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Retiring on Long Island

Long Island has a lot to offer but it’s also a relatively expensive place to live, especially for retirees. While other locations may be desirable retirement destinations once you’ve adjusted to the warmer climate and lower living costs, will you and your spouse be happy there for the long term?

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Table of Contents

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Chapter 1

Retiring on Long Island; Should I Stay or Should I Go?

Long Island has a lot to offer but it’s also a relatively expensive place to live, especially for retirees. While other locations may be desirable retirement destinations once you’ve adjusted to the warmer climate and lower living costs, will you and your spouse be happy there for the long term?


Long Island boasts plentiful entertainment choices including miles of beautiful beaches, mass transit, world-class health and educational facilities, a diverse economy plus relatively easy access to New York City and major transit hubs. Such attributes make Long Island a desirable area. However, all of this comes with a cost and many of those who are preparing to retire would be wise to take this into consideration.


 Each of us knows that for all of the positive aspects Long Island has to offer, taxes and other so called cost-of-living expenses here typically rank among some of the highest in the nation. Although a simple internet search will uncover numerous areas where the cost of living is less than on Long Island, many retirees and pre-retirees frequently express to us their desire to remain here.  While the lure of a warmer climate and lower cost of living are enough to justify a move for many from Long Island, others do not like the idea of being far from family and friends, as well as health-care providers, houses of worship and other elements of home. In the following posts, we’ll examine positive and negative factors that can help you decide whether to stay or go and how to turn whichever path you choose into an affordable reality.



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Chapter 2

5 Components of a Successful Retirement Plan

Retirement planning does not need to be complicated or overwhelming. In fact, in many ways it can be surprisingly simple, even fun at times as you‘ll see here. While individual situations vary, the five basic components of a successful retirement plan include:


  1. Lifestyle: Retirements today frequently last 20-30 years. How do you wish to live during this period?
    On one hand the media is full of images of successful and happy retirees enjoying life. On the other, it tells stories of seniors who can’t pay their bills, especially health care or cannot afford to stay in their home. Typically Social Security and Medicare pay only for a portion of one’s retirement. The balance is often covered by a pension and personal savings. Have you considered postponing retirement or working part time in your later years?
  1. Income: How will you pay to live the retirement lifestyle you desire?
    As fewer companies provide traditional pensions, saving for retirement has become the worker’s responsibility. Thankfully today there is a wide range of products and services that can help fund one’s retirement. But how will you be able to utilize them to provide for your financial future?
  1. Risk Tolerance: Each investment has some degree of risk. However, the biggest risk of all is not planning. The goal to successful investing is to understand your personal level of risk or “risk tolerance,” and invest accordingly. Generally speaking, an advantageous investment return may not be possible without some risk, meaning it’s possible that you may lose some or all of your original investment or principal. Asset allocation is one way we aim to exercise some control over how we invest.
  1. Long Term Care: Who will take care of you and/or your spouse as you age? This can be costly in ways you may not imagine today. You’d probably want to protect yourself and loved ones from having to make difficult financial choices or rush decisions. You may have expectations for your retirement lifestyle or legacy you’d like to pass to the next generation. But what if you need long-term care? Will your savings cover these costs or will you need to spend down your assets? A long-term care policy can cover long-term care expenses and preserve your assets.
  1. Help from a Financial Advisor: Opening a dialogue with an independent financial advisor can be one of the most valuable relationships you can have, especially as you age and your life becomes “financially complicated.”

Today dual-income households, business partners and those with moderate to significant assets often work with an independent financial advisor to help protect their long-term personal and financial interests. To maintain your lifestyle, you will probably need at least 70-80 percent of your current income level in retirement. While a long life is often a great blessing, it can also present financial hurdles, namely the idea of running out of money. A financial advisor may help to keep that from happening.

Investing involves risk including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss in periods of declining values. Past performance is no guarantee of future results. Please note that individual situations can vary. Therefore, the information presented here should only be relied upon when coordinated with individual professional advice.



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Chapter 3

Retirement Planning for Young Investors

Keep in mind that how you handle your money today may affect how you live tomorrow. Also note that it’s a common mistake to think that one needs a lot of money in order to invest and/or save for retirement. The most important thing actually is to get started. You can’t reach the finish line without entering the race. This is especially critical for young people who have the potential benefit of time on their side. Starting small is better than doing nothing.


