Click on image to read the e-Brochure.
Constructing a portfolio this way may help you ride through a bear market in retirement.
Provided by Jeffrey C. Hamm
Stocks sometimes retreat. That reality can be overlooked in a long bull market. Bear markets do appear, and a deep downturn could force you to sell securities in retirement, so you can pay for necessary expenses.
Right now, you might have too much money in stocks. Years of steady gains may have unbalanced your portfolio and heightened your risk exposure. If you are 60 or older, that constitutes a warning sign, especially given this bull market’s age. What would a downturn do to your retirement fund and your retirement income?
If you are wondering how to respond to this risk, consider the bucket approach to retirement income planning.
The bucket approach may help you through different market cycles in retirement. This investing strategy, credited to a Florida financial planner named Harold Evensky, has simple and complex variations. It assigns fixed-income and equity investments to different “buckets” with the goal of providing sufficient cash flow to retirees during different stages of their “second acts.”1,2
The simplest version involves just two buckets. One holds the equivalent of 1-5 years of cash reserves (in deposit accounts and/or fixed-income investments), and the other holds everything else in the investment portfolio. When you need to fund your expenses, you turn to the cash and the fixed-income vehicles and leave equities untouched. Rebalancing your portfolio (that is, selling investments in an overweighted asset class) lets you increase the size of your cash bucket.1,2
Other versions of the bucket approach have longer time horizons. In one variation designed to be used for at least 25 years, a cash reserve bucket is created to fund the first two years of retirement, its size approximating 10% of the portfolio; the cash comes from FDIC-insured sources or Treasuries. A second bucket, intended to generate somewhat greater income, is planned for the rest of the first decade of retirement; this bucket is filled with longer-duration, fixed-income investments and comprises about 35% of the portfolio. The third bucket (the other 55%) is designed for the years afterward and contains a sizable equities position; the goal here is to realize some growth and compounding for a decade, then tap into that bucket for income.
In glimpsing the details of the bucket approach, you can also see the big picture. Suppose a bear market occurs just as you retire. Since your retirement income strategy pulls cash from deposit accounts and fixed-income investments first, your equity positions have time to rebound. You have a chance to avoid selling low (and selling off part of your retirement fund).
Is the bucket approach foolproof? No, but no investing strategy is. In the worst-case scenario, you drain 100% of the cash bucket(s) and end up with an all-equities portfolio. That is hardly what you want in retirement. Bucket allocations must be carefully calculated, and periodic bucket rebalancing is also needed.
The bucket approach may have both financial and psychological merits. Most retirees use the 4% rule (or something close) when withdrawing income: they take distributions from various accounts and asset classes, perhaps with little regard for tax efficiency. If Wall Street stumbles and their portfolios shrink, they may panic and make moves they will later regret – such as selling low, abandoning stocks or even running toward alternative investments in desperation.
When you use a bucket approach, you first turn to cash and/ or liquid securities for retirement income rather than equities. Psychologically, you know that if a bear market arrives early in your retirement, your equity holdings will have some time to recover. This knowledge is reassuring, and it may dissuade you from impulsive financial decisions.
Ask about the bucket approach today. It could be a great financial strategy to adopt for your retirement.
Jeff Hamm may be reached at 228-474-3427.
This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note – investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.
Securities sold, advisory services offered through CUNA Brokerage Services, Inc. (CBSI), member FINRA/SIPC, a registered broker/dealer and investment advisor. CBSI is under contract with the financial institution to make securities available to members. Not NCUA/NCUSIF/FDIC insured, May Lose Value, No Financial Institution Guarantee. Not a deposit of any financial institution.
1 – seattletimes.com/business/about-to-retire-heres-how-to-cope-with-stock-market-shocks/ [11/25/17]
2 – news.morningstar.com/articlenet/article.aspx?id=839521 [12/13/17]
When you buy a home, it’s important to look beyond the sale price and mortgage payment to set your budget. First-time homebuyers are sometimes caught off guard by overlooked expenses, which can create an uncomfortable finance pinch. Be sure you consider these one-time and ongoing expenses:
- Home Inspection. Before you close on your home, you’ll want to have it thoroughly inspected by a professional. Your lender may even require it. For a few hundred dollars, an inspection can uncover potential trouble such as structural problems or asbestos. If problems are found, you may need to pay another expert to provide an assessment. A good inspector can also tell you what to expect in terms of…
- Home maintenance. Experts recommend setting aside 1 to 3 percent of the home’s purchase price for annual maintenance. You may need to buy lawn care equipment or replace the roof, furnace or water heater.
