New firm reflects a farm heritage
David Rasch first learned about investing from his father, an apple grower on the Fruit Ridge.
(As seen on WZZM TV 13) David Rasch, founder and president of a small new firm called Harvest Wealth Advisors, figures he was about 6 years old when he first saw his father studying the stock market at the family dining table and talking to his mother about their investments.
His father was a fairly aggressive investor.
“He always owned stocks, never bonds,” said Rasch.
Even today, he said, his mother’s investments are all stocks, but diversified.
Frank Rasch died in October at age 93; his wife, Gloria, still lives on the farm, near Fruit Ridge Avenue. A couple of David Rasch’s brothers are still fruit growers in the Fruit Ridge area.
Rasch said one of the benefits of growing up on a farm is experiencing hard work at an early age. Many adjust to it quickly and aren’t afraid of hard work through the rest of their lives.
Rasch has worked more than 25 years as an investments advisor and is a Registered Financial Consultant and Licensed Insurance Counselor. Previously a member of Strategies Financial Group in Cascade Township, last year Rasch went on his own and launched Harvest Wealth Advisors.
He and his team now have a lot of apple growers as clients, and his understanding of farming helps. Farmers generally face a different spin on retirement planning because most or much of their net worth is “tied up in their business — their land and their equipment,” noted Rasch.
Physicians, on the other end of the spectrum, have the ability to sock as much cash as they are able into their retirement accounts so that, when the time comes, their plans are typically “much larger,” he said.
But there are trends and developments in retirement investing that are almost universal for Americans, to some degree, and that add to the challenge of doing it right. Rasch said the two biggest issues right now in wealth management for retirement are the low interest rate and the cost of long-term care.
The financial industry — and Americans, in general — have been wondering for years when the record-low interest rate will finally start to rise significantly. It plummeted across the board in the U.S. in 2009 as the recession drilled down into the global economy, and now sectors of the economy are waiting for the Federal Reserve Bank to gradually begin to unleash it.
But a substantial rise in the interest rate is a major worry to retirees and others with significant fixed-rate investments — mainly meaning bonds.
“When interest rates go up, bond prices go down,” said Rasch. That means people who are invested in bonds will face a loss if they choose to sell them in order to get a more lucrative interest rate.
The pending impact on bond prices is probably more of a concern to retirees than any other sector in the population, according to Rasch, because so many retirees have invested in bonds. People nearing or in retirement tend to be more risk averse, and bonds are more stable than equities, although the long-term returns are usually less.
The market is hot right now and that alone may make older people nervous.
“People wonder how much farther can the Dow and the S&P 500 go? When it starts getting to the all-time highs, people start getting nervous,” he said.
“People are pretty bullish” on the stock market, he said, and “long-term bullish is a pretty good way to go.” But volatility is “more prevalent today than it has been in the past,” he added.
Most people haven’t saved enough for their retirement, said Rasch. In fact, it is widely accepted that about one-third of adult Americans have not saved any money for retirement. CBS News reported last year that a Bankrate.com survey of 1,000 adults found that 26 percent of them between 50 and 54 had no retirement savings; for age 65 and older, it was 14 percent.
When retired people keep hearing about a volatile stock market, they fear a major downturn, another recession, and they begin to wonder if they retired too soon, said Rasch. He noted when the market dropped precipitously in 2008, taking retirement investments with it, the retirement age for many people went from 65 to 70.
Wide swings in the market will be more of the norm, he said, noting the steep drop in the market just before U.S. Federal Reserve Chair Janet Yellen spoke to the U.S. Senate Banking Committee in February, and then the big jump in the market immediately afterward. Her comments revolved around the ever-present question of when interest rates will start to rise.
“People need to be really well diversified,” said Rasch.
Then there is the cost of long-term care. According to Genworth Financial, which sells long-term care insurance, the median cost of a nursing home semi-private room in Michigan in 2014 was $87,783 for the year. A private room was almost $95,000 and was increasing at an annual rate of 4 percent. An assisted-living, private, one-bedroom arrangement was $38,400 for 2014.
According to other Genworth data on the AARP website, the cost of a private room in a nursing home in Grand Rapids-Wyoming this year is estimated at $97,273; in Holland-Grand Haven, it is $90,520.
Genworth says that at least 70 percent of people over 65 will need long-term care services and support at some point.
“The cost keeps going up because people are living longer,” noted Rasch, thus increasing the demand. But at the same time, many of the “big players in traditional long-term care (insurance) have gotten out of the market,” such as Met Life and Unum, leaving many “second-tier” companies selling it.
The reason the insurance industry is shying away from long-term care insurance is precisely because people are living longer due to advances in medical science, and the cost of the medical treatment also keeps rising each year.
He said the average stay in a long-term care facility is now three years if physical ailments are driving that move to a nursing facility. But if long-term care is required due to mental impairment, an otherwise healthy individual “could be in there for years. It’s the insurance company’s worst fear — somebody going into a facility from a mental condition standpoint — because they know they could be in there for years and years.”
Compare long-term care coverage to a term life insurance policy, said Rasch. The life insurance policyholder usually can outlive it, and then the policy is no longer a future liability on the insurance company’s books.
Not so with long-term care insurance. “People are not dropping them,” he said, and insurance companies fear the growing liability for future claims.
An individual can try to save enough to self-insure for long-term care, but it can be very difficult. Rasch suggests a combination of an insurance policy and self-insuring, if nothing else. He noted there are also new policies with options that combine life insurance and long-term care coverage.
Rasch said the most important starting point for retirement planning is simple.
“People have to at least have a plan set up,” he said.