Jones began his talk with a question, “Your doctor comes in, says you’ve got about five minutes left to live. All you have time to do is reflect on your life, and in those five minutes when you're reflecting, what would you regret not having done?”
There were various answers including regrets about not joining the Lions sooner. But Jones said, “We write them down for our clients. We then say, ‘Okay, good news: you're not on your deathbed, right? You have more than five minutes to live, right? The things that are most important to you, how can we accomplish that? How can we use your money as a tool to make sure we accomplish the things that are most important to you in your life?”
Speaking to the Lions at a dry erase board, Jones explained the ways risk can manifest in investing. Stock market crashes, business bankruptcies, inflation, interest rates falling, reinvestment risk (the possibility of a decision to reinvest dividends in stocks by the company issuing them resulting in loss as the stock price goes down), liquidity risk (the cost of selling an investment security when its value is down from the initial investment) and longevity risk (living long enough in retirement to spend down all your money).
To reduce risk, Jones recommended investment in many types of securities, especially including mutual funds, which are invested in a number of different stocks managed by professional analysts to produce the best possible percentage rate of returns. While bank certificates of deposit can be attractive due to their guaranteed rates of return and FDIC insurance protection, those rates can go down severely enough to curtail continual income when the CDs mature and the option to renew comes up. Meanwhile, if the stock market goes up more than the interest rate, lost opportunity risk becomes a painful reality.
There are also two kinds of annuities, which are alternatives to letting money sit in a low-interest gathering savings account. “Fixed annuities--they guarantee a rate like CDs, they guarantee your return. Variable annuities will guarantee lifetime income. So if you got your Social Security and you say, ‘I want to make sure all my expenses are guaranteed,’ we can say, ‘Okay, you need an extra $2,000. This is how much you need to set aside in a variable annuity. Don't touch it, but if you don't touch it, you'll get a guaranteed income no matter how long you live.’”
Jones also explained the distinction between the tax-free Individual Retirement Account and the Roth IRA. Both would invest payroll deducted amounts in an account whose interest rate tracks the rate set by the Federal Reserve. But the Roth IRA does not require a tax be paid upon withdrawal of funds. They both, however, allow for fast withdrawals without penalty, unlike the CD.
Investment management is not the only service offered by Jones and his colleagues at Hope’s Edward Jones office. If you need to organize your complicated finances, Joshua Jones can help. “We are really good at consolidating your investments. Sometimes clients have two old 401Ks and an IRA hanging out somewhere, something they inherited from their parents, or whatever. A lot of that can get confusing. It's really hard on your taxes, because you have to file 1099s for all of them. We can help organize that for you to where you have your all your investments in the same house,” Jones said.
In other business, the Lions are planning a fish fry for Veterans Day November 11th in the veterans memorial area of the 1939 Hempstead County Courthouse. Eagle Scout Andrew Golden is planning to join the club with former Scoutmaster Ed Flagg as his sponsor.
