Nationwide: Successful Outcomes

Interactive Retirement Planner:
Review your retirement plan account to see
if you are on track to reach your goals

It's a great time of the year to review your retirement plan account to see if you are on track to reach your goals.  The Nationwide® On Your Side Interactive Retirement Planner can help you do just that.  It's an innovative resource, created for employees like you.  If you need to adjust your strategy, the planner can help with that, too! 

Try out the Interactive Retirement Planner Tool now.

LINK: https://isc.nwservicecenter.com/iApp/isc/rpt/launchRetirementTool.action

In just 10 minutes you can:

• Set a retirement goal
• Track progress
  
• Get suggestions to improve retirement outlook
• Model different investment savings and retirement scenarios based on feedback from the planner
• Save a PDF file of the information to share with others 

How does it work? 

The Interactive Retirement Planner analyzes the information that is important to your overall retirement outlook:

• Age and time until retirement
• Estimated Social Security payments
• Defined benefit account (if applicable)
• Other retirement assets such as IRAs or retirement plans from former jobs

Check it out at: nationwide.com/retirementplans

Increase your contributions to the max

The Internal Revenue Service has announced higher maximum contribution limits for defined contribution plans for 2012.  This means you'll be able to contribute more into your retirement plan accounts.

Beginning in January, you can contribute as much as $17,000 per year to your retirement plan account.  And if you are 50 or older, you could contribute as much $22,500 with the age 50+ catch-up provision.

We know that for many people, the maximum amount is not possible.  But consider increasing your contributions by just 1% of your salary this year.  A little can go a long way!

Uncle Sam gives tax incentives for retirement-plan investing

The IRS can give you a tax credit up to $1,000, or $2,000 if filing jointly, just for contributing to your company's retirement plan.  To receive a credit, you must earn less than $28,250 per year or $56,500 if you file jointly.  It's called the Saver's Credit.

How do you become eligible?

• You must be at least 18 years old and not claimed as a dependent on someone else's tax return
• You cannot be a full-time student
• When calculating the credit, you must deduct the amount of any retirement plan or annuity distributions you received in the current tax year and in the previous two tax years from the contributions you have made

The individual's Adjusted Gross Income (AGI) must not exceed the following 2011 limits:

Filing status	Your income	Rate of credit	Tax credit for a $2,000 contribution*
	$34,000 or less	50%	$1,000
Married Filing	$34,001 - $36,500	20%	$400
Jointly	$36,501 - $56,500	10%	$200
	more than $56,500	0%	$0
	$25,500 or less	50%	$1,000
Head of	$25,501 - $27,375	20%	$400
Household	$27,375 - $42,375	10%	$200
	more than $42,375	0%	$0
	$17,000 or less	50%	$1,000
Other Filers	$17,001 - $18,250	20%	$400
	$18,251 - $28,250	10%	$200
	more than $28,250	0%	$0

*Married couples filing jointly may apply up to $4,000 for a maximum $2,000 credit.

Here's an example of how it works:

Consider a married couple who make $30,000 a year and contributed $3,000 toward a retirement account.  They could get a tax credit of $1,500.  (They make less than $34,000, making them eligible to receive the full tax credit of 50% of their contribution.  If they had contributed $4,000, they could get a $2,000 tax credit.)  If you're eligible to claim a Saver's Credit on your 2011 federal income tax return, consider how much more you may be able to contribute if you plan to claim the credit on your tax return next year!

Nationwide

On Your Side

Hollis Lamon
Lamon & Stern
Atlanta, Georgia

Contact Hollis Lamon of Lamon & Stern today for all your retirement planning needs! 770-951-8411

Hollis Lamon is on LinkedIn

VISIT ME
ON LINKEDIN

Hollis Lamon
President at Lamon & Stern, Inc.
Atlanta, Georgia (Greater Atlanta Area) | Investment Management

Hollis Lamon specializes in 401k growth retirement planning, maintaining and growing retirement income, 401k bench comparisons and corporate retirement advisement. With this knowledge, Lamon has assisted retirement professionals in making sound investments that has helped them prepare for their future.

As a registered municipal principal, options principal and investment advisor, Hollis Lamon has also worked side by side with third party marketers and administrative firms.

Visit Hollis Lamon at LinkedIn

Read more about the Lamon & Stern, Inc. Team

Nationwide: Investment Basics

Investment basics :
Carefully consider the fund's investment
objectives, risks, charges and expenses

Investment Basics

Understanding how to invest in your plan may seem complicated, but once you learn a few terms and investing strategies, the choices can become clearer.

