John J. Grande, CFP

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Tapping your investment portfolio for income during retirement requires a balance between withdrawing too much-and running the risk of depleting your principal-and not withdrawing enough to maintain a comfortable, affordable standard of living that can keep pace with inflation. 

In determining how much money to withdraw from your retirement funds, you need to establish: 

However, while expenses for items such as travel and entertainment may lessen during the later retirement years, health-related costs could increase faster than the general inflation rate. Your financial advisor can assist you in modeling these varying lifestyle expenses throughout your retirement and keep you on track in managing your retirement resources. 

A typical rule of thumb suggests spending a "fixed real" amount equal to a designated portion of your wealth at retirement, keeping the balance invested in a mix of stocks and bonds. The appropriate withdrawal rate is determined by the amount of income you need during your retirement years less income from other sources. 

The rate should be calculated with a number of factors in mind, including the assets you currently own-and the potential impact of inflation on those assets. 

You also should consider the state of your health, the expected volatility of your investments, and, of course, the financial legacy you plan to leave your heirs. 

In most cases, holders of qualified retirement plans must make a minimum withdrawal each year beginning at age 701/2. Your financial advisor can assist you with calculating your required minimum distributions from your qualified retirement accounts each year. 

Your financial advisor has the tools and resources necessary to assist you in addressing many of the challenges that retirees face. 

John J. Grande, CFP®, Traudy F. Grande, CFP®, and John S. Grande, CFP® 

. John J. Grande, CFP®, and Traudy F. Grande, CFP®, are owners and principals of Grande Financial Services Inc. and registered principals of Raymond James Financial Services Inc., member FINRA/SIPC. 

Their son, John S. Grande, CFP®, has been in business with them for more than a decade. He has a degree in finance from Lehigh University, Bethlehem, PA. 

The Grandes lecture at the Johns Hopkins University School of Medicine, and they advise ophthalmologists across the country on a diverse range of investment and financial matters. Readers may submit their financial questions to them at 800/722-1258 or 


. Readers also may access the Grandes' newsletters at 

Articles

Whether you're in or near retirement, keeping a watchful eye on your spending can be pivotal in determining whether your funds will last at least as long as you do.

Establish realistic retirement income

 The companies and exchange-traded funds discussed herein are for illustrative purpose only and not a recommendation for the purchase of those specific securities.

-John J. Grande, CFP®, Traudy F. Grande, CFP®, and John S. Grande, CFP®

Q What is an exchange-traded fund (ETF)? Why would I use one?

Like closed-end funds, ETFs can be traded on a secondary market and thus have a market price that may be higher or lower than their net asset value (NAV). The NAV is the total value of a fund's assets less the liabilities. If the ETF shares trade at a price above their NAV, they are said to be trading at a premium. 

Conversely, if they are trading at a price below their NAV, they are said to be trading at a discount. For example, if the NAV of the fund is $50 and the fund is selling at $55 on the exchange, the fund is said to be trading at 10% premium to the NAV. If the fund is selling at $45, it is said to be trading at a 10% discount to the NAV. 

Typically, ETFs track stock indexes and are offered through a variety of well-known companies, including Barclays, Dow Jones, Merrill Lynch, Standard & Poor's (S&P), and Vanguard. 

The oldest and biggest ETF tracks the S&P 500 index. It's called SPDRs, short for Standard & Poor's Depository Receipts and is pronounced "spiders." It began trading on the American Stock Exchange under the symbol SPY. 

Since ETFs track specific indexes, their price fluctuates with the performance of the index. 

Innovative offerings in equities, fixed income, and emerging markets have made ETFs one the fastest-growing investment vehicles in the financial industry. ETFs are a popular investment choice among both active and passive investors because of their flexibility to trade like a stock and instant diversification in the form of an index fund. Keep in mind that diversification does not eliminate the risk of investment losses. 

Understand exchange-traded funds and why you may want one.

Finances: Discover exchange-traded funds

Q I recently read in a study that over a 10-year period, the average investor lagged almost 11% behind the actual performance of the same mutual fund. How can this be? 

