March-April 2015 | MONEY TALKS




PKS Investment Advisors’ Matt Repass and Tim Gonzales answer some key financial questions currently on the minds of investors both locally and around the country

One of the biggest concerns in our society currently is, can we live comfortably in our retirement, or will we outlive what we’ve worked so long and hard to put away for the future? Of equal importance, though, is who to trust to answer this all-important question? We recently sat down with Registered Financial Consultant Matt Repass and Certified Financial Planner™ professional Tim Gonzales of PKS Investment Advisors, LLC, in their new West Ocean City office to address these and other important financial issues.

CSM: We’re hearing the word “accumulators” USED a lot lately in your industry. What is an accumulator?

TG: An accumulator is basically an investor who is in the pre-retirement stage of their life. They are typically adults in their 30s, 40s and 50s who are still in the process of building their nest eggs rather than drawing from them.

When should a person start their retirement planning?

TG: It’s never too early to begin planning for retirement — likewise, it’s important to remember that you are never too old either. People tend to start planning later in life because they feel they can make a more accurate projection for the future once they are established in their lives and careers.

What do you think of Online Retirement Calculators?
MR: An ORC serves a certain purpose in that they can provide superficial or rudimentary guidance about what to expect from a rate of return on an investment over time. In other words, it’s a glorified calculator. And while calculators definitely serve a purpose, the problem is that real life practically never turns out the way ORCs would have it. To achieve a more realistic projection of your retirement earnings over time, you should really have a qualified financial professional help you prepare for dynamic market activity and create more realistic projections for the future. 

How does one avoid outliving their retirement income?
MR: That’s the number-one fear these days among people 44 and older. You do it by having a well-designed income plan that maps income throughout your lifetime, coordinating your earnings sources, rather than by just having an accumulation of financial accounts. A proper plan has those accounts or income sources working together to create superior returns at a risk level the client is aware of and comfortable with, while always taking taxes into consideration as the client begins to draw income from their savings. 

How do you integrate tax planning and retirement planning?
TG: One of the largest expenses of retirement besides healthcare is income taxes. Through our association with PKS & Company P.A., Certified Public Accountants, we work closely with our colleagues to incorporate tax efficiency within a client’s retirement plan.

Is there a difference between an investment advisor and an investment broker?
TG: A big difference. Investment advisors are bound to what’s called a fiduciary standard, which means they are obligated by law ­— and overseen by the SEC and state regulators — to put their client’s interests above their own whenever they render their services, even if that means advisors earn less themselves as a result. 
MR: Investment brokers, meanwhile, must only meet what’s called the suitability standard. This means that Instead of having to subordinate their interests to those of the client, they merely need to act on the reasonable belief that their recommendations are “suitable” to the client. With this standard, the ultimate allegiance of the investment broker is not to the client but to the broker-dealer they work for. The potential conflict of interest is well-known within the industry and clearly acknowledged by its regulators.

What are some of the things people should look out for when hiring an investment counselor?
MR: Good question. One is knowing whether you’re dealing with an advisor or broker. The other is knowing what your expenses are. Studies show that the average married couple loses more than $150,000 of their combined 401k balances due to excessive fees over the course of their careers. Those same couples can reduce their total investment expenses by 60% or more if they’re with the right financial advisor. The difference between 3% in annual fees and 1% is an amazing 82% increase in assets over a 30-year period. That’s a lot of money, no matter how modest your initial portfolio may have been.

According to Tim Gonzales
: The U.S. Department of Labor recently revealed that one-third of workers with access to an employee retirement savings plan like a 401k do not participate. That translates to as many as 40 million Americans who are missing a valuable opportunity to save money for retirement.

Additionally, a 45-year-old who saves $500 a month and earns a 6% return would accumulate more than $225,000 by the time they reach 65. A 55-year-old, meanwhile, would only accumulate just over $80,000 when they reach 65. This example illustrates the importance of beginning to save for retirement as early as possible.



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