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Financial Planning 101

Videoconference offers sound advice for scholars about planning for retirement and old age

Let’s say a married couple has worked for the samestate university for the past thirty years — the wife in admissionsand the husband in buildings and grounds. They are now ready to retireand want to invest some of their savings in the stock market. What is asafe way to do that?

Another female employee, age fifty, delayed investing in any kindof IRA and now only has social security. Is it too late for her tostart a retirement plan?

These were the types of questions raised by a panel of financialplanning experts who recently participated in a nationalvideoconference targeting higher education personnel.

Titled, “Reaching Your Financial Goals, Tips from America’sExperts,” the videoconference was sponsored by TIAA-CREF in conjunctionwith the College and University Personnel Association (CUPA). Itbrought together moderator, Elizabeth Vargas, an ABC News Correspondentfor 20/20; Peter L. Bernstein, president of a consulting firm toinstitutional investors and corporations, and author of Against theGods: The Remarkable Story of Risk; Elissa Buie, president elect of theInstitute of Certified Financial Planners, and one of the top 250financial advisers in the country, according to Worth magazine; Dr.Martin Leibowitz, TIAA-CREF’s vice chairman and chief investmentofficer; Kay McFarlin, assistant vice president with TIAA-CREF andcounselor to education institutions on pension and group insurancedesign; and Jane Bryant Quinn, one of the nation’s leading commentatorson personal finance.

Financial planning, IRAs, the stock market, and investments are notjust topics that should only concern those nearing retirement,according to the panel. The earlier you start saving, investing, andplanning, the better. One young woman in a film clip said she startedwith her first job saving 3 percent of her salary. The panel agreedthat was a good idea, but advised that the amount should increase overtime with the length of one’s career.

The panel also recommended a diversified portfolio that makes useof IRAs, mutual funds, money markets, certificates of deposit (known inbanking as CDs), stock market investments, and many forms of financialplanning.

As for the recent volatility of the stock market, McFarlin saidpeople should focus on the long term and leave theirstock-market-invested money alone. He suggested that would-be investorslook at the long-term performance of a stock to determine whether ithas a consistent pattern of long-term growth.

And although Leibowitz agreed, he warned, “We see that the market can be a risk. Nothing is a sure thing.”

The key is to have a diversified portfolio so that any high-riskinvestment is money that you can afford to lose, the panel agreed. Theyalso advised that before someone starts investing, they should use afinancial planner to determine what kind of investor they are.

Many people confuse financial planning with investment management, McFarlin pointed out.

“Dealing only with investments is like having a great big tank ofgasoline, and no car and no map to know where you’re headed. Planningis allocating your resources and setting goals. And this does not eventouch on risk management,” she said.

The panel said a big issue for the baby boom generation is theconcern that the current social security system that they now pay intowon’t be there for them at retirement.

“I wouldn’t worry for five minutes that I’m not gonna get my socialsecurity,” Bernstein said. “It’s an obligation of the government and itdoesn’t matter where the money comes from. It will pay the socialsecurity. But that’s not going to be enough to take care of you in oldage,” he added.

In discussing when to retire, McFarlin pointed out that the rightage is different for everyone. And the panel pointed out that thecurrent trend is toward earlier retirement.

But although people are retiring earlier, they are living veryactive lives and that translates to more expensive middle years –which was described as those in their fifties and sixties — and agreater need for more retirement planning and financial management.

Buie pointed out that during the later years of retirement (ageseventy and beyond), there may be increased medical needs and costs,which also should be taken into consideration when planning retirement.

The panel offered three tips to prioritize fund management: haveemergency funds on hand — for a young family or a one-income family,put away four to six months worth of salary; remember that saving moneyis second to your present needs; and get rid of debt.

COPYRIGHT 1998 Cox, Matthews & Associates

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