 Another tip: keep emotion out of your investing. Once you determine your risk tolerance, create a sensible plan and follow it while keeping in mind that it must be rebalanced or revised periodically. Hoping to put something aside at the end of each month rarely works. There are too many demands. Having funds automatically deducted and invested is a great way to start. Such plans can be started for as little as $50 per month. If that does not work, consider an independent financial advisor.


Financial planning may be one of the most important aspects of your life and where you are in that life often determines how you invest. It’s usually easier and more objective when done with a professional as fear and procrastination can cause you to lose sight of your goals. Not sure if you should hire a financial advisor? According to research firm Spectrem Group (www.spectrem.com), 77% of ultra-high-net-worth investors (those with $5 million to $25 million in investable assets) are satisfied with their advisor.


Another top financial priority for someone in their 20’s or 30’s is to get out of serious debt. Then think about your other financial needs and start saving to reach them. A single person with no dependents may consider investing in a fairly aggressive strategy with investment growth as the primary goal.


If your job offers a 401(k) or a Simplified Employee Pension (SEP) plan try to maximize the tax-deferred savings. Many employers encourage contributions by offering a match, which makes these options even better. A younger person has a longer time horizon until retirement and may wish to accept more risk and weather market volatility, so they may choose to invest in equities or equity-based securities with the hope that they will be rewarded for the risk they take on.


For long-term investors it’s important to have a portfolio that is well diversified.  Bonds can be a part of this since they may experience better performance when the equity market does not.



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Chapter 4

So You Want To Retire Early? A Case Study on Achieving Early Retirement

Chase is a recent college graduate. Having earned a degree in software engineering he accepted a promising career offer before graduation.  Like most of his peers, Chase has a large college loan to repay but since he attended a state college, his payments are not as steep as that of his private college peers. His new employer also pays for his cell phone and provides health insurance.


Since Chase majored in an in-demand field, his new employer gave him a sign-on bonus which he immediately put towards his first loan payment. “It was free money,” he said. “Making my first payment on time helped to establish a good credit rating.” That good rating helped Chase qualify for a credit card that generously rewards him with cash back on purchases and charges no annual fee.


As Chase wants to get married “in the next few years,” he needs to save money. He decided to live at home instead of renting his own place. He also bought a second-hand car to get to-and-from work. “New cars lose value very quickly,” he says. “A used car is much more affordable and I did not need a loan.” Chase also took an online defensive driving course to lower his auto insurance payments. The money saved from his lower insurance premiums, about $50 per month, was enough to open an automatic-investment plan with a well known mutual fund company, enabling him to invest nearly $600 per year.      


Here Are Some Ways to Get There

Lots of us would like to retire early. Short of winning the lottery or finding out that a previously unknown rich uncle left you a mountain of cash, most of us have no idea how to get there. But for those who’d like their early retirement dreams to move from fantasy to reality, here are a few steps to consider taking.


Two key things to do to retire early are eradicate debt and save. If you can’t do this with your present salary you may need to consider postponing retirement or taking an additional job, using the extra income to meet your goals.


Eliminate Debt: Young adults often face a mountain of college debt. Student loans often have a grace period before repayment begins. Use this time to create a realistic budget to reduce loan debt. Set up automatic payments to avoid late fees. Avoid student loan default and bankruptcy at all cost.


Understand Credit: Similar to eliminating student loan debt, it’s critical to keep credit card spending to a manageable level. Debts can quickly grow out of control. Credit card interest rates are very high, around 20% and borrowers pay interest when they don't fully pay the monthly balance. Such debt can take a long time to eliminate. Interest charges and the way they are calculated can be complicated. Make sure you understand whichever card you use.


Know Your Expenses: Day-to-day living expenses include housing, utilities, food, transportation and medical/health insurance. Budget for entertainment/ discretionary expenses like travel/vacation, eating out and movies. Wait to buy a new vehicle. Getting another year from your present car, especially if you own it, can save lots of cash. Why take on new debt if it can be postponed a year or two?