- Taxes and insurance. Property taxes and homeowners insurance aren’t always included in mortgage payment calculators. Costs vary widely, depending on the value of your home and its location, but taxes and insurance together can easily total a few hundred dollars a month.
- Extra cash at closing. Your lender should give you a detailed estimate of closing costs. But beyond those, you may have to pay additional expenses, such as a prorated portion of property taxes or homeowners association fees that the seller has already paid.
- The move. Whether you hire professional movers for a few thousand dollars or rent a truck, buy boxes and recruit friends to help, moving costs money.
- Settling in. You may have to pay utility connection fees when you move in, plus utility costs may be higher than you were used to as a renter. You’ll probably want to replace the locks on all the doors. And you may need new window coverings, rugs and furniture.
Find the Right Mortgage
The experienced mortgage specialist at Navigator Credit Union can help you understand the true costs of homeownership so you don’t encounter any unpleasant surprises. We’ll help you find the right mortgage for your circumstances and budget. Contact a mortgage professional by calling 228-475-7300 or 800-344-3281, option #5; emailing Mortgage@navigatorcu.org ; or click here.
Memorial Day is coming up. The holiday marks the beginning of summer travel season for many people. According to AAA, more than 41.5 million Americans will travel this Memorial Day weekend. With more people on the road, it’s important to be patient and drive smart.
The Mississippi Department of Transportation has these reminders for motorists:
- Obey all speed limits and signs, especially through work zones.
- Always wear a seat belt.
- Never get behind the wheel under the influence of alcohol or drugs.
- Use your cell phone for emergency situations only.
According to the National Highway Traffic Safety Administration, 94 percent of crashes are caused by human error. One of the most important safety steps drivers can take is simply slowing down and paying attention.
Navigator Credit Union will be closed on Monday, May 28 in observance of Memorial Day. Remember, ’N Touch online and mobile app are available 24/7 to meet Members’ banking needs.
Navigator Credit Union is excited to announce a new and enhanced Visa Credit Card program coming in August, 2016. Navigator’s new Visa Credit Card features heightened security with an EMV chip, online account access, credit card design options, and electronic statement availability. Please continue reading to familiarize yourself with the changes coming to your Visa account as well as the many features and benefits of your new credit card.
Visa Credit Card Features:
- EMV Chip Technology: Your new credit card will have an embedded microprocessor chip that stores and protects your data which increases security and reduces fraud. The EMV chip will be in addition to the standard magnetic strip located on the back of every credit card.
- 24/7 Cardholder Service: Call 844-700-0990 for balance inquiries, payment information, transaction history, statement requests, or to dispute a charge.
- Online Access: View transaction history, pending activity and other account information in real-time from your computer or mobile device. Plus, sign up for customizable email alerts and electronic statements to help monitor your Visa Credit Card account. Visit https://navigatorcu.org for online access.
- Your new credit card will be mailed August 15, 2016. Please allow 7-10 business days for delivery.
- A credit card will be mailed to each cardholder on the account with a new card number and expiration date.
- Secondary cardholders will have a unique card number, CVV number and expiration date for enhanced security.
- Your new Visa Credit Card can be used at any ATM using a Personal Identification Number (or PIN.) A unique PIN can be established during the activation of the card or by calling 24/7 Cardholder Service at 844-700-0990.
- Automatic payments made with your current credit card must be reestablished to avoid any interruption in payment. Contact each vendor receiving automatic payments to inform them of your new card number and expiration date.
- Please refer to a list of frequently asked questions included with this letter. Additional inquiries BEFORE August 29 may call Navigator at 800-344-3281. All inquiries AFTER August 29 may call the 24/7 Cardholder Service department at 844-700-0990.
New uChoose Rewards® Program:
Beginning August 30, 2016, you will have access to a new rewards program for your Navigator Visa Credit Card. uChoose Rewards® will allow you to redeem points on your credit card purchases for use towards shopping, travel, event tickets, gift cards and more. Important information about the transition of the rewards program includes:
- ScoreCard® Rewards will no longer be earned after August 15, 2016.
- ScoreCard® Rewards will be credited to you.
- Your NEW credit card will begin earning uChoose Rewards® points on August 30, 2016.
- To register your card or to monitor and redeem your uChoose Rewards® points, visit www.uchooserewards.com.
We’re proud of our new credit card features and excited to make them available to you. As always, you can count on Navigator Credit Union to remain committed to great service.
Josh Duncan, Chief Lending Officer
FREQUENTLY ASKED QUESTIONS
Why am I receiving a new credit card?
Navigator Credit Union is changing the credit card processor to better serve your credit card needs. This change requires that a new card be issued.
Will my interest rate change as part of this conversion and card issue?
