Brenda Vingiello, Sand Hill’s Chief Investment Officer, joined Squawk Box to discuss her thoughts on the latest market trends and market outlook for 2025. This
Retirement: Are You Overlooking a Potentially Powerful Asset?
Published Date : July 24, 2014
Most of us imagine our transition to retirement will be filled with both excitement and relief; however many find the transition to have an unexpected emotional impact. As a way to manage the transition, a growing number of professionals are making a calculated “downshift” into a flexible state of semi-retirement that has both personal and financial benefits. By capitalizing on their accumulated knowledge and experience, new retirees reap the two-fold reward of retaining their ability to contribute, while bolstering and extending the longevity of their retirement portfolio by tapping their earning potential first. This is especially true for those with expertise in professional fields. Today, close to 80% of Americans are working in service industries,* which are less susceptible to productivity declines from aging. Many of those industries need and want access to the knowledge and experience that consultants and part-time professionals can offer. With an increase in life expectancy, this “downshift” appoach has financial and personal benefits that may become the model for future retirees.
In terms of financial sustainability, unless you have a healthy retirement portfolio or pension providing a reliable income, you will need to accumulate, at a minimum based on long-term historical trends, an asset base equivalent to 20 times your annual spending rate if you intend to maintain your lifestyle through retirement. As financial advisors who help our clients navigate such major life transitions, we are noticing, with an increased frequency, that a number of them are turning to an overlooked asset – their own knowledge and experience – to pad their balance sheet. Whether you are just getting started (or restarted!) or closer to retirement, each of us has a “millionaire inside” who has the ability to earn a wage, our greatest asset, and one that has benefits beyond remuneration.
If your retirement horizon is 10 to 15 years away, the thought of delaying full retirement may not seem worth the aggravation. But while part time income will likely only be a fraction of your current income, the benefits extend beyond just a little extra spending money. Delaying the need to completely rely on your investment portfolio also affords you the ability to delay the transition of your portfolio allocation from capital appreciation to capital preservation. The assets that would have been liquidated and consumed over the semi-retirement period will have the opportunity to grow and compound, building a buffer to guard against the unknowns of your investment portfolio, such as market volatility, higher inflation and taxes. The additional earned income could also allow you to delay Social Security retirement benefits to age 70, giving you, under current law, an automatic 8% per year annual increase for each year delayed past your full retirement age (32% total increase from age 66 to age 70). For those who may not have worked enough to accumulate the credits necessary to qualify for full retirement benefits, extending your earning years will help you qualify or draw closer to the full Social Security income payout.
The gradual shift from full employment to full retirement, in addition to providing a larger financial cushion, can also serve to ease the emotional transition to retirement while offering an enjoyable social outlet. Given the increase in life expectancy and challenge of building adequate savings, future generations will be wise to follow the lead of these income earning retirement pioneers and utilize their accumulated human capital assets before spending from their portfolios.
* www.bls.gov/emp/ep_table_201.htm, United States Department of Labor, Bureau of Labor Statistics, “Employment by Major Industry Sector”
Articles and Commentary
Information provided in written articles are for informational purposes only and should not be considered investment advice. There is a risk of loss from investments in securities, including the risk of loss of principal. The information contained herein reflects Sand Hill Global Advisors' (“SHGA”) views as of the date of publication. Such views are subject to change at any time without notice due to changes in market or economic conditions and may not necessarily come to pass. SHGA does not provide tax or legal advice. To the extent that any material herein concerns tax or legal matters, such information is not intended to be solely relied upon nor used for the purpose of making tax and/or legal decisions without first seeking independent advice from a tax and/or legal professional. SHGA has obtained the information provided herein from various third party sources believed to be reliable but such information is not guaranteed. Certain links in this site connect to other websites maintained by third parties over whom SHGA has no control. SHGA makes no representations as to the accuracy or any other aspect of information contained in other Web Sites. Any forward looking statements or forecasts are based on assumptions and actual results are expected to vary from any such statements or forecasts. No reliance should be placed on any such statements or forecasts when making any investment decision. SHGA is not responsible for the consequences of any decisions or actions taken as a result of information provided in this presentation and does not warrant or guarantee the accuracy or completeness of this information. No part of this material may be (i) copied, photocopied, or duplicated in any form, by any means, or (ii) redistributed without the prior written consent of SHGA.
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All video presentations discuss certain investment products and/or securities and are being provided for informational purposes only, and should not be considered, and is not, investment, financial planning, tax or legal advice; nor is it a recommendation to buy or sell any securities. Investing in securities involves varying degrees of risk, and there can be no assurance that any specific investment will be profitable or suitable for a particular client’s financial situation or risk tolerance. Past performance is not a guarantee of future returns. Individual performance results will vary. The opinions expressed in the video reflect Sand Hill Global Advisor’s (“SHGA”) or Brenda Vingiello’s (as applicable) views as of the date of the video. Such views are subject to change at any point without notice. Any comments, opinions, or recommendations made by any host or other guest not affiliated with SHGA in this video do not necessarily reflect the views of SHGA, and non-SHGA persons appearing in this video do not fall under the supervisory purview of SHGA. You should not treat any opinion expressed by SHGA or Ms. Vingiello as a specific inducement to make a particular investment or follow a particular strategy, but only as an expression of general opinion. Nothing presented herein is or is intended to constitute investment advice, and no investment decision should be made based solely on any information provided on this video. There is a risk of loss from an investment in securities, including the risk of loss of principal. Neither SHGA nor Ms. Vingiello guarantees any specific outcome or profit. Any forward-looking statements or forecasts contained in the video are based on assumptions and actual results may vary from any such statements or forecasts. SHGA or one of its employees may have a position in the securities discussed and may purchase or sell such securities from time to time. Some of the information in this video has been obtained from third party sources. While SHGA believes such third-party information is reliable, SHGA does not guarantee its accuracy, timeliness or completeness. SHGA encourages you to consult with a professional financial advisor prior to making any investment decision.
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