There are three major types of investments:

 1.  Cash equivalents
 2.  Bonds
 3.  Stocks

CASH EQUIVALENTS

Cash equivalents, which include certificates of deposit (CDs), U.S. Treasury bills and money market funds, can be turned into cash at any time.  While these are some of the less risky investment options, returns may not keep pace with inflation.

BONDS

Bonds are loans made to a government or corporation.  In return for borrowing our money, bonds may pay a fixed amount of interest.  Bonds are sensitive to interest rates – and can gain or lose value.

STOCKS

Stockholders own a part of the assets of the company they invest in and part of the stream of cash those assets generate.  As the company acquires more assets and the stream of cash it generates gets larger, the value of the business increases.  This increase is what drives up the value of its stock.

"I knew I needed to start contributing to my plan if I wanted to retire someday.  But there's so much information and so many choices, I wasn't sure what to do about selecting and managing the investments that would help me reach my goals.  I needed help.  And I got it."

WHAT IS A MUTUAL FUND?

A mutual fund is a mix of investments that may include stocks, bonds and cash equivalents.  The fund is managed by a professional money manager and has a stated objective or investment style.  The core investment options in your retirement plan are mutual funds rather than individual stocks or bonds. 

HOW MUCH RISK SHOULD YOU TAKE? 

Knowing your investment horizon time (or years until retirement) is important because it indicates the number of years your money will remain invested.  Generally speaking, the longer your time horizon, the more aggressive you can be with your investment. 

DIVERSIFICATION HELPS, TOO. 

Diversification is the process of spreading your money among different investment types.  By investing in stock, bond and cash mutual funds, down periods in one fund may be offset by gains in another.  Maintaining a diversified portfolio can help smooth the ups and downs of your investments – though diversification itself does not ensure profit nor protect against loss. 

YOU SHOULD KNOW. 

For more information about the funds available, including all charges and expenses, please consult a prospectus.  Fund prospectuses and additional information relating to your retirement plan can be obtained by contacting your pension representative.  Before investing, carefully consider the fund's investment objectives, risks, charges and expenses.  The fund prospectus contains this and other important information.  Read the prospectus carefully before investing.

Hollis Lamon
Lamon & Stern
Atlanta, Georgia

Contact Hollis Lamon of Lamon & Stern today for all your retirement planning needs! 770-951-8411

Thought Capital: New Participant Fee Disclosure Rules: What Plan Sponsors Need to Know

FROM: 
Thought Capital 

New Participant Fee Disclosure Rules: 

What Plan Sponsors Need to Know

TO:
The new participant disclosure rules are intended to help ensure that all participants and beneficiaries in participant-directed individual account plans have the information necessary to make informed decisions.

Compliance should not be terribly
burdensome for plan sponsors.

Effective date update:  On July 13, 2011, the Department of Labor (DOL) announced an extension of the deadline for the participant disclosure rules.

Initial disclosures must now be furnished no later than the later of:

      ·60 days after the plan's anniversary date that occurs on or after Nov. 1, 2011, or

    ·60 days after the effective date of the plan sponsor-level fee disclosure rule (April 1, 2012)

Please take this change into account as you proceed in reading.

Executive Summary

In October, the Department of Labor ("DOL") published final regulations that require plan administrators (typically the plan sponsor) to disclose certain fee and investment information to participants and beneficiaries in Employee Retirement Income Security Act of 1974 (ERISA) covered participant-directed individual account plans, which include the vast majority of 401(k) and private-sector 403(b) plans.  The final regulations will apply to plan years beginning on or after November 1, 2011.  Thus, for calendar-year plans, the regulations will become effective January 1, 2012.

The new participant disclosure rules are intended to help ensure that all participants and beneficiaries in participant-directed individual account plans have the information necessary to make informed decisions about plan participation and selection of investment choices for their accounts.  

Of course, record keeper and investment service providers to individual account plans have long helped plan sponsors make information about plan fees and investment-related expenses available to participants and beneficiaries, typically through a secure website.  The new regulations, however, require plans to affirmatively provide specified information to "participants," defined broadly to include all individuals eligible to participate in the plan (without regard to whether an individual has an account balance).

For the most part, the information required to be disclosed under the regulations is not dissimilar from the information that is typically made available to participants and beneficiaries today, although the new regulations require disclosure of investment-related performance and fee information in a comparative format, which may differ from current practice.The new rules also create more uniform fee and performance disclosure requirements for different types of investment options, which may help plan sponsors as well as participants effectively compare investment alternatives.