Avoid “Hidden Fees”: When it comes to saving there are no small fees. Avoid late fees, ATM surcharges and overdraft fees. Understand any service contracts like with the cable company, monitor your accounts, use credit cards with no annual fees and only use ATMs in your network. Try to avoid impulsive purchases.


Invest Early: Once debt is under control consider investing in four types of mutual funds: growth and income, growth, aggressive growth, and international. A variety of funds can provide diversity that can insulate investments from stock market volatility. Some automatic investing plans can be started for as little as $50 per month.



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Chapter 5

Staying on Long Island After Retirement? How to Maximize your Savings

Sobering news on the horizon is that in some 35 years Social Security may become exhausted as the number of Americans 65 or older should have doubled and there won’t be enough younger people working to pay all their benefits.


Only about 73 cents for each dollar of scheduled benefits will be able to be paid according to government estimates. If you’re concerned over how to fund your retirement, Social Security is only part of the answer.


Consider 401(k) and profit-sharing plans. These retirement-funding plans allow workers to regularly deposit money from their salary on a tax-deferred basis until retirement into a variety of investments. The employer has no obligation to contribute although many do provide a “match” based on a percentage of the worker’s contribution. The responsibility for these “self-directed” plans is on the worker, who may or may not have the financial know-how to invest for the long term.


Inflation poses another great risk to long-term purchasing power, especially for anyone with a limited income. Will today’s dollars be worth the same tomorrow? Any retirement discussion should cover ways to fight inflation.


Long Islanders, as well as many Americans are sailing on stormy seas when it comes to their financial futures. Consider that the strength of our Social Security system is questionable and inflation may be returning to whittle away at purchasing power. With a defined benefit (DB) plan one depends on their employer to wisely invest and administer pension funds. With a defined contribution (DC) plan investors are responsible for their own fates.


In addition to Social Security these plans, plus savings and other income sources (and usually a lower-expense lifestyle) helped generations to comfortably retire.


While the mainstream media (and some of our politicians) often make investing sound simple, the examples above prove otherwise. The truth is – today’s pre-retirees are vulnerable. Therefore, we need to take greater responsibility for our retirements and align with an independent financial planner sooner rather than later. Such relationships can help retirees get the most out of their financial future.



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Chapter 6

Leaving Long Island After Retirement? How to Maximize your Savings

There is a lot of interest in passive vs. index investing.

While passive investing has its attributes, such as providing full access to an index at a very low cost, the biggest and likely most unrealized risk is that by piling onto the passive investing bandwagon, one virtually puts the attainment of their goals on “cruise control.”

Passive investing typically offers very low fees, transparency and tax efficiency but relinquishes such attributes as:

  • Flexibility
  • Decision-making ability
  • Investment choice and
  • Restricted returns.


Conversely, in a basic active strategy, there are four basic strategies that may better enhance investment performance:

  • Duration position
  • Sector-allocation selection
  • Security selection
  • Due diligence.


Limited Choices

Each of us likes choice. Consider that with passive investing no one examines balance sheets, considers what-if scenarios and most of all thinks about major risk factors. When the seas get rough the experience and judgment of a manager can matter.

Performing their due diligence, most active managers regularly seek to identify “mispriced securities” which they categorize as opportunities. They also position for future market and interest rate movements. Managers, like many investors, understand that markets are not completely efficient, setting the stage to capture opportunities. Index funds regularly rebalance, exposing the fund to price inefficiencies, plus style and size drift.


Judgment + Experience = Active Management

With passive investing, no one’s minding the money. Active managers can sell when they think risks become too great. Passive managers must hold their positions no matter the climate. Similarly, while selling at a profit may mean a capital gain and a subsequent tax, in some instances, advisors can manage this by selling losing investments and offset some or all of the taxes generated by winning selections. An actively managed fund may provide superior risk-adjusted, long-term returns.


Investing involves risk including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss in periods of declining values. Past performance is no guarantee of future results. Please note that individual situations can vary. Therefore, the information presented here should only be relied upon when coordinated with individual professional advice.



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Chapter 7

Retiring on Long Island, a Case Study

Seven Steps to Make It a Reality


 The Carbunkel’s are self-described “Long Island Lifers.” Not only did they raise a happy family here but their children and many of their friends and relatives have remained nearby. The idea of relocating largely to save money does not appeal to them when compared against the benefits of “staying home.”


