dollars,” says Mark Schupbach. What he means is that saving die difference in financing the two cars (say a Mercedes versus a Taurus) and investing it at a conservative 8 percent, then living on that investment for another 25 years actually yields more than a million dollars.

To help you ease the burden of saving, financial planners have some pain-free tips.

● First, determine whether you’re having too much tax withheld from your paycheck. Many people do this to avoid the crunch of having to write the 1RS a check on April 15. But financial planning will help you gauge exactly what your tax bill will be. Instead of giving your dough to the government for a year, put it in a mutual fund every month.

If having Uncle Sam hold it is absolutely the only way you won’t spend it, then put your tax refund in a mutual fund immediately.

● Begin a persona! spending freeze. Richard Sapio, founder and president of 1-800-MUTUALS, Inc., advises that any raises or gifts of money or extra funds should be put directly into an investment fund, preferably stock equities.

● “The most painless way,” says Glenda D. Kemple, a certified financial planner with Quest Capital Management, Inc., “is to save a set amount every single month that is saved before you see it. Saving is a challenge: There are five-year periods in your life of fairly heavy expenses. When you get those marginal extra dollars, save them,”

If you pay off a car loan, for example, invest the amount of the loan payment every month. You’ve already managed to live with this payment in your budget, so you won’t miss the money.

● Cut back on personal expenses. “Say you have dinner out and see a movie every weekend,” says Richard Rogers. “Cut back to twice a month. That’s about $1,800 a year more in your 401(k). At 9 percent compounding for 25 years, that’s an extra $169,500 towards retirement. “

STEP TWO: TEAR UP AND CANCEL CREDIT CARDS UNLESS YOU CAN PAY OFF THE BALANCE EVERY MONTH BEFORE INTEREST ACCRUES. Watch out for some of these credit cards, too, that have you pay interest from the time of purchase. Forget about lower interest rates. Revolving credit cards are high-interest mini-loans. Make sure you get a 30-day ride, then write a check for the balance before the due date.

STEP THREE: ENROLL IN AN AUTOMATIC INVESTMENT FUND OFFERED BY MANY MUTUAL FUND COMPANIES AND DISCOUNT BROKERS. Deposit your paycheck in your bank account, and a set amount will be drafted automatically every month to your mutual fund account.

STEP FOUR: CHECK OUT YOUR COMPANY’S 401 (k) OR 403(b) RETIREMENT PLANS AND INVEST THE MAXIMUM AMOUNT YOUR PLAN PERMITS. A 40 l(k) is usually offered by companies; the 403(b) plans are sponsored by nonprofit employers. Financial planners say these plans can be an employee’s windfall. Some companies will match your contributions, and while your money is compounding, taxes are deferred, The typical match from employers is currently 3 percent, but Congress is hoping to bring that up to 4 percent with the tax law changes being hammered out in Washington.

The 401(k) is not the guaranteed path to Nirvana. The Pension Rights Center in Washington, D.C. warns that 401(k)s aren’t as secure as the old-fashioned defined benefit pension plans. They are not insured by the Pension Benefit Guarantee Corporation, a sort of FDIC for pension plans of old. All the more reason why you want to get smart about your 401 (k) and take care of yourself.

STEP FIVE: IF YOU’RE SELF-EMPLOYED, CHECK OUT SEPS AND KEOGHS. The Simplified Employee Retirement Plan, or SEP, and the Keogh plan are basically your own pension and profit-sharing plans. It’s a great way to defer taxes on 15 percent of your income; you can sock away as much as $30,000 annually. This is especially appealing for small business owners. The money will compound, accrue interest, and you won’t get the tax bill until you pull it out at age 59.5. There’s a penalty if you use the money before that age with some exceptions.

Warning: What you do for yourself, you must do for your employees. Seek professional advice from a stockbroker or knowledgeable financial planner to set up and manage these plans for maximum return.

STEP SIX: INVEST IN IRAS. You can invest $2,000 maximum per year and deduct that from your income taxes if you or your spouse aren’t covered by another retirement plan or your income doesn’t top $40,000 to $50,000 married, filing jointly; $25,000 to $35,000 if you are single.