"The new rules also create more uniform fee and performance disclosure requirements for different types of investment options, which may help plan sponsors as well as participants effectively compare investment alternatives. "

Compliance should not be terribly burdensome for plan sponsors.  Plan administrators should work with their record keeper to see that the necessary information is gathered and the required disclosures developed.  Helpfully, plan sponsors are permitted to rely in good faith on information provided by their service providers, such as record keeper and investment providers, who will assist with providing the required information and developing the required disclosures.

The new rules may have broader repercussions.  It is possible that the new rules and their comparative format requirement will indirectly affect covered individual account plans by helping to inform the number and types of investment alternatives that plans offer to participants.  In addition, since the regulations highlight the manner in which plan administrative services are financed, they may influence plan sponsors' approach to financing plan costs.

By Davis and Harman LLP, for the Principal Financial Group*

Hollis Lamon
Lamon & Stern
Atlanta, Georgia

Contact Hollis Lamon of Lamon & Stern today for all your retirement planning needs! 770-951-8411

ROAD OF RETIREMENT INCOME Series | OVERVIEW

Road of
Retirement

THE PROCESS OF MANAGING RETIREMENT INCOME
KIT: AT-A-GLANCE

The road of retirement should be paved with more than good intentions. Soon-to-be retirees should develop and follow a retirement income plan that balances current lifestyle with the long-term sustainability of the retirement portfolio.

Retirees and their advisors should thoughtfully establish a spending plan to balance the desire to maintain a consistent lifestyle with preserving assets for a retirement that could last 30 to 40 years.

The Road of Retirement series provides some best practices for accomplishing this balance.

• The Language of Retirement Income Planning

Transitioning retirees' financial planning from the savings or accumulation phase to the distribution phase takes on a language of its own. This article defines the "new" terminology that we use throughout the Road of Retirement series.

• Preserving Purchasing Power

Longer life expectancies can present a number of new challenges for retirement. One such challenge is the potential loss of purchasing power due to the eroding effects of inflation. This article can shed light on some of the preparations that may provide retirement portfolios with the ability to keep pace with inflation over the long term.

• Sequence of Returns & Reverse Dollar Cost Averaging

Historical average returns mean very little to a retirement portfolio undergoing the stress of systematic withdrawals. Understanding how a series of returns is realized can impact how a retirement plan should be structured. Here we discuss the impact a series of poor returns and the need to sell assets at inopportune times could have on  a retirement portfolio.

• Endowment Spending Policy

Implementing a policy that determines a retiree's annual spending amount can be difficult, especially during periods of high inflation or a bear market. Adopting an endowment spending policy may be an attractive alternative for many  retirement income plans. This article discusses the Endowment Spending Policy and the Lifestyle Spending Policy.

• Building a Cash Flow Reserve Ladder

Structuring a retirement savings portfolio using a cash flow reserve ladder is a technique that matches liquidity needs with investment horizons. A cash flow reserve is established to fund up to twenty-four months of spending. The balance of the portfolio is invested in a combination of fixed income and equity investments with longer-term investment horizons.

• The Value of Dividends in Retirement

Soon-to-be retirees should look past current yield when considering income alternatives for retirement. A globally-focused, high and growing dividend strategy may provide retirees with a growing dividend income stream and the opportunity for price appreciation with which to outpace inflation.

• Converting Savings into Monthly Spending

Using a defined process to convert retirement savings into a monthly spending should be the cornerstone of every retirement income plan. Balancing the desire to increase income from the portfolio without foregoing the potential for price appreciation takes planning.


HOW TO ORDER

To order The Process of Managing Retirement Income kits go to www.Thornburg.com/RoadOfRetirement. The individual articles in this series are also available for downloading from the same web site.

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 these articles are subject to change.

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

ROAD OF RETIREMENT INCOME Series | PART 7 of 7

Use a globally diversified portfolio
that generates enough income
to cover the current spending
needs without having to sell assets.

CONVERTING SAVINGS INTO MONTHLY SPENDING
PART 7 of 7 Series:
THE ROAD OF RETIREMENT
The Process of Managing Retirement Income

Retiring baby-boomers, who can expect to spend 30 to 40 years in retirement, will likely need a framework for converting their savings into a sustainable monthly income stream. Investors who are on the road of retirement all share some common fears including spending too much, principal loss from market volatility, loss of purchasing power due to inflation, and the biggest fear of all, running out of money.