However, it is precisely the idea of “staying,” that has become a source of stress. Mrs. Carbunkel, a retired data analyst at a large real estate firm, understands the benefits of living in a community dominated by homeowners. She has also personally seen many former Long islanders return after a few years in the Sun Belt because they missed family and friends, or were running out of money and needed care.


On the negative side, the Carbunkel’s were tired of paying taxes and maintenance for a large house they no longer needed. Consequently, they planned with their children to remodel the house into one that would enable two families to live in it, thus reducing the tax and maintenance burden.


While the economic impacts of homeownership are well known, there are other benefits that are just as, if not more valuable. Homeownership is at the core of community building. The stability gained in an area through consistent ownership creates strong, cohesive relationships and social networks. According to a Harvard University review, compared to renters, homeowners display increased civic engagement and feel a greater sense of responsibility to invest time, money and resources in community and environmental improvements. Collectively, these factors lead to better school systems, lower crime rates and stable neighborhood growth—a ripple effect that persists for generations.


The Carbunkel’s took seven simple steps in order to make their Long Island retirement a reality:


  1. Where’s the Money Going? Gradually adjust expenditures toward a future budget. Run the household like a business.
  2. Start Living Like a Retiree. Change your lifestyle to reflect how it might be in retirement. That might mean home downsizing, reducing leisure travel or driving a more efficient car.
  3. Increase Savings or 15 / 15. When within 15 years of retirement, annually contribute a minimum of 15% of earnings toward retirement.
  4. Explore Social Security Choices. Postponing benefits until age 70 can significantly boost lifetime income. Explore spousal benefits, too and speak with an independent financial advisor for maximum benefits.
  5. Be Diversified. A broadly diversified, well-balanced portfolio of equities, bonds and cash positioned for the long term often offers the best opportunity to maintain the necessary growth of capital while minimizing volatility.
  6. Keep Learning. Utilize personal finance books, magazines and websites as well as cable and internet programs to increase your financial acumen. Attend personal finance and retirement planning seminars or take a course at a local library or college.
  7. Have a Plan. Many procrastinate when it comes to saving and are not taught how to plan or set goals. Write on a calendar, one hour a week to focus and learn about everything financial, including, saving, investing, taxes, insurance and building net worth.


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Chapter 8

Retiring Off Long Island, a Case Study

The Millers were each born and raised on Long Island. They also raised their family here but each of their three children, now adults, lives off Long Island with their young families as they found the high cost of living and lack of good-paying jobs too difficult for them to raise families of their own here.


Unlike their children, Mr. and Mrs. Miller did not have education loans to repay, had jobs that provided health coverage and pensions, sent their children to good public schools and have seen significant appreciation of their home, which has become their primary asset.


Now that they have retired they no longer need a large home or the taxes and maintenance that come with it. While they would miss their friends, they would also like to be closer to their children and grandchildren. Although the Millers have some savings as well as good pensions and are taking Social Security benefits they worry about the cost of health care as they age. In addition to being near their children and grandchildren, the Millers do not want to give up their independence. The criteria they’ve established for finding a place for their “Second Act,” include:

  • A vibrant economy
  • Efficient transportation
  • Accessible health services
  • Learning and social opportunities
  • Affordable housing.


Additionally, the Millers do not plan to work during their retirement and want to make their money “work for them.” Buttressed with the windfall that came from selling their Long Island home, they are nevertheless concerned about making their money last as well as inflation and market volatility. Consequently, they have consolidated their accounts. This provides several attributes such as:

  • Listing each of their holdings on one easy-to-read statement
  • Lower overall fees by moving investments to one company
  • Access to a dedicated financial advisor


           The Millers would also like to one day leave a legacy to their children and grandchildren. Mindful of stock market volatility and by working with their financial advisor, they have decided not to allocate all of their invested assets to equity, i.e. stocks, even though it’s the asset class perceived to have the best prospects for attractive long-term returns. Strategic allocations to non-equity assets that offer other appealing characteristics, such as stability or a history of appreciating when stocks decline can be beneficial, even if their prospects for long-term return aren’t as attractive. These allocations can offset equity volatility, helping to position them for long-term financial stability through diversification.