Hot Retirement Destinations

Growing up in Arizona, we referred to retirees that lived the summer months somewhere up North and the winter months in the Southwest as “snowbirds”.  Increasingly, snowbirds have been shedding their Northern nests and settling in the desert in massive retirement communities like Sun City in Phoenix and Las Vegas.    In the Southeast we have similar developments in Peachtree City South of Atlanta and the Villages in central Florida. These communities offer a fantastic quality of life, but they are hot.  I mean blazing hot.

Last week I helped my mom and stepdad move from Las Vegas to Tucson, which is a retirement mecca.  The temperature hovered at 108 degrees.  I don’t care if it is a dry heat, that’s hot!  When I offered to help my parents move, it didn’t occur to me they would choose the first week of August as the ideal time to do it.  But I’m not complaining too much.  At least I didn’t have to go to Houston, TX.

My bride’s grandparents grew up in Texas and lived in Houston for over 60 years.  Granddaddy’s birthday was August 9th.  Every year since he turned 98, the family would go to Houston and throw him a birthday party, and it was a lot of fun.  He enjoyed it so much, he kept having them so we could come back and visit him.   Granddaddy lived to be 104 years old.

One year we had an ice cream social at the fellowship hall of Granddaddy’s church (South Main Baptist).  I offered to ride with Grandmother and Granddaddy in the car to the party.  I was wearing a suit and a tie and I was sweating profusely because it was over 100 degrees with 110% humidity (mild August weather for Houston).  Granddaddy was sitting in the front seat with the air conditioner blowing on him.  He got cold, so he kept opening the windows to “let the warm air in”.  I thought I was going to die of heat stroke.  I would rather go to Vietnam in August than go to Houston.

Warmer climates are a great retirement destination for retirees, especially if they live in a low maintenance community.  Our retired clients live predominantly in the Southern states and are quite active.  Most of our clients are in North Georgia, which is far enough North that you see four seasons but far enough South that you don’t have to shovel snow.  We also have clients that live in Nevada, the low country of South Carolina and the Florida coast. 

Retirees are the busiest people I know.   Living in a climate where they’re not shut in for the winter months adds a lot of quality to their lives.  For folks that have settled into retirement up North, come on down to the South and look around!

Cash is Not King for Pre-Retirees

I’ve counseled dozens of people since October and I’m hearing a recurring message from investors with 401k plans: “I’ve decided to go to cash and wait for things to level out”.  My advice is to do quite the opposite.

Choose a good allocation of stocks and bonds and max out your monthly investment. Those investors that have made their monthly contributions diligently since October of 2008 are going to make a lot of money over the long term.  In fact, for pre-retirees, this market is a Godsend.   By dollar-cost-averaging into the market at its decade-lows they will see fabulous results over the next five to ten years. 

It’s human nature to project whatever market environment we are currently experiencing into perpetuity.  So if we’re in a bull market, investors expect the market to rise steadily forever.  If we’re in a bear market, that’s what investors expect from now on (remember how the Great Depression influenced the generation that lived it?).   We’ve had a horrendous experience since October of 2008, but this is not our new paradigm.  Sir John Templeton wrote, “The four most dangerous words in investing are, ‘This time it’s different’”.   Those words pertain to negative as well as positive expectations.  We will see a reversion to the mean and a return to historical risk and return characteristics where stocks will outperform cash and bonds handily.  Be sure you are well-positioned for that eventuality.

Life Goes On

Turmoil in the real estate and financial markets has taken a massive toll on our balance sheets and on our peace of mind.  Investor sentiment hit a forty year low towards the end of February.  Thankfully, we’ve seen an improvement in sentiment and a significant market rebound in March.  The reason the market is rebounding is that it is getting a better understanding of what the rules are and what it can expect from Washington, although visibility is still impaired.  There is more cash on the sidelines right now than there has ever been in the history of Western Civilization.  All we need is a catalyst and that money will pour out of money market funds and into real estate, stocks and bonds (all of which are cheap). 

Most of our clients are retired.  For retirees, the market volatility has been very stressful.  It’s caused many to cut back on their spending and re-evaluate their lifestyles.  But it hasn’t caused their lives to come to a complete stop.  They’re still as active as ever.  They have grandchildren being born, graduations and weddings.  Some are still taking trips. In recent months, our clients have been to Italy, the U.S. Virgin Islands, and all over the United States.  We have a family that is going to the Calgary Stampede in July.

This behavior personifies the “Life Goes On” thesis that will lead to improving investor sentiment and the eventual healing of our economy.  We’re still going to buy the essentials (whatever we deem those to be), we’re still going to make college tuition payments, and we’re still going to take family vacations.  And within reason, we should.

There comes a point where we have to look  fear in the face, accept the hand that we’ve been dealt, and move on with our lives.  That doesn’t mean that there isn’t uncertainty regarding the short-term future, but over the long-term, the picture is good.  Markets don’t boom or crash forever.  Eventually the pendulum swings back the other way.

The pendulum (i.e. the economic cycle) never stops moving.  We’ve been in a bear market since October of 2007 and we’re much nearer the end than we are the beginning.  The stock market will rise significantly before we know for certain that the recession is over.  If GDP growth gradually improves and becomes positive in the first quarter of 2010 (as Fed Chairman Bernanke has hypothesized), we are likely to see the market rally several quarters before that, which makes a market rebound in the next six months likely.  Remember, the stock market is a forward-looking indicator.

I believe we’re at the point in the market cycle now where people are making choices based on long-term hope rather than short-term fear.  We’re still going to see some spectacular short-term gyrations.  But the long-term destination of asset values will be much higher than they are today.