As we have all experienced over the past few years, retirement plans designed to fund annual spending solely through the sale of the assets are exposed to the vagaries of the market.

We will outline how to convert the retirement savings to a monthly spending amount, using an approach that balances the need for current income and future growth.

The objective of this conversion process is to utilize the strategies outlined in this series to build the framework that may help a retiree sustain a lengthy retirement time frame. This process will use a globally diversified portfolio with a cash flow reserve ladder structure that strives to generate an attractive level of current income with the possibility for growth.

Cash Flow Reserve Ladder

This ladder provides three rungs aligning the most liquid investments to fund near-term spending needs, while the more volatile, growth-oriented investments are held inside a diversified portfolio with a five-year investment horizon.

Using a cash flow ladder, the retiree writes a check each month from the money market fund within the cash flow reserve and deposits it into their checking account. Providing a specified amount each month is a key attribute of the structure while also giving the retiree some separation from the larger pool of assets in the investment portfolio. This separation can help reduce the desire to overspend.

Within the various levels of investments from the cash flow reserve and investment portfolios, the interest and dividend income generated will not initially be re-invested. Instead this income will be deposited into the money market fund to continually replenish the cash flow reserve. However, if the income stream grows adequately enough to cover the spending amount and more, the excess is reinvested in the investment portfolio. The concept is to use a globally diversified portfolio that generates enough income to cover the current spending needs without having to sell assets. However, whatever portion of the spending is not covered by the current income will come from selling assets opportunistically into the market to refill the cash flow reserve back to the two-year spending level.

Using a Globally Diversified Asset Allocation

Given the opportunities globally to invest in companies that have the ability and willingness to pay a high and growing dividend, the equity portion of the retirement portfolio will be allocated to these types of income investments. The balance of the portfolio will be allocated into municipal bond investments to help preserve capital, offer some diversification and provide a tax-efficient interest income stream.

• The cash flow reserve portion of the portfolio represents approximately two years'  worth of spending and is equally divided between a short-term municipal bond fund and a municipal money market account. A short-term municipal bond fund is used since it may provide a higher income stream with a historically limited level of  volatility. The cash flow reserve receives income generated from the various  investments and is also the source from which the monthly spending check is written by the retiree for deposit into their checking account.
• Within the investment portfolio there is an additional 25% or approximately four to five years of spending allocated to intermediate-term (10-year) municipal bonds, which can be liquidated if there is a protracted decline in the equity markets. These municipal bond investments can help provide a more tax-efficient income stream and some good diversification benefits to the growing dividend stock strategy. Although the income from municipal bond investments is exempt from regular federal and state income tax  they may be subject to the alternative minimum tax (AMT).

In terms of income expectations from the municipal bond investments, while the current level of income may be relatively attractive, they are not geared to grow. A common flaw of retirement portfolios is an over-allocation to fixed income investments, leaving the portfolio highly susceptible to the loss of purchasing power.

Using a global approach to investing in companies that provide growing dividends allows an opportunity to improve portfolio diversification by industry, sector, and country.
Using the Cash Flow Reserve Ladder, with its focus on maintaining two years of liquidity in the reserve, together with an allocation to municipal bonds, allows a portfolio to benefit from the growing dividend income stream while also alleviating the need to sell these more volatile equity investments at inopportune times.

Best Practices

A structured process for converting hard-earned retirement savings into a monthly spending amount should be attractive to the majority of baby-boomers looking to retain control of their assets in retirement. Three to five years before your planned retirement date, begin investing in a well managed globally diversified portfolio of high and growing dividend stocks.

One of the best ways to increase the potential for a higher dividend income stream at the time of retirement is to get a head start.


Reinvest the growing dividend income that's generated before the retirement begins, thereby buying more shares and increasing the level of dividend income available when retirement distributions finally do begin. And remember to revisit the retirement plan annually with your financial advisor.

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

 --------------------------------------------------------------------------------------------------

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

Investments in stocks and bonds are not FDIC insured, nor are they deposits of or guaranteed by a bank or any other entity.

Investments in a money market are not FDIC insured, nor are they deposits of or guaranteed by a bank or any other entity. Although a money market fund seeks to preserve the value of your investment at $1.00 per share, it is possible to lose money by investing in a money market fund.

Investing outside the United States, especially in emerging markets, entails special risks, such as currency fluctuations, illiquidity, and volatility.

