Synopses & Reviews
A comprehensive guide to lifelong financial planning best practices
Investing for a Lifetime +Website: An Interactive Education in Managing Wealth for the "New Normal" is the comprehensive guide to planning for lifelong financial security. Written by a Wharton Professor for the Private Wealth Management Program, the book provides professionals with the facts they need to serve their clients' best interests. Taking into account the most common concerns clients express, the book details retirement preparation from the perspectives of saving and investing, investment choices, and wealth management. The companion website underscores the concepts presented in the text with lectures, casework, short papers, and more, providing examples and clarification of the methods discussed. The book offers guidance on the "best practices" every financial advisor needs to know when planning for their clients' futures.
One of the smartest things an individual can do is realize just how unstable the world truly is. Globalization induced billions to enter the market with very low interest rates in the 1980s, and countries either promised too much or consumed too much. The result is today's market instability, and the millions of people nearing retirement age with not nearly enough assets. Investing for a Lifetime provides the education that allows advisors to feel confident in their clients' security. Topics include:
- Why retirement requires saving, not just investing savings
- Stretching resources by starting Social Security at the right time
- Tracking investment performance with benchmarks for each class
- Setting savings goals for singles and high-earning couples
The biggest questions about saving for retirement are "how" and "how much." The book provides concrete guidelines to answering both of those questions, as well as planning for retirement spending on an individual basis. Financial professionals want to shape a comfortable future for those who have entrusted it to them, and Investing for a Lifetime provides the facts, techniques, and methods that can make the difference.
Investing for a Lifetime + Website
is about three main themes: savings, spending in retirement, and investing. Professionals will learn that:
- Investing for a lifetime involves saving for retirement rather than just investing those savings.
- A “savings goal” tells an investor how much must be saved by the time of retirement. For example, a married couple that has earned $100,000 per year must save 11.5 times that income to keep their standard of living steady in retirement.
- Investors with higher incomes must save much more because Social Security matters less and less as income rises. So do single men and women because they miss out on Social Security “spousal benefits”.
- By setting a rate of savings high enough to accumulate the required wealth by the time of retirement. That couple making $100k must save 15% of income during their working years to achieve their savings goal.
- Investing for a lifetime also requires careful planning about how much can be spent in retirement.
- Social Security remains a pillar of any retirement plan because benefits keep pace with inflation. Yet over two-thirds of Americans start Social Security early. Too many Americans retire without a clear plan for stretching resources through retirement.
- Investing itself is much easier than saving, although investing has many pitfalls for the unwary.
- Most investments are relatively easy to understand. That’s true of U.S. stocks and bonds, but also true of foreign stocks and real estate.
- The two largest challenges for investors are to choose the right portfolio to begin with and to stick with investment strategies. But investors must also keep track of investment performance using benchmarks for each asset class. These and other “best practices” help to guide investors to make the right investment decisions.
Investing for a Lifetime
is designed to make saving and investing understandable to the investor. Written as a guide through the main investment decisions throughout a lifetime, author Richard C. Marston demonstrates how younger investors can set savings goals, how both younger and older investors can choose investment portfolios to achieve these goals, and how investors can sustain spending once reaching retirement.
Younger and older investors alike should understand savings goals that will provide enough income to sustain spending in retirement. They should devise rates of saving that allow them to reach their goals by the time of retirement. Though retirement is often the main goal of investing, it's not the only one. Marston discusses how funding a child's education or saving for a down payment for a home affects overall saving.
Sensible investing is also necessary for savings goals to be realized. Investing need not be complicated, but Marston explains that a diversified portfolio should include a mix of different types of U.S. stocks, foreign stocks, real estate as well as bonds. He describes each of these asset classes and shows how they fit in an investor's portfolio. He shows how investors can monitor the performance of their portfolios by establishing benchmarks for each asset class to judge how well their investments are doing.
