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FINANCIAL PLANNING TERMS...Reverse Dollar Cost Averaging

What is reverse dollar cost averaging?

Once an investor retires and begins to receive systematic withdrawals from their retirement portfolio, these periodic declines in the price of these shares, now being sold to cover expenses, becomes detrimental. Retirees look to generate a certain amount of dollars to pay expenses so when the share prices of the investments in the portfolio decline, the retiree has to sell more shares to raise the dollars needed.


Financial Benchmarking and Why it is Important To You

Locate invesment planners
who recognizes the
importance of benchmarking

In life it may not be wise to try to keep up with the Joneses but in the business world it can be the hallmark to success, especially in the realm of benchmarking. 

In a nutshell, benchmarking  is a  process by which a business analyzes its own internal strengths and weaknesses and then compares themselves with  companies that are successful in areas they find lacking.   

By  utilizing the tools of  those who have succeeded where they had failed, businesses can very well improve.

When it comes to retirement funds, wise investments can ensure a sound financial future.   Benchmarking then becomes essential as a means of  decreasing risks and making sound choices.

The first aspect of this would of course be risk assessment and how to get the biggest return for your dollar.  This would of course require benchmarking as it would involve evaluating and reviewing  the "what is working" paradigm.

For the average Boomer benchmarked can be coupled with a solid financial plan that takes into account the following:

•    Your goals and aspirations--what do you hope to achieve
•    Assessing your financial inventory  and income
•    Ensuring you have an understanding of how your retirement benchmarks are evaluated

With this in mind, it pays to locate invesment planners who recognizes the importance of benchmarking.  This alongside a healthy respect for what you, the client, needs, is what can make all the difference in how happy, as well as secure, your retirement is.


Retirement should be a time to enjoy life, not worry over the small things.   With retirement planning  benchmarks in place, you can be one step closer to that goal.

At Lamon and Stern, we are well versed in the benchmarks that lead to solid retirement investing.  Contact Lamon and Stern online to learn more about retirement benchmarks and other all important  aspects of planning that can  establish firm financial foundations.

Call today and invest in your peace of mind.

Hollis Lamon

Let us get you started on your Retirement Planning Today!
Online at our website:
Call us at 770-951-8411



Determine how the real return
from an investment compares
to the real return hurdle.
PART 2 of 7 Series:
The Process of Managing Retirement Income

Baby-boomer retirees may be particularly susceptible to the eroding effects of inflation, given that they will be less likely than past generations to have some form of pension that could be indexed for inflation. 

This generation is relying more on savings accumulated in 401(k), 403(b), IRA, and after-tax savings accounts to support them in retirement. Unless these savings are prudently invested during retirement to allow the income stream to grow at a pace comparable with the increase in inflation, purchasing power will be diminished.

To illustrate this concept, let's use a simple hypothetical case of a retiree who has $1 million in retirement savings and has decided to spend the amount evenly over a 30-year period ($33,333 per year). The retiree also decides not to invest the money to ensure safekeeping. Over the next 20 years, at an average annual inflation rate of 3%, purchasing power drops by 42% to the equivalent of $19,010 per year; and if inflation runs at 4% annually, purchasing power declines by 52% to $15,821. Imagine retiring at age 62 and by age 82 only being able to spend the equivalent of $15,821 per year in today's dollars!

3 Basic Variables to Retirement

There are three basic variables that a retiree needs to factor: the length of time to be spent in retirement; the initial spending rate desired; and a legacy, if any, that the retiree wishes to leave. Each of these variables is described below.

    * Time Frame – the longer a retiree plans for their retirement to last, the more investment earnings are needed to support it. For retirement planning purposes, most advisors will use a minimum of 30 years, but in some instances 40 years may be even more realistic.

    * Spending Rate – the first year's after-tax spending amount (say $40,000) divided by the total retirement savings (say $1 million) for a 4% initial spending rate.

    * Legacy – how much of the initial retirement savings account is desired to be left as a gift to family members or charity upon the end of the retirement period.

Combining these three factors and preparing a simply cash flow model yields a real return hurdle (after the cost of inflation, investment expenses, and taxes) that must be achieved or exceeded each year to provide a retirement that will sustain itself for 30-40 years and beyond. 

For a majority of the baby-boomers retiring in the coming years, most, if not all, of the retirement savings accumulated during retirement plus the future earnings on these savings will be spent over their planned retirement period. The concept of spending some, if not all, of the retirement savings to fund a retirement will be the norm, not the exception.

Retirement Return Hurdle

For these retirees, a legacy amount will be available only if they do not use all their financial resources due to an unusually strong investment market or if spending amounts are actually less than planned. However, for those retirees who want to plan a legacy at the beginning of the retirement plan the real return hurdle would be required to provide for a sustainable spending plan, plus leave a legacy at the end of the 30-year plan. Needless to say, higher returns are required to achieve both objectives.