Diversification does not assure or guarantee better performance and cannot eliminate the risk of investment losses.

ROAD OF RETIREMENT INCOME Series | PART 6 of 7

Use an active investment
management team that chooses
investment opportunities based
upon fundamental research

THE VALUE OF DIVIDENDS IN RETIREMENT
PART 6 of 7 Series:
THE ROAD OF RETIREMENT
The Process of Managing Retirement Income


Over the past eighty-three years, dividends have accounted for approximately 40% of the total return for the S&P 500 Index. The importance of dividends has been an often overlooked part of investing, but will continue to come to the forefront as baby-boomers prepare for retirement and look for high and growing income generating investments.

There are generally two schools of thought regarding how best to fund expenses in retirement. There are many who believe a total return approach is optimal, whereby an asset allocation and total return is targeted for the portfolio and a portion of the retirement assets is sold periodically to cover expenses. While this approach attempts to provide the growth that retirees need to outpace the effects of inflation, they may also be forced to sell assets at an inopportune time.

A cow for her milk. A hen for her eggs,
And a stock, by heck, for her dividends.
An orchard for fruit. Bees for their honey,
And stocks, besides, for their dividends.

                John Burr Williams,
                "Evaluation of the Rule of Present Worth," 1937

The second school of thought follows a high income approach, whereby the portfolio is comprised of high yielding income investments in an attempt to generate sufficient current income to cover expenses. This approach can leave a retiree too heavily exposed to fixed income expenses and the ravages of inflation.

We will explore a third approach, which is a hybrid of the total return and high-income approaches. We will explore how an investment in stocks of companies that provide both high and growing dividend income can benefit a retirement portfolio undergoing the duress of withdrawals. This type of investment strategy can have the potential to provide a growing dividend income stream as well as capital appreciation needed by retirees.

Understanding Yield

When reviewing income generating alternatives, retirees often focus on current yield (the current income divided by the current price). This works well for fixed income investments, which are, essentially, contracts that pay a certain level of income to the bond holder each year and then return the principal amount at maturity. However, for equity investments, where both the income and stock price may appreciate, looking solely at current yield can disguise the growth in the actual dollar amount of the income generated.

Not only can growing dividends help contribute to the retiree's distributions, but the portfolio value may also have the ability to outpace inflation through price appreciation.

Dividend Income in Retirement

For most retirees, developing a growing dividend income stream should be an attractive alternative to the total return or high income approaches described earlier. Having the retirement portfolio generate sufficient income to cover expenses while the portfolio is poised with an opportunity for continued growth should be a goal for every retiree.

Best Practices

Before implementing a dividend grower strategy, there are two improvements that should enhance the portfolio's diversification and selection of attractive dividend opportunities. First, looking for companies around the globe that offer both a high and growing dividend, versus limiting the investment universe to just domestic stocks, may improve results.

Another benefit from using a global approach is the opportunity to improve the portfolio diversification by in by industry sector. In the United States where attractive dividends are typically concentrated in real estate and utilities. Outside the United States, dividend opportunities exist in a multitude of sectors.

The second improvement when implementing this dividend growers strategy would be to use an active investment management team that chooses investment opportunities based upon fundamental research. The decline of dividends for U.S. companies in the S&P 500 Index during 2008-09 has made the headlines recently, and even the Dividend Growers were not immune. It is important to use an active manager who can analyze both a company's willingness and ability to pay a high and growing dividend as a way to try and navigate around some of the dividend declines seen in the broader market.

As the baby boomer generation progresses on the road of retirement, a dividend grower strategy may be prudent addition to their equity portfolios, as part of a core investment strategy. Not only can growing dividends help contribute to the retiree's distributions, but the portfolio value may also have the ability to outpace inflation through price appreciation.

Diversification does not assure or guarantee better performance and cannot eliminate the risk of investment losses.
The performance of any index is not indicative of the performance of any particular investment. Unless otherwise noted, index returns reflect the reinvestment of income dividends and capital gains, if any, but do not reflect fees, brokerage commissions or other expenses of investing. Investors may not make direct investments into any index.


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

FINANCIAL PLANNING TERMS...Bonds

What is a bond?

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.

ROAD OF RETIREMENT INCOME Series | PART 5 of 7

Quickly liquidate assets
into potentially more
favorable investment markets.

