Time and Consistency Build a Retirement Nest Egg:

Whoever told you that only the very rich can afford to invest for their retirement? There are ordinary people making ordinary incomes who are quietly retiring with reliable incomes. The key is to pick a small amount of money that you can comfortably invest each month for years and be consistent – no matter what it takes.

“If you put away $100.00 for 30 years into the S&P 500, then you would have over $200,000 at the end of the 30-year period,”  says Don Puff, president of D.J. Puff Advisors Group, Inc. which is based in New York. “I have hundreds of clients who have simply taken advantage of time and consistency,” he added.

Puff recalls, when he first launched his business as a financial planner over 30 years ago, 90% of his competitors were tripping over each other trying to sell their financial planning services to 10% of the population comprised of “the high net worth folks.” He didn’t feel comfortable pestering friends and family, so he focused his marketing efforts on the 90% of the population that almost nobody was talking to. “It generally started out with small cases and little pieces of business. And being consistent and persistent, we built an asset base.”

“Systematic accumulation really makes sense in the 21st century, because of four crucial factors,” Puff explains. “These are the time value of money, compound interest, life expectancy and historic returns.” Puff recalls that when he was a child, 70-year-old people were not common. “So what we’ve seen over the past 50 years is a dramatic increase in life expectancy. We have more time than ever to achieve a specific result, and the net result is driven by a consistent return from the equity markets, the stock market,” says Puff.1

The investors who benefit the most are those who are in it for the long haul. Patience, consistency, discipline and realistic expectations are paramount. “As long as you give the markets enough time – and what we are talking about is looking at the S&P 500 – for a 25 year period ending in 2014, the S&P 500  total return averages 9.6% per year,” So we look for 25-year returns ending in 2014,”1 Puff says. Based on this kind of analysis, an even better rate of return was realized in the 25-year period from 1950-1975 according to Puff.

Honesty trumps longevity and life expectancy if investors wish to get the most bang from their investment dollars. “So we need a certain type of person. We need somebody who can be truly honest with themselves and us,” says Puff. “And then what we can do in return is be truly honest with them.  Forging a close working relationship is key!”

Puff explains how a client with a $500,000 portfolio wanted to be withdrawing a certain amount of money monthly, and Puff agreed, because these withdrawals were only 4% of the client’s portfolio. “We can generate that income relatively simply over an extended period of time historically,”1  Puff explains. But another client wanted to be withdrawing 10 to 11% of his portfolio. Puff explained to the client that such a rate of withdrawal was unsustainable. “All you have to have is one year where the market goes down 20%, and you’re pulling out 10 or 11 or 12% of your original portfolio value. It’s a huge impact that you can never recover from.”

It all boils down to what Puff calls “a management of expectations.” He reiterates that client honesty and truthfulness are absolutely crucial to a successful retirement and investment strategy. “So we have to have people who will tell us the truth, be honest with themselves, allow us to be honest with them and then act upon the advice that we provide.”

One example of such advice lies in the basic difference between a Roth and a Traditional IRA. Puff says he hardly ever advises a client to use a Roth.  Money deposited into an IRA “is tax deductible” but state and federal taxes must be paid when money is deposited into a Roth in New York. “If you earn a dollar, you put about 70 cents, after payroll tax withholding, into a Roth, or you can put the whole dollar into an IRA with anticipation in the future you are going to pay lower taxes.  In New York, for example, each person after reaching age 59 ½, taking money from their IRA gets the first $20,000 each year New York State income tax free.  You get a positive net after tax return by how you save the money!” 

Puff’s company also provides corporate retirement plans, but their “bread and butter” business, is offering retirement plan advice to Education Professionals, nonprofit organizations and small businesses.  The company sponsors workshops for teachers where the 403(b) retirement plan is presented. It is a “pre-tax deposit deferred compensation supplemental retirement plan that teachers can take money out of their pay checks to invest”. 

Unlike the IRA, there is reportedly no income qualification for a tax-deductible 403(b). “And like a 401(k), they can put away up to 100% of their compensation or $18,000 per year. Plus, if they are over 50, they can catch-up and put away another $6,000.00,” Puff explains. This means that New York teachers can reportedly invest up to $24,000 of their salaries into a 403(b), before state and federal taxes.

Puff says he isn’t concerned about the increased longevity currently being experienced by Americans – and he sees it as an opportunity for both his clients and his company. “We have developed a clientele, and some of these folks have been with me for over 35 years.”

Besides being gratified with such rock-solid client loyalty, Puff believes that his greatest success has been his company’s achievement of full independence. “Very few advisers in this industry have the type of contract relationship with their affiliate companies that I do. We are truly independent, and work directly for our clients”

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