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 institutions.

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 accounts.

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.