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The televised SEC Seniors (sic) Summit III was scheduled to start at 10:00 a.m., but actually began at 10:26. The morning session was for investors, while the afternoon session was for financial institutions.
The Motley Fool discussed the six steps of managing income. For questions, the speaker can be reached at email@example.com. Step 1 is to choose the right withdrawal rate over the 30 years or so of retirement. For most people, this is 4% of net assets the first year (say, $40,000 on $1M of investments). Raise this amount each year by the inflation rate (with 5% inflation, the second year drawdown would be $42,000). Step 2 is to diversify. The speaker likes diversification over 12 asset classes, although he did not name more than stocks, bonds, and TIPS. Step 3 is to have an income cushion. The cushion should be cash equal to 5 years of unfunded expenditures (say, $250,000 of cash if annual expenses are $70,000 but Social Security is paying $20,000/year of this in annuities). Step 4 is asset location. The speaker says a person can earn the equivalent of an extra 15% per year by the correct placement of funds in both tax-advantaged retirement accounts and capital-gain-advantaged investment accounts. Step 5 is to be smart on withdrawals. One way is to liquidate taxable accounts first, then retirement accounts, then Roth accounts. However, if one wants to leave the assets to heirs, this order might be reversed. Rebalancing the accounts annually is good (say, keep x% of assets in midcap mutual funds and adjust the Dec 31 amounts back to x% each year). Step 6 is to monitor costs and performance. The speakerclearly prefers index funds (with, say, a 0.2% fee/year) over managed mutual funds (wit, say, a 1.4% fee to the mutual fund and another 1% to the wealth manager).
The second session was How to Stay Healthy, Wealthy, and Wise.
The third session involved risky behavior. One of the biggest risks for making unprofitable investments is said to be making these investments on one's own, without consulting a trusted professional advisor. Reciprocity is the act of accepting a free lunch from an unknown investment advisor; it triples the likelihood that one will purchase an investment from the host. An investor should always ask a host whether the host is licensed and whether the product being sold is regulated. If neither licensed nor regulated, this should be a red flag for the investor. More information about regulated investments is available at www.saveandinvest.org or 1-800-289-9999. AARP is encouraging its members to attend free-lunch events, then mail in all notes, invitations, and literature from the events so that AARP can forward the facts to the SEC.
The afternoon sessions concerned the financial industry rather than individual investors. The first topic was unlicensed professionals selling unregulated products. During the opening remarks, one of the panelists, an unlicensed medical professional, perhaps wanted to tease his fellow panelists or his audience. He stated that recent increases in human lifespans are due to increased use of Lipitor. No one on the panel, including the SEC Chairman, challenged the man's credentials for making such an outrageous statement, nor did they ask the man if he were regulated by any drug agency or if he had any financial connection with Pfizer.