Retirement Planning for a Single Person

I attended an informal brown bag lunch session sponsored by UBS in our Chicago office.  In most respects, the talk was about traditional retirement planning:  IRAs; 401ks; wills & estates, etc.  An interesting question came up from an attendee which I thought was both simple in its query yet eye opening in its response:  “what is different for me as a single person (with no kids)?”

The UBS advisor noted that a single person does have a different set of retirement needs than a (gulp) ‘traditional’ situation of a married couple with children.  On the plus side, a single person has no real need for life insurance, since there is no dependent relying on the single person’s income.  Similarly, a childless single person should have less worries about burning through his or her financial assets during his orher lifetime, since there is no person or people whom the estate will need to (or seek to) support.  So far so good.

On the downside, the UBS advisor noted that a single person will have to ensure funds are available for their long term care, especially since there will be no ‘moving in with the kids’ at a later stage in life.  A single person should also identify a trusted advisor (accountant, attorney) to serve as a power of attorney in the event of incapacitation.

In many respects, a single person’s plan mirrors that of a coupled person: healthily fund retirement accounts; keep expenses modest; have contingencies in place in the event you are unable to make your own decisions.  What is different, however, is that someone who is (and intends to remain) single does need to be more thorough in their plans, since there is really no fail-safe (ie someone else) in the absence of a plan.

— Tim Shields, UBS


Are Dividends an Important Aspect of the Investment Equation?

A diversified financial portfolio refers not only to an appropriate mix of products (stocks, bonds, real estate, art, insurance, etc.), but also diversification within each product category.  In the UBS wealth management and private banking businesses, a significant amount of time and due care is placed on ensuring that UBS clients achieve appropriate levels of diversification for their goals, needs, and risk tolerances.

For personal investors, a question which comes up frequently is: Should I care about dividends?  After all if a dividend is a cash payout from an invested entity to an investor, does the dividend achieve anything?  The investor receives cash, but her shares are now invested in a company with less cash, and thus the shares are themselves worth less.  That, of course, is a gross oversimplification, but the concept is quite real: if a company is paying out cash, then the company is sending a signal that it thinks investors can achieve yield on paid-out cash than they could if the company hung onto the cash and plowed it back into the business.

But, as the article points out, a consistent cash payout in the form of a dividend can also be considered a signal of the organization’s financial strength, and its ability to make such cash payments.  A high flying penny stock will almost never pay a dividend, and while there are good reasons for this (namely, whatever cash they have is being used to build the business), it is also often the reality that there is no cash available to pay out anyway.

— Tim Shields, UBS