Charles Schwab : You're Fifty--Now What

Sometimes the most basic tasks get overlooked. Fortunately, Schwab has enumerated what one should do, no matter your age. This book offers those guidelines. I will attempt to summarize the ones I found most helpful here. Schwab divided the book into two section, Planning for the Financial Second half of your life and Putting your house in order in the second half.

Expectedly, in the first half of the book, this leader of a brokerage firm suggests that readers invest in stock. He presents the historical evidence that stock has outperformed  other financial instruments in the past. Furthermore, he proposes that you invest for growth as aggressively as you can tolerate and afford. He argues that asset allocation--stocks, fixed income, and cash equivalents-- determines 90% of your long-term investment returns. Knowing your budget for this period allows you to measure actuals with inflation against budget. For starters, Schwab suggests a Core and Explore asset allocation--a combination of index funds and actively managed mutual funds and individual stocks.

After deciding a strategy, Schwab directs readers to list all their current assets--cash, IRAs, 401Ks, etc. What paperwork should you keep:

1. Tax returns with supporting documents, such as 1099s (up to six years back)
2. Settlement sheets on house closings, improvements or remodeling of the house
3. Retirement Plan records, records of contributions to retirement plans distributions, conversions, and rollovers
4. Purchase of securities that you own, purchases or gifts--for up to three years

The next step requires estimating the income you will need in retirement, after major life changes, etc.  factoring in inflation and compounded interest.  From there, he proceeds to go deeper into the asset allocation options--aggressive plans, moderate plans, and conservative plans, with varying degrees of each. Then we get to the point of all this planning, paying yourself from the earnings of your investments in a manner that supports your expenses throughout your lifetime. The trick, not running out of money before you run out of time--making your money outlive you with, hopefully, some to spare for progeny. The remainder of the first section deals with the mechanics of managing your portfolio--monitoring  and rebalancing it--how to, the frequency, and logic.

The second portion of the book concentrates on financial advice--determining if you need it, where to get
it and the questions you should ask to assess the quality of the potential advisor. Having reviewed your assets and determining your preference for an asset allocation, you should be prepared for any questions that the advisor might ask you. Regarding the questions you should ask him or her:
"What is your education and professional background?
What is your management style and philosophy? What is the best investing decision you've make in the last five years? the worst?
How are fees set?
Do you prefer one type of investment over another?
Have you had success with clients similar to me? What has your past performance been for clients with financial objectives similar to mine?
How will you help me define my investment objectives? Will you provide a customized investment plan? How often will you review my portfolio?
Where will my assets be held?

Schwab recommends that you consider only fee-based managers. Check the fine print : Form ADV (Application for Investment Advisor Registration), required for all investment advisors who manage more than $25 million in customer assets, a registration of the SEC. Needless to say, communication with the advisor, reading and understanding all documents, openness and trust are key.

The book ends with a discussion about insurance--life, term, medical, disability, and long-term care--estate planning, and charitable giving.
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Schwab, C.2001. You're Fifty--Now what? Investing for the second half of your life. New York: Crown Business.