Have a financial plan, experts advise

Seniors should think about goals and take a realistic look at themselves.


If you're getting motion sickness from the ups and downs in the financial markets, you're not alone. While everyone's situation and risk tolerance are different, local experts encourage putting together a plan.

At Baker Boyer Bank, Chris Avey, director of Investor Services, encouraged seniors to think about goals and take a realistic look at themselves. He said, "Reevaluate your situation at a minimum of yearly. Decide what the money is earmarked for -- putting together a plan can be simple."

"With my clients, the concerns tend to be more political, like 'the country's going to hell in a handbasket,'"

Some are in fear and feeling overwhelmed. "Many of these things you can't address directly. So let's focus on what you can control. Look out the window. You feel the world is about to teeter off the edge, but look outside right now, people are still out there, talking to each other." Since nothing is visibly collapsing at this moment, Avey suggested taking a step back and looking at the reality of the situation right now. In a panic people tend to have an unrealistic fear of looking at their situation.

"We want a guarantee but guarantees are not great right now. They tend to over compensate for risk." In fleeing other risk, you can keep too much in cash and run into inflation risk, where your money loses buying power.

"For the most part, the people I work with are kind of staying put. The time to address the stock market is before it crashes. We have enough of our client's assets in defensive positions, such as traditional bonds, bond mutual funds and direct real estate, commodities and fixed income holdings. Guaranteed fixed income holdings are more popular right now."

"It's tough to address now, it's easier to calmly look at it. We have been putting people in maturity ladders, one year, two year and three year intervals. To bridge the gap, the strategy is the rates are low, so stay fairly liquid so you can make decisions once the rates return.

In general his advice to seniors would be to have a plan. It's about doing the math, figuring out what amount of money you need for your particular situation, now and for the future.

"In this climate a lot of seniors like municipal bonds, tax free bonds," said Brian Hearden financial adviser with Raymond James Financial Services Banner Bank Investment Services. "If you're in the 35 percent tax bracket, then the tax-free income is 35 percent."

But they're not without risk. "There's been some big defaults, like the WWPPS bonds and Orange County. But the default rates are very low historically. Seniors tend to like the relative safety. A lot of municipalities are in financial difficulties and now for the first time you have to keep an eye on these," he said. These investments are no longer something you can just put your money in and forget about. "They're not used to having to watch them. When they bought the bonds they were rated AA and they thought they'd stay there forever. But we're not in that climate anymore. But not all municipalities are struggling."

"There are advantages and disadvantages to every investment," he said. Diversification may help balance that risk. According to Hearden, for example CDs, are safe and liquid. "The FDIC coverage can and still does apply," he said. And he's confident the FDIC will continue to back up its promises. The disadvantages to holding cash in today's market is not just the low interest rate but the tax inefficiency and price inflation.

"It's the same thing with having cash in the mattress, you're losing purchasing power." In addition to the erosion of your buying power, the investment's income is fully taxable. But many seniors are reluctant to take on the risk of the stock market for their investments. So they often turn to the bond market.

"To many seniors, fixed income securities, bonds, means a 'nothing to do with the stock market' investment," Hearden said.

"Seniors have traditionally liked utility bonds. These bonds had a high credit rating, AAA. Bonds offered some comfort because they were insured. However, they are insured by AMBAC. Those are insured but the insurance company is unable to pay any claims. Now the bonds are BBB. They're still insured but the insurer can't rub two nickels together."

Financial Adviser Scott Krivoshein, owner of Krivoshein Financial, added that many of his senior clients are also concerned with the CD rates so low. He also often suggests insured, tax free bonds for seniors. "These bonds are insured, AAA rated and pay a three to four percent yield and are tax free."

"Sure there's some risk," he said. According to Krivoshein, it's always a balance between risk and return.

Seniors are living much longer, medical care has improved the chances of living to 100 and beyond, according to Krivoshein. "You might retire at 62 and realistically have 30 years of retirement. You may have more years in retirement than you did in the workplace." So your money needs to last as long as you do.

He suggested seniors find a good financial advisor. Because every client is different, there's no one solution that fits everyone's situation. Some factors include: the amount of cash on hand, the individual's debts and their health. According to Krivoshein, talking with the advisor at least once a year will help you to remain current. It's important to discuss what hopes you have and desires for the future, as well as worries.

According to Krivoshein, diversification is key to any strategy. "I'm a big fan of diversity. I don't have a crystal ball, I don't know which is going to do well."

Seniors are conservative, they've seen worse times than these and they're cautious. "They've been through the Depression," Krivoshein said.

Karlene Ponti can be reached by calling 509-526-8324 or by e-mail at karleneponti@wwub.com.

Investor Services Baker Boyer Bank


Krivoshein Financial


Brian Hearden, financial adviser

Banner Bank Investor Services

Raymond James Financial Services



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