No. Your interest rate and other terms on your account will not change.
Will I have a new PIN number so I can access cash from my credit card?
You will no longer receive a PIN in the mail, and your old PIN will not work with the new card. You can select your unique PIN by calling the number on the activation label and choosing the PIN option.
My existing card does not expire for quite a while; can I continue using my existing card until expiration?
No. Your existing card will not work after August 29, 2016 at 6:45 a.m. EDT. Instructions will come with your new card to ensure it is ready to use on or after August 29, 2016 at 6:45 a.m. EDT.
What is EMV?
EMV stands for Europay, Mastercard® and Visa®. EMV chip technology is becoming the global standard for credit card and debit card payments. This smart chip technology features credit cards with embedded microprocessor chips that store and protect cardholder data. This standard has many names worldwide and may also be referred to as: “chip and signature.”
Will all merchants be able to accept my EMV (chip) credit card?
Yes. Your card will be accepted at all merchant locations. You will insert your new EMV card into the bottom of the chip enabled terminal and follow the instructions. For merchants that are not yet Chip enabled, you can swipe your card just like you do now to complete the transaction.
My spouse and I have Navigator Visa Credit Cards, and I only received one card. Will my spouse receive a card?
Yes. As a security feature, all cards being issued with this conversion will have a unique number and will arrive separately. However, you will continue to receive only one bill, regardless of the number of cards on the account.
What do I do if I have preauthorized or recurring payments that are tied to my existing Navigator Visa Credit Card?
To ensure there is no interruption in recurring or preauthorized payments (such as monthly telephone, electricity, gas bills, insurance, clubs), contact the merchant on or after August 29, 2016.
Will the due date for my credit card payment change?
No. Your due date will stay the same.
Will I need to send my payment to a new location after the conversion?
Yes. The new address will be included on the statement. If you pay this bill through online bill payment, you will need to update the mailing address to P.O. Box 2711, Omaha, NE 68103-2711 on or after August 29, 2016, to ensure that your payment reaches the processor by your due date.
I setup my monthly credit card payment as an automatic ACH transfer, payroll deduction or as a recurring transfer. Do I have to make any changes?
To ensure there is no interruption in automated payments, contact the provider of this service (i.e., another bank or bill pay service) on or after August 29, 2016 to provide your new credit card number and payment address of P.O. Box 2711 Omaha, NE 68103-2711.
Will my previous card history transfer to my new card number so I have access to the information if needed?
Your previous card history will be retained for customer service inquiries. However, you will not be able to access statements/history online as of August 29, 2016, so we recommend you save the statements to your computer or print hard copies before this date.
What is uChoose Rewards®?
uChoose Rewards® is a program that earns you points for using your Navigator Visa Credit Card. All Navigator Visa Credit Cards with rewards are automatically enrolled in the program. You can redeem your points toward anything from our huge online rewards catalog found at www.uchooserewards.com.
Do I need to register my credit card before I can start earning points?
No, you will start earning points the first time you make a transaction with your new credit card. However, you will need to register your card before you will be able to redeem your points. To register your card, visit www.uchooserewards.com and click the Register link.
How do I register my card?
Please visit www.uchooserewards.com starting August 30, 2016. On the right side, you will see “New to UChoose Rewards?” with a Register link. Click Register, and then enter your credit card number. Once your card is authenticated, it will ask to establish your user name and password. Follow the instructions as provided.
How do I start earning points?
Every time you make a purchase with your card, you’ll earn 1 point for every $1.00 you spend. Plus, you can earn additional points by shopping in-store or online with participating retailers.
Where can I earn points?
You earn points everywhere your Visa credit card is accepted. Participating retailers offer additional reward points for purchases made at their stores or online. A list of participating retailers can be found at www.uchooserewards.com.
Where can I view my point activity?
You can access the history of your point activity through www.uchooserewards.com.
When can I redeem points?
It can take up to 40 days for your points to be credited to your account. You must first accumulate 1,500 points before you can redeem points for catalogue items or gift cards. You must earn 2,500 points before you can earn cash back which will show as a credit to your credit card statement. Your points are available to view on www.uchooserewards.com. Here you can keep track of the points you’ve earned, and then shop the online rewards catalog when you’re ready to redeem. A Wish List Tracker is also available to notify you when you’ve earned enough points to redeem a specific item.
Can I share points with family members?
All credit cards within an account automatically earn points together.
How much does it cost to participate?
There’s no cost to participate. Membership in uChoose Rewards® is free as part of your Navigator Visa Credit Card. Visit www.uchooserewards.com to start monitoring your points and browsing our online catalog.