Rational minds can act irrationally							

When the images are presented in this new format, our perception changes. This shift tells us that we cannot rely on our perceptions, intuitions, or gut feelings alone. It also has been shown that investors tend to rely on their perceptions, making the same investing mistakes over and over. Fortunately, studies by some of the leading academics in the field of behavioral finance have shown that investors' irrational behavior tends to be systematic. The point here is that illusions must be identified early and counteracted in an appropriate manner. 			

The efficient-market theory states that security prices efficiently incorporate all public information. Supporters of the efficient-market theory contend that if information about a particular security is publicly available to one investor, then it is available to all investors. Consequently, the price of a security reflects its true investment value at all times.  

Asset allocation relies on the fact that markets are efficient and that investors behave in rational, predictable ways. Investors do not always behave rationally, however and, rational behavior is not as widespread as one may believe. In fact, investors actually can end up being their own worst enemies. Investment decisions are influenced by several emotional and psychological factors, and this fact has given rise to the field of behavioral finance.  

When an investor suffers from overconfidence, he or she rates himself or herself as above average when making investment decisions. Being overconfident often leads to overestimating the probability of good outcomes. Overconfidence can cause people to focus primarily on the upside of investments while underestimating the probability of poor outcomes for events over which they have no control.  

In "Behaving Badly," a 2006 study conducted by Dresdner Kleinwort Wasserstein Securities Limited, 300 professional fund managers were presented with several questions, and one related to overconfidence. In an attempt to see just how over-optimistic fund managers were, they were asked: "Are you above average at your job?" Some 74% of the sample reported themselves to be above average at their jobs. Many wrote comments along the lines of "I know everyone says they are, but I really am!" Of the remaining 26%, most thought they were average, but very few, if any, said they were below average.  

Getting in and out of a mutual fund at the wrong time is generally accounted for by the psychology behind an investor's behavior.

Mutual funds: Seeing is not believing

This crisis will pass, but so will the gift of it to waking-up to live the rest of your lives in gratitude and appreciation for each breath you take.

Unexpectedly-suddenly-there may come like a thief in the night, a seemingly, overwhelming and insurmountable crisis that threatens our very existence.

However, if examined carefully, this crisis can actually be a doorway to peace. At the time of writing this article-and I highly doubt things have changed before publication-our world as we have known it has been turned upside down, and what security we thought we once had, we are suddenly aware was only an illusion.

In a matter of weeks, our financial security, our businesses, our way of life, our world as we knew it, and even our very lives have become threatened.
	
	My profession over the past several decades, blessedly, has been to council ophthalmologists around the country in planning for a successful financial life, and a carefree retirement.

My partners and I continue to work with doctors in all phases of their lives, from accumulating assets to withdrawing assets in retirement. Our job was always to plan carefully and prudently to achieve their goals with minimum risk. But, and perhaps because of the very nature of our business, we noticed that there was never a correlation between how much money a person had and how happy they were. This mystery compelled me to search out why this occurred.
	
	So, this article is about our current crisis and happiness, or freedom from the terror of one’s own punishing thoughts.
	
	I have seen it all, or at least I thought I had. But this current financial/health outlier-black swan event is one in which no one can give early predictions as to the impact on our world or domestic economies, or the very survival of our healthcare system. Our family’s and our very own mortality are actually called into question. From nowhere we are now faced with unprecedented challenges. And in many cases overwhelming fear of the unknown.
	
	First, on the financial side, if you are in the accumulation phase of your career, nothing has changed. Unless this is the end of our financial systems as we have always known them, and that is highly unlikely, the companies you have invested in and loved are now at fire-sale prices, provided you are going to hold them long-term. Just keep saving and investing as you have been.
	
	Uncertainty is the last thing Wall Street wants to see. Uncertainty is the last thing any of us wants to see, especially when it comes to our health or financial security. We have, as a team at Grande Financial Services, witnessed more than three decades of ups and downs in the market, and just about every geo-political event imaginable.
	
	This most recent downturn, as severe as it has been, is something that we have not seen before. It is disconcerting, to say the least, to watch your investment holdings lose up to 30% of their value in one week.