BUILDING A CASH FLOW RESERVE LADDER
PART 5 of 7 Series:
THE ROAD OF RETIREMENT
The Process of Managing Retirement Income

One of the challenges that confronts retirees and their advisors is how to prevent having to sell their hard earned retirement assets at the wrong time. 

We have all heard the age old investment adage "Buy Low and Sell High," which tells us to buy assets when they are out of favor but to time the disposition of the assets when the markets are in your favor.

This timing is even more important for retirees since they are liquidating assets to support expenses and not reinvesting. Therefore, one goal for each retiree and their advisor is how to prevent being in a position of having to sell their retirement assets for less than their potential worth.

When structuring a retirement investment portfolio, there are two tenets that can be followed which may help achieve this goal.

• The first is to invest the retirement savings in a well-diversified portfolio that includes cash, fixed income, and equity investments. Preferably, the equity investment allocation should focus on providing a high and growing dividend income stream. 
• The second is to implement a Cash Flow Reserve (CFR) Ladder that can provide monthly income during retirement and can allow the retiree and their advisor the ability to dictate when to sell assets into the market. 

Historically, fixed income and equity assets have had a tendency to be favorably priced at different times in the market, giving the retiree the ability to time the disposition of the retirement assets when it may be most optimal. Using a ladder structure that includes a cash flow reserve for near-term expenses, and both fixed income and equity assets for intermediate and longer-term expenses, is one structure that may help achieve this goal.

The consequences of not being diversified and then forced to sell into a bear market can be significant.
Structuring a Cash Flow Reserve Ladder

A Cash Flow Reserve Ladder is comprised of three "rungs" that strive to align the least volatile assets to meet the retiree's near-term expenses while giving equity assets the opportunity to grow. This potential growth of the equity investments is intended to offset the eroding effects of inflation on the retirement savings.

Checking Account

On the first of each month, the retiree writes a check from the cash flow reserve and deposits it into the checking account to pay for expenses. This provides a monthly cash flow, which from a behavioral finance perspective is very healthy and allows the retiree to budget for monthly spending accordingly.

Cash Flow Reserve
The cash flow reserve is comprised of two years' worth of spending needs in short-term assets such as a money market account and possibly a limited-term bond fund. The retiree draws a check from the cash flow reserve to deposit into the checking account at the beginning of each month. The relative liquidity of this rung can provide the retiree with the ability to cover two years of spending. Having two years' worth of disposable assets can be key to helping alleviate ill-timed selling into a bear market. At the end of each year, or as the market dictates, the advisor will sell either fixed income or equities from the investment portfolio to refill the cash flow reserve to cover the next two years of expenses.

Investment Portfolio

Fixed income investments have historically performed better when equities are out of favor; therefore, having a balanced portfolio of fixed income and equity investments can help alleviate selling retirement assets at a less opportune time in order to fund retirement spending. In this rung of the ladder, there will typically be enough fixed income investments to pay for an additional four to five years of spending. Also included in this rung is an allocation to equity investments, which have historically been more volatile than fixed income assets but also provide the potential for higher returns over time. While the equity investments may provide the necessary growth to help offset the eroding effects of inflation in retirement, retirees also need to have the flexibility to sell assets when the markets are attractively valuing those investments. The assets from this rung are used to replenish the funds in the cash flow reserve as needed. Again, the goal is to have the flexibility to sell either the equity or the fixed income assets at an opportune time.

Asset Allocation Alternatives
Now that we know the basic structure and operation of a Cash Flow Reserve Ladder, let's discuss just a few of the many ideas for how the retirement assets can be allocated to each rung. The most appropriate investments will vary depending on an individual's needs and investment objectives and should be discussed with a financial advisor.


Retirement Investment Portfolio
CASH FLOW RESERVE LADDER + WELL-DIVERSIFIED RETIREMENT PORTFOLIO

The Cash Flow Reserve Ladder approach allows the retiree and advisor time to liquidate assets into potentially more favorable markets.

Using a high and growing dividend-paying stock fund in this rung may provide the double benefits of a growing dividend stream to contribute to the current income needs of the retiree and the potential growth that is historically associated with equity investments.

Utilizing the structure of a Cash Flow Reserve Ladder with a well-diversified retirement portfolio during the distribution phase of retirement can provide retirees with the necessary foundation and discipline to alleviate selling their retirement assets into a bear market. The cash flow reserve has the ability to provide two years of liquidity, thus allowing expenses to be met readily. The investment portfolio has a mix of intermediate-term fixed income and equities focusing on a high and growing dividend income stream that may be liquidated during opportune times in the market to refill the cash flow reserve. Hopefully, this type of structure can help the retiree stay on plan and meet expenses.

