How do you define Retirement?

 Retirement Planning  Comments Off on How do you define Retirement?
Mar 252015

I just read an article by Michael Pompian on Morningstar’s website regarding the changing definition of retirement.

Most likely everyone has their own view or idea what their personal “dream” retirement will look like.

Mr. Pompain suggests these visions come under the heading of the “Three P’s”.

Pasture – Play – Purpose

Pasture: This refers to the time when you are simply no longer capable of working or have reached “retirement age”. This may perhaps be the idealized vision of retirement which consists of leisure activities.

Play – This is perhaps a newer definition of retirement used by somewhat younger retirees. They are the more affluent members of the baby boomer generation. They are using retirement to pursue the activities they did not have the time do while working.

Purpose – These are younger retirees who are using their new found freedom to volunteer, start a business, or simply working for fun.

How do these fit into your Dream Retirement?

So you want to be a millionaire

 Wealth Management  Comments Off on So you want to be a millionaire
Mar 082015

Actually you may need to be a millionaire if you want to have a comfortable retirement!

So how can a young family create an adequate pool of funds for their retirement.

Well the simple answer is it can be done one of two ways: Spend less than you make or Make more than you spend. In other words, is simply to live at least somewhat below your means.

Initially this will allow you to build up a cash reserve for those unplanned and unexpected expenses that always seem to pop-up!

Debt is going to be part of a growing family’s finances for some time. Hopefully this is primarily for the purchase of your home and transportation needs – not short-term debt simply to provide funding for your wants and wishes. As funds allow, you will want to manage this debt to your advantage.

The main step is to save and invest to achieve your ultimate goals. This means you will take advantage of any employer retirement plan you have access to – especially if you are eligible for employer matches. Otherwise look to a traditional or Roth IRA to save independently. Review your investment options to be sure you are allocating these funds appropriately and in a cost-effective manner.

Initially the progress will seem slow, but with time on your side you can accumulate the funds necessary to achieve a successful retirement.

A professional financial planner can help you get and stay on track to achieve your goals.

How do you transition from a retirement saver to spending for retirement?

 Retirement Planning  Comments Off on How do you transition from a retirement saver to spending for retirement?
Mar 082015

Transition from Retirement Saver to Retirement Spender

You’ve spent your working life saving for the big day when you switch to spending for retirement, but how do you do it?

It actually can be quite scarier to switch modes. We can develop the cash flows and model these changes, but psychologically it is still a little disconcerting.

So where do you start? Budget is not one of those nasty four letter words, but it has a similar reputation. The good news is you have your records that will help you identify your everyday living expenses. Simply look at the last year’s records and come up with your expenditures for everything from utilities to insurance payments to clothing and entertainment. Some of these will decline in retirement and others will actually increase.

Next look at your income items like Social Security, pensions, annuities, rental income etc. – all of your steady, regular monthly income sources. If you include this in your expenditure spreadsheet, you will now know how much additional income you will need.

If this number is positive you’re in great shape, the resources you will need from your retirement accounts will be limited to funding major expenditures, gifts, and your legacy plans.

If the number is negative, you will need to come up with a spending plan to drawdown your investment accounts. This can be somewhat challenging to come up with a plan or methodology on how to start to spend down these funds recognizing these will need to last a lifetime. There are a number of variables to take into consideration in this part of the planning process such as: life expectancy, investment returns, asset allocation, drawdown factor, etc.

It may be time to contact a professional financial planner to help you develop and plan out the various options available to you to have a successful retirement plan.

As a financial planner, I will help you understand where you are financial, help you identify your goals, create a plan to utilize your resources effectively so you will know what your retirement may look like.


Do Nothing?

 Wealth Management  Comments Off on Do Nothing?
Mar 042015

When is doing nothing the right thing?

From the Wall Street Journal’s Wealth Advisor site:

Regular investment meetings aren’t a good idea. Chicago-based adviser Mitch Kovitz attributes his advisory firm’s success as much to what it doesn’t do as to what it does. “We don’t have any organized regular investment meetings,” he tells Endless Rise Investor. “We don’t believe it’s a good idea to have a situation where you feel forced to come up with great investment ideas every week. Most of the time you get the best results in investing by doing absolutely nothing.”

Probably Most of the Time!

Behavioral Finance and Investor Mistakes

 Retirement Planning  Comments Off on Behavioral Finance and Investor Mistakes
Mar 022015

Investor Mistakes

This is from Morgan Housel’s article in this weekend’s WSJ NINE MISTAKES INVESTORS MAKE.

  1. FEELING CERTAIN – the future in the market revolves around probabilities not certainties.
  2. EXTRAPOLATING THE RECENT PAST INTO THE FUTURE – the easiest and most common forecast is to assume the future will resemble the recent past – check this out the next time you come across a prediction for the future, particular with regard to the market or the economy.
  3. PEOPLE SELLING FINANCIAL PRODUCTS ON COMMISSION – Keep this in mind “Never ask a barber if you need a haircut”!
  4. FEELING SMARTER AFTER THE MARKET RISES – Virtually everyone who stayed invested in the stock market the last few years has done well – were you smart or just in the right place at the right time?
  5. FEELING VICTIMIZED AFTER THE MARKET DROPS – Rather than blame the market or someone, recognize that downs are just as much a part of the market as ups.
  6. IMPATIENCE -Investing requires patience and discipline. Trying to beat the market or get ahead of it is not a likely recipe for long term success.
  7. LETTING PARTISAN VIEWS GUIDE YOUR INVESTMENT DECISIONS – Long term corporate earnings drive the market not the two year election cycle.
  8. WORRYING ABOUT THINGS YOU CAN’T CONTROL – Put your energy and effort into things you CAN control: return expectations, asset allocation, investment costs, etc.
  9. REFUSING TO CHANGE YOUR MIND WHEN THE FACTS CHANGE – Confidence and consistency are obviously good characteristics, but humility and open-mindedness are also good. Sometimes “I don’t know” and a changed forecast as more data is available are the right thing to do.

This is not an exhaustive list, but these nine things are good ones to keep in mind as you make and follow your investment decisions.

February Stocks & Bonds Returns

 Wealth Management  Comments Off on February Stocks & Bonds Returns
Mar 022015

February was quite a turnaround month!

  • The NASDAQ composite index was up 7.1% at 4963.53 very close to a 15 year high.
  • The S&P 500 closed the month of February at 2104.5, which was a 5.5% gain.
  • The Dow Jones Industrials Average had it best performance in two years with a gain of 5.6%, closing at 18,132.70.

The bond results bear their usual contradictory results. Interest rates were up over the month, which of course means the bond values are actually down.

  • The 10 year US Treasury note ended the month with a yield of 2.002%, which is a relatively large increase from the 1.679% it was yielding at the end of the year.
  • However it was still below its yield of 2.173% at the start of the year and well below the 3.03% yield at the start of 2013.