He focuses particular attention on those investors nearing retirement. In today's low interest rate environment, he discusses whether it is possible to fund retirement from interest and dividends alone. He shows how savings combined with Social Security can fund retirement spending. And he asks how the "New Normal" of lower returns might force investors to save more than in past decades, and to spend less in retirement than in the past.
This is a book for investors who want to understand more about the savings and investment process, particularly those who worry about whether their retirement savings will last a lifetime.
"Investing for a Lifetime
is packed not only with solid financial advice, but also vivid examples drawn from recent market history. This is the book that investors need to read as they reassess their finances after a tumultuous decade and a half for the stock and real-estate markets."
Jonathan Clements, author of The Little Book of Main Street Money and columnist for The Wall Street Journal Sunday
Investing for a Lifetime
saving, investing, and spending
- Investing starts with savings. A "savings goal" tells an investor how much must be saved by the time of retirement.
- How do investors reach these goals? By setting a rate of savings high enough to accumulate the required wealth by the time of retirement.
- Investing itself is much easier than saving, although investing has many pitfalls for the unwary. The two largest challenges for investors are to choose the right portfolio to begin with and to stick with investment strategies when markets tumble.
- Trying to fund retirement from investment income alone may lead to portfolios that are too risky for a retiree in this low interest rate environment. It's better to base spending on investment returns, not just on the income from investments, and to choose diversified portfolios of stocks as well as bonds to fund retirement.
- A "New Normal" may mean that stock returns in the future will fall short because of slower growth in the industrial world. A New Normal may also mean that bond returns will fall short as the thirty year bull market for bonds finally comes to an end.
- A New Normal with lower investment returns may make saving, investing, and spending that much more challenging. Younger investors may find that they have to save more than their parents did and older investors may find that their plans for retirement fall short of their hopes.
- Investing for a Lifetime addresses all of these issues.
About the Author
RICHARD C. MARSTON is the James R.F. Guy Professor of Finance at the Wharton School of the University of Pennsylvania. A graduate of Yale College and MIT, where he received his PhD, Marston was also a Rhodes Scholar at Oxford University. He has taught asset allocation for over twenty years in the CIMA Program sponsored by the Investment Management Consultants Association. In 2014 he received IMCA's Matthew McArthur Award for outstanding contributions to investment management. Since 1999, he has been Academic Director of the Private Wealth Management Program, a week-long program for ultra-high net worth investors. Marston has lectured on investments throughout the United States and in over a dozen foreign countries. He is the author of numerous articles and books, including his most recent book, Portfolio Design (Wiley, 2011).
Table of Contents
PART ONE Saving and Investing 1
CHAPTER 1 Introduction: Investing for a Lifetime 3
CHAPTER 2 The Building Blocks of a Portfolio: Bonds and Stocks 11
CHAPTER 3 Long Swings in Returns: Are We in a “New Normal?” 23
CHAPTER 4 A Savings Goal for Retirement 37
CHAPTER 5 What Rate of Savings? 49
CHAPTER 6 Savings and Taxes 61
PART TWO Investment Choices 73
CHAPTER 7 Investing in U.S. Stocks 75
CHAPTER 8 Foreign Stock Markets: Industrial Countries of Europe and the Pacifi c 89
CHAPTER 9 Emerging Markets 101
CHAPTER 10 Investing in Bonds: The Basics 115
CHAPTER 11 Investing in Bonds: The Wider Bond Market 129
CHAPTER 12 Investing in Real Estate: REITs 145
CHAPTER 13 The Home as an Investment 157
PART THREE Wealth Management 169
CHAPTER 14 Choosing a Portfolio: Fitting the Pieces Together 171
CHAPTER 15 Best Practices for Investing 187
CHAPTER 16 Investment Income for Retirement 199
CHAPTER 17 Spending in Retirement 209
CHAPTER 18 Retirement: Putting Together a Plan 223
CHAPTER 19 The “New Normal” and Retirement 239
About the Author 249
About the Companion Website 251