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: www.Thornburg.com

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

 --------------------------------------------------------------------------------------------------

Disclosures:

Following this strategy does not assure or guarantee sustainability of a retirement portfolio, better performance, or protect against investment losses.

Investments in a money market are not FDIC insured, nor are they deposits of or guaranteed by a bank or any other entity. Although a money market fund seeks to preserve the value of your investment at $1.00 per share, it is possible to lose money by investing in a money market fund.

Rebalancing - refilling the money market fund with an allocation from the equity account at the beginning of each year, except in 2009, when the decision was made not to replenish and ride through the turbulent equity and fixed income market. No further rebalancing was necessary.
 
Monthly Cash Flow - monthly check withdrawn from Cash Flow Reserve and assumed placed into checking account at the beginning of each month.

The Consumer Price Index (CPI) measures prices of a fixed basket of goods bought by a typical consumer, including food, transportation, shelter, utilities, clothing, medical care, entertainment and other items. The CPI, published by the Bureau of Labor Statistics in the Department of Labor, is based at 100 in 1982 and is released monthly. It is widely used as a cost-of-living benchmark to adjust Social Security payments and other payment schedules, union contracts and tax brackets. Also known as the cost-of-living index.

The S&P 500 Index is an unmanaged broad measure of the U.S. stock market.

FINANCIAL PLANNING TERMS...Stock

What is stock?

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.

The DFA Micro Cap Portfolio (formerly U.S. 9-10 Small Company Portfolio) is a mutual fund investing in the smallest 5% of the market universe or smaller than the 1,500th largest US company. The DFA U.S. 9-10 Small Company Portfolio targeted companies in the lowest 9th and 10th deciles ranked by market cap. Small company stocks tend to be less liquid and have greater price fluctuations compared to large company stocks.

ROAD OF RETIREMENT INCOME Series | PART 4 of 7

A decrease in the spending
amount during an extended
bear market is vital for improving
the sustainability of a
retirement portfolio.

ENDOWMENT SPENDING POLICY
PART 4 of 7 Series:
THE ROAD OF RETIREMENT
The Process of Managing Retirement Income

Retirees and their advisors should thoughtfully establish a spending plan to balance the desire to maintain a consistent lifestyle with preserving assets for a retirement that could last 30 to 40 years. 

To achieve this balance, a spending policy should be developed to determine what percentage of the retirement savings will be spent initially and how this amount will change over time to reflect the effects of inflation and the performance of the underlying investment portfolio.

A spending amount is defined as the amount of money withdrawn from the retirement savings to cover expenses. All too often they increase this amount annually by a cost of living adjustment as measured by the Consumer Price Index (CPI). This spending policy is referred to as a "lifestyle" policy since it is intended to provide for a consistent standard of living indexed to inflation.

The lifestyle spending policy, although attractive due to its simplicity, is flawed in two important areas.

   1. This policy does not tie the spending level to the performance of the underlying investment portfolio. As a result, the lifestyle policy never requires the retiree to slow or reduce the spending level during an extended bear market.

   2. In periods of high inflation, spending amounts may increase too rapidly, placing a retirement portfolio at risk of premature depletion.

Blended Approach Retirement Portfolio
DECREASE SPENDING DURING AN EXTENDED BEAR MARKET


Another policy is a blended approach, meaning it uses a percentage of the prior year's spending amount together with a percentage based upon the current portfolio value. When blended together; these two values determine the next year's spending amount. Having a percentage of the spending tied to the performance of the portfolio will increase or decrease the spending amount in tandem with the value of the retirement assets. A decrease in the spending amount during an extended bear market is a vital concept for improving the sustainability of a retirement portfolio.

Endowment Policy Retirement Portfolio
DECREASE SPENDING DURING AN EXTENDED BEAR MARKET GRADUALLY


While the endowment policy is designed to lower the spending amount during a bear market, it does so on a gradual basis, thereby allowing the retiree time to adjust spending and stay on plan. Like the university endowments that use a similar policy, it can provide a balance between funding current operations while also preserving assets to cover future operations.

To begin using an endowment policy, retirees and their advisors must decide on two factors: what spending rate is appropriate and what smoothing rule should be applied, described as follows.

• Spending Rate is the percentage of the portfolio value the retiree will use to determine their annual spending.

