Expert Advice / Don Gould '79
Don't Be Shy About Retiring
By Laura Tiffany
Don Gould ’79 has rarely strayed far from
the familiar grounds of Pomona. After finishing
his M.B.A. at Harvard, Gould returned
to the West Coast and entered the investment
management field. He launched the
Pasadena-based Huntington Funds in 1986
and, after it was acquired by Franklin
Templeton, he continued to manage money
there through the 1990s. In 1999, he
opened Gould Asset Management in the
Claremont Village. Today, the firm manages
more than $300 million for individuals and
Gould’s ties to Pomona aren’t just due to
geographic proximity. His brothers Jeff ’70
and Ken ’84 attended Pomona, as did his
nephew Adam Freed ’06. He was president
of the Pomona College Alumni Association
in the late 1980s, and he now serves as a
trustee of sister institution Pitzer College.
Pomona interns are a fixture at his firm, and
Gould teaches an investment management
course at the Claremont Graduate University.
“I find—and I tell my students—that
despite all the complexities of today’s financial
markets, the main lessons of personal
finance remain the same,” says Gould.
If Gould could share just one piece of
advice regarding personal finance and retirement,
it would be: “Start early and be disciplined.
If you do those two things, you are
85 percent of the way there.”
Gould offers five more pieces of smart personal finance
advice to help with the other 15 percent:
Rate of Savings Trumps Rate of Return.
It’s not glamorous, but focusing your attention
on your rate of savings makes a lot more
sense than worrying about your rate of
return. Over a working career, raising either
rate by one percentage point has roughly the
same impact on the size of your nest egg at
retirement. However, your rate of return is
largely out of your control—there’s no magic
bullet for increasing your rate of return by
that measly percentage point. So preparing
for retirement is in some ways more an exercise
in budgeting than investing.
Put Everything in its Right Place.
The U.S. tax code rewards investors who buy
and hold assets that rise in price over time. It
does this first by deferring any tax until the
asset is sold, and second, by applying a lower
tax rate to the gain when the asset ultimately
is sold. Conversely, tax rules penalize
investors who take their returns in the form
of ongoing income, for example, interest on
a CD or from a taxable bond fund, by taxing
the returns each year at the higher so-called
“ordinary income” rates. A well diversified
portfolio is going to have elements of both
the tax-advantaged growth investments and
the potentially “tax-ugly” income assets.
As my Pomona econ professors would say,
“all things being equal,” it makes sense to
keep your tax-inefficient assets, like taxable
bonds and bond funds, inside the tax-deferred
retirement accounts, while placing
longer term growth investments, such as
stocks and stock mutual funds, in your after-tax
Keep Expenses Low.
Cutting investment expenses by a percentage
point increases your rate of return by an
equal amount. It’s that simple. One percent
may not seem like a lot, but over a retirement
savings horizon, it can translate into a
30-percent larger portfolio at retirement.
Time is Your Friend.
The effect of time and compounding is the
most powerful force in retirement saving.
Roughly speaking, putting off savings for a
decade requires that you double your savings
rate to meet the same goal. For example,
someone who starts saving $2,000 per month
at age 30 will have about the same assets at
age 70 as someone who starts saving $4,000
per month (inflation-adjusted) at age 40.
Freedom’s Just Another Word…
Our money management clients range in size
from a half million dollars to the tens of millions,
and one thing I’ve learned over the
years is never to assume that the size of a
portfolio corresponds to the client’s sense of
financial freedom. It may sound trite, but no
amount of money is “enough” if you are not
living within your means. Many young people
are enamored of the idea that once
they’ve accumulated X dollars, they’ll feel
free. In my experience, it just isn’t so.