However, and yes there is a however, even though we have not seen exactly this particular rapid spiral into a bear market, and a possible recession, we know how it has turned out in the past, which has always been to come back and advance further. This should be no different as the banks are strong and the government is giving its full accommodation to both the virus and the financial markets.
	
	I have witnessed firsthand over the years that fear is the most dangerous emotion when it comes to investing. The feeling of watching your portfolio grow each year is pleasant and rewarding, but does not match the intensity and pain of watching your investments lose value. Presuming that you had a good financial plan laid out, and your exposure to stocks was not more than the absolute minimum risk you had to assume to achieve your financial goals, just stay the course.

You must remember that your stock portfolio represents a long-term strategy, and that you are not to panic and sell out because of fear. Selling out after a large decline in the markets is turning a paper loss into a real loss.

Then comes the problem of getting back before the markets turn upward, possibly as fast as they went down. This is the age of computer trading and things happen very fast, as we have just experienced. This particular downturn may well be the fastest and most severe to date. It gave few investors a chance to trim down their holdings as the markets were down considerably in just one week’s time.
	
	For those ready to retire or in retirement now, it may be a good time to divide your expenses between essential and discretionary. Essentials must be paid, e.g. food, mortgages, property taxes, insurances, gas and electric, cars, etc. The discretionary side would be anything not essential, such as eating out, gifts, travel, etc. When you calculate what the essential and discretionary costs are, you can divide each number by your investment net-worth, find what the percentage is, and stick to a budget that does not exceed this percentage.

As your portfolio goes down or up and, if the percentage is higher than planned, you may want to cut back on your discretionary spending until the portfolio has recovered again. This will preserve principal and the danger of creating a vicious cycle of depleting your savings when your withdrawal percentage keeps increasing as the portfolio goes down. There are many more strategies to be considered, which will be covered in future articles.

Some examples would be tax-harvesting losses by switching positions on the same day. Thereby, not missing a market upturn if one would occur, but locking in future loss carry-forwards. Also, repositioning portfolios that previously had too much gain to consider a move because of capital gains. There are actually many positive moves one could consider while we are experiencing these depressed markets. Of course, it is imperative that you consult with a tax professional before making these changes.

There is not enough space in this article to fully address the opportunity that presents itself for all of us, but I will give it a try. This shock to our daily lives, in my opinion, is a wake-up call.

It is a time to re-evaluate the reality of the mechanical lives most of us have been guilty of living. We plan and do and do so much every day that most of us miss being in the sacred moments of being alive. Please excuse me for philosophizing, but the moment seems to call for it. I have watched it my whole career.

Professionals on a treadmill, always looking into the future for when things will really be good, trying to turn ”what is” into “what should be”-thereby missing what joy is right in front of them. It is time to come down from our cluttered minds into our hearts and remember the innocence of our childhood. We are more than our money, our professional achievements, our pride. If we look deeper, and this terrible crisis is a perfect opportunity to do so, you will find a peace within you.

Instead of trying to control the future, which we now see we cannot, we can become more grounded in the preciousness of each moment. Just take a look at the fragility of life and what we thought was our security. What have we been missing in an attempt to achieve this illusion?

I am not saying not to plan. I am saying to be fully alive while planning. Remember the love we are as human beings. Remember the kindness and compassion that we innately are. There is no such thing as security no matter how much planning we do. There is only now. I urge you, my friends of many decades, to embrace this opportunity to re-evaluate your priorities.

Yes, I said, "opportunity." Don’t miss it! This crisis will pass, but so will the gift of it to waking-up to live the rest of your lives in gratitude and appreciation for each breath you take.

Perhaps this sounds like strange advice from a wealth counselor, but I have always loved my profession and my clients and only want them to be whole in life. Integrating their knowledge, intelligence and success without needless suffering. I believe this is a wake-up call. May everyone stay safe.

John J., John S., and Traudy F. Grande, CFPs, are co-editors of the "Money Matters" column in 

. They are owners and principals of Grande Financial Services Inc., Oakhurst, NJ (

). The Grandes advise doctors across the country on a diverse range of investment and financial matters. Readers may submit their financial questions to them at john.s.grande@grandefs.com or call 800/722-1258.