• Smoothing Rule determines how quickly to increase or reduce the retiree's annual spending amounts based upon the portfolio's investment performance. Selecting a 90/10 smoothing rule assumes that 90% of the spending amount will be based on the prior year's spending and the 10% will be based upon the portfolio's current valuation.

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: www.Thornburg.com

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

 --------------------------------------------------------------------------------------------------

Disclosures:


When using the endowment policy, retirees and their advisors can expect that spending amounts may not keep pace with the cost of living, unless the performance of the underlying investment portfolio grows sufficiently to support it. This slow "tightening of the belt" during bear markets is one of the keys to a sustainable retirement portfolio.


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


Investments carry risks, including possible loss of principal. Investments in equity securities are subject to additional risks, such as greater market fluctuations. Bonds are subject to certain risks, including interest-rate risk, credit risk, and inflation risk. The principal value of bonds will fluctuate relative to changes in interest rates, decreasing when interest rates rise. Investments in stocks and bonds are not FDIC insured, nor are they deposits of or guaranteed by a bank or any other entity.


The performance of any index is not indicative of the performance of any particular investment. Unless otherwise noted, index returns reflect the reinvestment of income dividends and capital gains, if any, but do not reflect fees, brokerage commissions or other expenses of investing. Investors may not make direct investments into any index.


Before investing, carefully consider the investment goals, risks, charges, and expenses. For a prospectus containing this and other information, contact your financial advisor. Read it carefully before investing.

ROAD OF RETIREMENT INCOME Series | PART 3 of 7

Alleviate reverse dollar
cost averaging with a
trusted retirement advisor.

SEQUENCE OF RETURNS &
REVERSE DOLLAR COST AVERAGING
PART 3 of 7 Series:
THE ROAD OF RETIREMENT
The Process of Managing Retirement Income

The effect on a retirement portfolio under the stress of systematic withdrawals can be quite dramatic.

Sequence of returns is simply the order in which returns are realized by a retiree. The consequences of a bad sequence of returns, especially early in retirement, can mean premature depletion of the portfolio.

Retirees need to avoid being in the position of having to sell during inopportune market environments. Being forced to sell at the wrong time can result in "reverse dollar cost averaging".

Reverse Dollar Cost Averaging
PLAN TO ALLEVIATE REVERSE DOLLAR COST AVERAGING

During the pre-retirement or accumulation stage, investors making systematic deposits into an investment portfolio will typically benefit from "dollar cost averaging". This benefit results from nothing more than taking advantage of periodic drops in the price of an investment being systematically purchased. During these periods of share price decline, the investor is getting more shares for the dollars being invested.

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. This is "reverse" dollar cost averaging.

Best Practices for Retirement Income Planning
RETAIN CONTROL OVER YOUR RETIREMENT ASSETS

To help alleviate the effects of the sequence of returns and reverse dollar cost averaging, there are four very simple best practices that can be incorporated into your retirement income planning.

   1. Diversify Your Portfolio by staying invested in cash, fixed income and stocks.

   2. Use a Cash Flow Reserve Ladder when structuring the portfolio to provide allocations to cash and short-term, highly liquid investments, which is optimal. The retiree is not under duress to have to sell.

   3. Develop a Growing Income Stream using high and growing dividend paying stocks for the equity portion of the portfolio can provide a growing income stream that should reduce the dependency on capital appreciation to achieve the retirement plan.

   4. Use a Trusted Financial Advisor who can help thoughtfully develop and manage your retirement income plan. They can provide a line of defense during times of market turbulence.

While there is no way to adequately predict the sequence of returns you will experience during your retirement, you can control the timing of when you sell your assets to support expenses. Using the strategies outlined in this article can provide a framework that will help alleviate the negative effects of reverse dollar cost averaging and should be appropriate for the majority of retirees looking to retain control over their retirement assets.

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: www.Thornburg.com

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

 --------------------------------------------------------------------------------------------------

Disclosures:

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

Investments carry risks, including possible loss of principal. Bonds are subject to certain risks, including interest rate risk, credit risk, and inflation risk. The principal value of bonds will fluctuate relative to changes in interest rates, decreasing when interest rates rise. Investments in equity securities are subject to additional risks, such as greater market fluctuations. Investments in stocks and bonds are not FDIC insured, nor are they deposits of or guaranteed by a bank or any other entity.

The views expressed in this article are subject to change.

Diversification does not assure or guarantee better performance and cannot eliminate the risk of investment losses.