IRA contributions peaked in 1985 when American workers socked away $38.2 billion dollars. Then Congress put on the limits and by 1994, Americans contributed just $7.7 billion. According to the 1RS, less than 4 percent of wage-earners who were eligible took the IRA deduction in 1994. Congress is considering changes to increase the salary limits for IRA investments.

STEP SEVEN: SQUEEZE THAT IRA FOR ALL THE INCOME YOU CAN-INVEST IN STOCKS. No matter how much money you earn, it won’t be taxed until you take the money out at age 59.5. If you take it out early, or don’t take it out by age 70.5, you must pay penalties.

You can invest after-tax income in IRAs if you fill out form 8606 on your tax return. This tells the 1RS you’ve already paid taxes on the money you are investing-but as it grows, you won’t pay more taxes on the initial investment. For example, invest $2,000 you’ve already paid taxes on. If that investment yields $ 10,000, you will only pay tax on the profit, or $8,000. The $2,000 initial investment is excluded.

STEP EIGHT: KNOW WHERE THE MONEY GOES: IF YOU CAN’T DO IT YOURSELF, GET HELP. The first step in taking control of your finances, say financial experts, is to know where the money goes. That’s where a home accounting computer program such as Quicken Financial Suite can help. Time consuming, yes; but it makes tax preparation easier and you can categorize what you’ve spent for everything-“home repairs,” “clothing,” or “pet care.” It may surprise you.

“One client could not track $5,000 that was just gone, every month,” says Mark Schupbach. “We looked everywhere, turning up stones. This client told me that five years ago he lived on that much money in one month alone-now it floated away.”

STEP NINE: PLAY THE MARKET FOR MAXIMUM RETURN. You’ve gotten control of your spending. You’re cruising ahead in the retirement and savings fast lane. Now for the other point of the retirement triangle: Where do you go to get the best return on your cookie jar full of saved dollars? How do you obtain maximum return, maintain a safety margin, and not get ripped off by taxes?

A common theme from all the financial planners, stockbrokers, and investing experts interviewed was: Get in stocks. Do not fear the stock market, they say; stay in for the long term, and diversify your portfolio.

“Since 1926, there has not been a 15-year period in history where people haven’t made money in the stock market,” says Richard Rogers. Hang in there, experts say, even when the market plummets. It’s kind of like a leisurely car trip. You don’t mind the stops along the way as long as you get to your destination.

“What happens day-to-day is essentially immaterial,” says Rogers, “But be sure you have a good, solid financial plan in place and keep your long-term goals in view.”

Even those who have been burned still go back. Richard Sapio, president and founder of Dallas-based 1-800-MUTUALS, lost a portfolio of $350,000 when the market crashed on Oct. 19,1987. But the former options trader still believes in the market.

Do You Need the Experts?

“INVESTORS HAVE NEVER HAD SUCH GREAT ACCESS TO INVESTING IN corporate America.” says Gary Schoen, president of Dallas-based Frontier Investment Management Company. “But it’s like more ammunition for a gun-if it is not pointed in the right direction, it can be damaging.” Richard Sapio agrees “It’s crazy not to be in stocks- but for the long haul.” Assuming they’re right, which advisor is best for you? A large brokerage house with a century-old name, a discount broker, one of the newer one-stop mutual funds supermarkets, a bank trust department, or a financial planner/investment advisor?

If you want the no-frills-Iow-on-the-bills approach, then you might like the discount brokers such as Charles Schwab or the new mutual funds supermarkets. Sapio bills his two-year-old company (a fund supermarket) as the world’s first user-friendly mutual fund investment firm. He’s named it 1-800-MUTUALS for instant identification, and says companies have offered him $10 million just to buy the name-number.

“We’re a financial Wal-Mart for the average investor,” he says. Sapio’s customers can get into mutuals for a minimum of $100 per month with a flat fee, compared to higher minimums and commissions (called loads) at many investment firms or brokerage houses. Sapio sees 1-800-MUTUALS as part of a trend that may make stockbrokers and financial planners go the way of the dinosaurs. In the Information Age, he says, we simply won’t need them.

But recent financial news reports claim the average cost of owning a mutual fund is actually rising, even at the “supermarkets.” In 1995, mutual fund investors paid an average of $99 per year for each $10,000 invested; the average was $71 in 1980. Why are the costs going up when many of the “supermarkets” are billing themselves as blue-light specials?