The views depicted in this material are for information purposes only and should not be considered specific advice or recommendations for any individual. All investing involves risk, including the potential for loss. Past performance is not indicative of future results. No investment strategy can ensure a profit or protect against loss in a declining market.

John J. Grande, John S. Grande, and Traudy Grande are Registered Representatives offering securities through Cetera Advisor Networks LLC, Member FINRA/SIPC. Advisory services offered through Summit Financial Group, Inc., a registered investment adviser. Summit and Cetera are related and are under separate ownership from any other named entity. Registered Branch: 257 Monmouth Rd, Oakhurst, NJ 07755. Phone: 800/722-1258. Website: 

COVID-19 ‘wake-up’ call: Unexpected advice for happiness from a wealth counselor

This realization of no longer being able to rely on earned income is compounded by numerous other risks an individual will face leading up to and during retirement. 

Given the uncertainty of world economies and the increased volatility in world stocks and bonds, 

are near the top of the concern list. The impact of increased volatility is amplified as one approaches and then enters retirement. It is difficult enough for someone with a long-time horizon to see his or her savings decrease in market downturns, but it can be outright devastating for an individual close to or in retirement. The sustainability of his or her portfolio could be in question depending on the degree and timing of negative market returns. 

Couple the aforementioned risks with unknown risks, such as premature death of a spouse, long-term care needs, and disability, and it is no wonder individuals have concerns about the prospects of their retirement years. 

The reliable income can be counted on and should support the majority of your Needs. Using our example from above, the Income Needs are $60,000 and the Reliable Income is $45,000. There is a shortfall of $15,000. 

The goal is to have as much of your income needs satisfied with reliable income as possible. 

This way, you are not relying on market performance and investment assets to meet your most essential retirement expenses. Since this is not always possible, any shortfall will need to be made up using income derived from investments. 

When meeting with pre-retirees as well as current retirees, one of the most common areas of concern, apprehension, and (at times) outright fear, is whether they will run out of money during retirement.

Piecing together your retirement puzzle

The folk music trio Peter, Paul, and Mary sang a song back in the '60s, "The Times They Are A- Changin." If you don't believe they are, and you are aged more than 40 years, consider the technologic  prowess that young people have today. My 14-yearold grandson, Matthew (whom I consider a  genius-although I may be biased), is so far ahead of me technologically that often I'm not even sure I  know what he's talking about. He has certainly grounded me in the technologic chasm that exists  between me and his generation. (In my defense, however, his college plans do include MIT.)  

So, what does this have to do with your future financial independence? Everything! The rules of  investing have changed, and the old approach of "buy and hold" may not be enough to achieve goals.  Though there's still a place for this time-tested method within your portfolio, our experience indicates that it must be complemented by and coordinated with other more sophisticated investment strategies.  If you are frustrated and even stressed by watching your portfolio zig-zag for the past 10 years,  reaching new highs and then back to new lows and winding up back where you started, then it may be  time to look at an updated approach that's potentially better suited for the times.  

Profound geopolitical, economic, and technologic shifts are reshaping the world's industries, governments, and consumers.  Have you noticed the rising correlation between world events and your  portfolio statement values? One example of a geopolitical shift is that in 1960 the United States  represented 39% of global gross domestic product, but in 2009 it accounted for just 24%. (Source:  Central Park Group) 

The average investor is struggling and needs to find ways to adapt to the pace and complexity of these  accelerating changes. Many individual investor portfolios reflect conventional stock and bond  allocations, heavily weighted toward long-only portfolios of publicly traded securities with limited (if  any) exposure to alternative investments: commodities, currencies, hedge funds, structured products,  private equity, and opportunistic credit funds. Most investors' returns tend to be measured on a relative  basis against a narrow group of benchmarks.  

But, did you know that today there are investment managers with global operations that trade 24/7 all around the world? And, they do this at lightning  speed in markets so complex that the average individual investor could not hope to compete. Unprecedented global change seems to be the catalyst  for opportunities that investors must begin to position their portfolios to capitalize on po- tentially in  order to achieve their goals in this new world of investing. 

Based on our experience over the years, we believe the rules of investing and planning for retirement that one can feel confident in have changed forever.