Library hosts conversation on retirement planning

The township library hosted a talk called “Introduction to Retirement Planning” on June 19, part of its ongoing Community Conversations series.

Alberto Portela Jr., managing director and financial advisor with Northwestern Mutual, told attendees how to plan for retirement and offered strategies they could use to protect their assets. He is licensed in 27 states, working in New Jersey and Pennsylvania and as far as Washington state and California.

“Part of what we do as advisors is not just engaging with individual clients, but being a part of the greater community and providing information, giving resources to those out there who might not be able to, or maybe not have the time to engage personally with an advisor,” Portela said.

He opened the discussion by handing out packets of material on retirement and financial planning and asking attendees what they wanted to know about.

“We find that people are most financially vulnerable not while they’re accumulating money, but while they’re actually taking distributions,” Portela explained. “When we’re in retirement and we’re not earning any money anymore, we’re pulling money out. One distribution in a down market can have a hugely negative effect.”

He then asked a series of true-or-false questions that participants could answer for themselves to determine where they are in their financial journey. Queries included how much money attendees have coming in and going out, credit scores and how much workplace disability income insurance covers and for how long.

Portela then laid out the four steps to building a strong financial foundation. 

First is understanding one’s cash flow and where the money goes, he pointed out. The second step is protecting one’s own income, family and assets. Portela emphasized that an individual’s biggest asset is the ability to earn income and that disability insurance is a good idea.

“When we run illustrations for disability insurance, we typically see the cost of replacement or the cost of that warranty,” he noted. “That disability in relation to the income is typically between 1 and 2%, so for those that are in their working years, 1 to 2% to protect your most valuable assets probably is a smart thing to do.” 

The third step toward building a financial foundation, according to Portela, is to develop a savings and investment plan. He recommended putting aside 20% of income for savings and investments; 60% for fixed expenses; and 20% for discretionary spending, with room for flexibility in those numbers.

The fourth step, he said, is to create a strategy to manage debt, specifically getting rid of all credit card debt, finding lower interest rates on student loans, seeking loan forgiveness and looking for ways to consolidate debt.

“The way you want to think about whether debt is good or bad, (there are a) couple of factors,” he offered. “One of the things before I think about it is, if I had that money invested, could I beat the interest rate that I’m paying on the debt?”