Planning for a 30- to 40-year retirement period makes preserving purchasing power of paramount importance.

Being able to see how the retirement plan variables relate to a real return hurdle is a great first step. Going through the process of identifying each retiree's unique cost structure, including inflation assumptions, investment expenses, and taxes, will determine how the real return from an investment compares to the real return hurdle needed to accomplish the plan.

Please note that any discussion related to average returns over a long period of time, such as a 30- to 40-year retirement, needs to be accompanied by a good understanding of the order in which returns are realized, called the "sequence of returns". For a retiree who is liquidating a small amount of their retirement savings each year to support the expenses, the order in which returns are realized is very important. We have addressed this sequence of return issue as a separate piece in this kit and it should be deemed as integral part of the discussion on preserving purchasing power.

If you would like us to mail you the information KIT with a FREE CD discussing the ins and outs of managing your retirement income please contact us today.
Review it online here:

Let us get you started!
Online at our website:
Call us at 770-951-8411



Bonds are debt investments in which an investor loans money to an entity (corporate or governmental) which borrows the funds for a defined period of time at a fixed interest rate. Bonds are subject to certain risks including loss of principal, interest rate risk, credit risk, and inflation risk. The value of a bond will fluctuate relative to changes in interest rates; as interest rates rise, the overall price of a bond falls.

Government bonds, or Treasuries, are negotiable debt obligations of the U.S. Government, secured by its full faith and credit and issued at various schedules and maturities. Income from Treasury securities is exempt from State and local, but not Federal, taxes. Treasury bill data is based on a one-bill portfolio containing, at the beginning of each month, the bill having the shortest maturity not less than one month. Intermediate government bond data is based on a one-bond portfolio with a maturity near five years. Long-term government bond data is based on a one-bond portfolio with a maturity near twenty years.

A corporate bond is a debt security issued by a corporation. Corporate bonds are taxable and have more credit risk compared to Treasuries. The Citigroup Long-Term High Grade Corporate Bond index includes those issues from the Credit Index that have at least 10 years to maturity (long term) but exclude asset-backed securities and non-U.S. sovereign/provincial issues.

A stock is a share in the ownership of a company. As an owner, investors have a claim on the assets and earnings of a company as well as voting rights with the shares. Compared to bonds, stock investors are subject to a greater risk of loss of principal. Stock prices will fluctuate, and there is no guarantee against losses. Stock investors may or may not receive dividends. Dividends and gains on an investment may be subject to federal, state or local income taxes.

Standard & Poor's 500 Stock Index is an index consisting of 500 stocks chosen for market size, liquidity and industry grouping, among other factors. The S&P 500 is designed to be a leading indicator of U.S. equities and is meant to reflect the risk/return characteristics of the large-cap universe.



Balance lifestyle and
long-term sustainability of
the retirement portfolio.

Part 1 of 7 Series:
The Process of Managing Retirement Income

The oldest of the baby-boomer generation is now 63 years of age and moving ever closer to the age when a "traditional" retirement would begin. 

Much has been written on the impact the baby-boomer generation has had on society and what retirement will look like for them going forward, but there hasn't been enough written on the topic of retirement income planning, from a process point of view.

The road of retirement should be paved with more than good intentions. Soon-to-be retirees need to develop and follow a retirement income plan that balances current lifestyle and long-term sustainability of the retirement portfolio. The Road of Retirement series provides some best practices for accomplishing this balance.

In advance of reading the various articles, it is important to be acquainted with the unique language of retirement income planning.

It has emerged in the past ten to fifteen years as academics study the unique issues facing the baby-boomer generation. While this is not meant to be an exhaustive list, it will provide some of the essentials for the topics addressed in this Road of Retirement series.
  • Longevity.
  • Sustainability.
  • Purchasing Power.
  • Initial Spending Rate.
  • Current Spending Rate.
  • Spending Policy.
  • Accumulation Phase.
  • Reverse Dollar Cost Averaging.
  • Sequence of Returns.
  • Legacy.
  • High and Growing Dividend Stocks.
  • Real Returns.
  • Real Return Hurdle.
  • Income Replacement Ratio.

Best Practices for Retirement Income Planning


The use of a trusted financial advisor to help you thoughtfully develop and adhere to a retirement plan during your journey on the road of retirement is highly recommended. While baby-boomers are expected to spend many years in retirement, with this extended time will come many changes in the financial markets, family needs, health concerns, and legacy issues. These changes will result in times of challenge and prosperity. A good financial advisor will provide the last line of defense between you and yourself during both.

If you would like us to mail you the information KIT with a FREE CD discussing the ins and outs of managing your retirement income please contact us today.
Review it online here:

Let us get you started!
Online at our website:
Call us at 770-951-8411


Following these strategies does not assure or guarantee sustainability of a retirement portfolio or better performance, nor do they protect against investment losses.

The views expressed in this article are subject to change.