In 1988, Deborah Taylor, then an investment officer at a bank in Washington, D.C., married an independent jeweler. At tax time that year, after comparing his modest individual retirement account balance with his wife’s impressive one, Bob Taylor quickly became Deborah’s best client.
Today, Deborah Taylor is a financial advisor with Legg Mason Wood Walker, Lake Mary, Fla. Her message to jewelers: “Wealth is what you accumulate and save, not what you spend.”
JCK asked Taylor for tips on how independent jewelers can accumulate—and keep—funds for a comfortable retirement:
JCK: What issues should jewelers consider when planning for retirement?
DT: Owners must decide how long they’ll be in business and name a successor for when they retire. Jewelers also need to know how they’ll fund their retirement—through business profits, an income stream from real estate, or investment-retirement funds. What do they want to have happen to the business upon their retirement, death, or disability? Will you sell or gift the business to a child or other family member upon your death? Is there an opportunity to sell to an outside party or [arrange for] key-employee succession? Establish buy-sell agreements before you need them.
Remember to settle estate issues—for example, how do you compensate the child who really has no interest in the jewelry business if you are planning to sell or gift it to the child who has worked beside you for several years?
Jewelers also need to be putting the maximum amount they can into IRAs. Don’t think you can’t spare the funds this year—you can’t afford not to! And consider starting a retirement plan for your employees. The cost of initiating the program isn’t as much as you might think. Many potential employees find 401(k) [plans] the most alluring perk. And when you need a good gift for a wife, daughter, or granddaughter, don’t look to your jewelry cases—give someone her own retirement account. Half of the working women today have no pension. The recipe for retirement success is to save early and save often.
JCK: What’s the worst-case scenario of not planning for retirement?
DT: Outliving your income.
JCK: What should jewelers do with a lump sum of money in savings?
DT: First determine when you’ll need the money—in five or 10 years, or at retirement? Then know your tolerance for investment risk, investing in a well-diversified portfolio that is maintained on a monthly basis. The benefits of dollar cost averaging (investing a fixed amount of money each month) work very well in a fluctuating market and can help take the emotion out of investing. With this approach, you don’t have to guess which way the market is going.
Asset allocation involves getting the right mix of investments based on objectives and tolerance for risk. Basically, what every good asset allocation program avoids is putting too many eggs in one basket. Investors who have a large percentage of their money in one stock or sector are living on the edge. Your portfolio is less vulnerable to adverse developments in any market, sector, or security when it’s spread among many investments. Key points are: Stay invested, reinvest those dividends, diversify your portfolio, and stick to monthly investments over the long term—a 20- to 50-year period—and you’ll be financially fit.
JCK: What immediate steps should jewelers take if they haven’t started saving for retirement?
DT: Direct dollars into retirement vehicles and tax-deferred investments outside of the showcase. Max out 401(k) and IRA accounts and encourage family members and employees to do the same.
For more information about retirement planning, tax issues, and more, contact Taylor at (877) 526-9096 or at email@example.com.