The retirement challenge: will you sink or swim?

Joking about retiring at 110 or joking about never retiring at all seems to be all the rage this year. Given the economic conditions there’s no wonder why. However…behind the laughter millions of us are quietly trying to figure out how to get that nest egg back on track and take greater control of our financial future. Frank Armstrong III is a fee-only registered investment advisor with more than thirty-years experience and several successful books to his name. Frank’s “The Informed Investor” was cited by Business Week as one of the best business books of the year. His new book written with Jason Doss, “The Retirement Challenge: Will You Sink or Swim?”, delivers 48 quick and practical lessons as well as access to many easy online calculators.

Frank Armstrong, welcome to SmartPlanet.

What are the questions we need to be asking when it comes to retirement planning?

The economics are pretty simple:

• How much income will I need?
• How much capital will I need to generate that income?
• Am I on track?
• Am I taking the right amount of risk for my career stage?
• Are my investments properly diversified and economical?

There is a universe of helpful information available to help plan your retirement, including our site, www.sink-swim.com, or professional advisers. But, the one part that you need to do yourself is actually save. If you don’t have enough capital and you can’t save enough to make your goals, the best investment advisor in the world can only confirm that you will be poor.

There’s lot’s of talk that buying and holding mutual funds is no way to create financial success going forward? What do you recommend?

That’s garbage. We had a bad year in 2008. So what? Bad years are part of the investment process. Most folks that tried to market time ended up shooting themselves in the foot. Using discipline, taking the right amount of risk, properly diversifying around the attractive parts of the world economy and controlling costs are the trick to riding out the inevitable ups and downs of the market.

How do we make the most of the retirement plan options available to us and how can we get more control?

Many 401(k) plans are so poorly designed and so expensive that you might be better off not participating beyond capturing the match. You will need to do a little research on your plan, but as a rule of thumb, if the total plan expenses exceed 1.5%, shy away.

There are many alternatives to a crummy 401(k): IRA’s, Spousal IRA’s, or tax efficient brokerage accounts may be far better alternatives. You have absolute control over the investment policy, asset allocation, cost of the funds, and tax implications.

But, don’t let a crummy 401(k) plan become an excuse not to save. The best thing about a 401(k) may be the forced saving element. It’s relatively painless to save a little each paycheck in the plan. If you don’t use your 401(k), make sure you actually save somewhere else.

How much time should we be spending each month working on our retirement investment plan?

Not very much. It’s best to set up an “autopilot” saving approach where the deductions are made every paycheck, the asset allocation is fixed, and only annual re-balancing is required. That shouldn’t take more than a few minutes a year. Of course, you should check once in a while to see if you are on track. But, constant fiddling with the account is highly unlikely to improve the results, and the last thing you want to do is chase the top performers and dump the losers. Stay the course with an appropriate asset allocation plan for best results. In the end, that’s the path that offers the highest probability of success.

You teach people how to “Do-it-Yourself”. Do we need advisers at any point? If so…when?

The more you know, the better decisions you will make, even when it comes to hiring an advisor. Some people won’t or can’t do it themselves. They recognize that they don’t have the discipline, knowledge, time, expertise or tools to do the job right. The stakes are high. A bad and/or emotional decision can derail your retirement, and in real life there is no rewind button. You only get to play the game once.

Most of our clients are pretty savvy. But, they chose to delegate their investment planning and execution to a trusted professional so that they can do things that they consider add value to their lives like practicing their profession, taking time with their family, or volunteering in the community.

What are the 4 things I can do today to get my retirement planning in better shape?

1. Learn about your company plan, if any.
2. Get a savings goal that will meet your objectives.
3. Actually save that amount.
4. Invest it economically; tax efficiently, effectively and at the right level of risk.

What kind of benefits can the reader of your book expect?

• How does my retirement plan work?
• Is it worth investing in?
• What are the alternatives to a crummy plan?
• How much will I need to retire?
• How much should I be saving?
• How much risk should I take to reach my goals, and how do I control that risk?
• What should be my end game strategy?
• How can I make my nest egg last forever?

Thanks Frank!

Learn more about Frank's Company, Investor Solutions.
Learn more about "The Retirement Challenge."
Learn more about Frank's other new book, "Save Your Retirement."