Complex reasons; basically, buyer beware. Since they advertise no broker commissions, supermarket fund companies have to make money somewhere. There are hidden fees: administrative, advertising, accounting, legal, printing, and more. Sometimes these companies get small percentages from the mutual fund company but you never know it. While that may not influence their investment advice, it does drive up fees for all investors in the long run.

Sapio says it’s the advertising that’s making mutual funds more expensive these days-not to worry. “You’re still getting a much bigger bang for your buck,” he says.

Still, the emergence of these companies makes many a financial planner feel like a “personal shopper” these days as they scan the market for the best deals in mutual funds. They warn that not all mutual funds are a bargain.

Far from retreating, the brokerage houses are fighting back. Fee structures are changing. More brokers are beginning to work for straight fees or a percentage of the portfolio’s profit. Houses are hiring more stockbrokers, gearing up for the investment boomers, And the large firms are opening their own discount fund supermarkets.

Gary Schoen at Frontier sums it up in four easy steps: Qualify your objectives; seek professional money and investment management expertise with a “heads-up” arrangement; be patient because investing is an ongoing process; relax-let the pros worry about your money.

At least you’ve taken the first step-you’ve read this article. Next you need to take the plunge and get with the second half of the ’90s ! Frugality is in, decadence is out. Stash the cash-we no longer measure success by tax-laden European cars and Rolex watches. Tell someone at your next cocktail party that you have half a million in your 401(k) earning 16 percent-and watch heads turn your way.


WOMEN AND MEN DIFFER SOMEWHAT IN THEIR FINANcial planning needs, experts say-and often, single women have more trouble arranging a secure retirement than do single men or married couples, according to Carole Cohen, a certified financial planner/investment consultant with The Principal Financial Group. Whereas most advisors say you’ll need 80 percent of your current income for retirement, Cohen says women need 100 percent.

“Women still have lower incomes than men-shorter earning years,” she says. “They have less time to make the money.”

Women also outlive men-50 percent of women over age 65 will outlive their husbands by 15 years. Live longer; die poorer.

Glenda Kemple, a certified financial planner and C.P.A. with Quest Capital Management, Inc., agrees: Women tend to worry too much about an extravagant lifestyle and not enough about the family’s savings. Those designer suits will eventually go to the Salvation Army, she says, but $5,000 in a mutual fund will be worn many times in the future.

Texas may be a community property state, but half of nothing is nothing for a divorced woman. Kemple has seen many a devastated divorcee from the Park Cities and affluent suburbs crumble after family assets were sold and divided. Sometimes, she says, not much is left but a garage sale. Before women worry about retirement, advises Cohen, they should worry about survival. She tells her clients to keep three to six months of living expenses available and accessible-liquid, as they say, The best place for these funds: money market accounts or Certificates of Deposit. But don’t keep more than emergency funds in this safe (but lower-yielding) option.


DEPENDING ON YOUR NEEDS AND WISHES, THERE ARE four major types of financial experts who can help with your savings and investments:

Certified Financial Planner/C.F.P: Two-day test and maintains continuing education every two years. Call the Certified Financial Planner Board of Standards, 800-282-7526.

Chartered Financial Analyst/C.FA: Three six-hour exams and needs three years’ experience as a financial analyst. Call the Association for Investment Management and Research, 804-980-3668.

Chartered Financial Consultant/Ch.F.C: Ten two-hour financial planning exams. Needs three years1 professional experience and 60 hours of continuing education every two years. 800-392-6900.

Personal Financial Specialist/P.F.S.: Must be a Certified Public Accountant and pass a six-hour test. At least three years’ experience in financial planning. Continuing education every four years.

What to ask your planner:

1. How much experience and education do you have?

2. What’s your area of expertise?

3. Describe your average client?

4. Please provide me complete information on your compensation, including commissions and management fees. Let me see a sample plan.

5. If the planner is a registered investment advisor, ask to see parts I and II of Form ADV filed with the Securities and Exchange Commission. Part I lists any disciplinary actions taken against the planner; Part II spells out fees, services, and affiliations.


Keep me up to date on the latest happenings and all that D Magazine has to offer.