financial planning

Our Alzheimer’s Project

© Can Stock Photo / HighwayStarz

Mentally challenging activities and social engagement may support brain health, according to the Alzheimer’s Association.

We love doing puzzles. Some companies have bonds outstanding that are trading at half their face value because the issuing company has evident problems. Which companies have a good chance to survive and pay all the interest and principal due? Which ones are likely to go broke, with losses to bond owners?

To solve that kind of puzzle, we need to read financial statements, do analysis, search through SEC filings, study the annual reports, and review action in the bond market. And that puzzle might lead to another one: how can we quickly put $1 million or $2 million to work for you, with everyone getting an appropriate amount of the bonds at a favorable price?

You provide us with puzzles, too. When can I afford to retire? How should I balance the split between cash liquidity and long-term core investments? What are my options for the dormant 401(k)? How should I pay for a new home?

Figuring out how to maintain the infrastructure of staff and resources to manage the needs of more than a hundred investment advisory clients is another puzzle.

So we have the mental part of the prescription covered. The other piece is social engagement. How many times have you heard me say I’m in business to talk all day? We share coffee and conversation, have breakfast or lunch together, talk on the phone and by email—and increasingly through Twitter or LinkedIn.

In addition to engaging with you, the team in the office is in constant contact with one another to take care of your business.

I didn’t create the enterprise at age forty so that when I was in my sixties I would have a way to reduce the risk of Alzheimer’s. But two of my heroes worked to age 92 in their businesses, working effectively with people they enjoyed, and they were joyful and vibrant all the way.

Anyway, thank you for your role in our Alzheimer’s project. If you’d like to talk about this or any other pertinent topic, please email us or call. (You can learn more or donate to the real Alzheimer’s project at www.alz.org.)


The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.

Bonds are subject to market and interest rate risk if sold prior to maturity. Bond values will decline as interest rates rise and bonds are subject to availability and change in price.

It’s Open Season!

© Can Stock Photo / kingjon

In recent years we have learned a lot more than we ever wanted to about two things. Potentially catastrophic health situations taught us a lesson about insurance and benefits and health care providers. We aren’t the experts—we are not telling you what to do—but we do know a thing or two.

Medicare recipients face the same basic choice that many working age people have confronted. Do you accept some limitations on the doctors and facilities and treatments you might use in return for lower costs or other minor advantages? Or do you go with more expensive arrangements that give you greater choice?

Like many important decisions, this highly personal decision would be a lot easier if we had a crystal ball. If you are healthy and stay healthy, the less expensive plan saves money. But if you want or need specialized care from premier providers, the more expensive option may be more likely to cover superior choices.

(We aren’t kidding about not being experts. Consult advocacy groups or online resources or professionals in the field. This is general information only.)

A long time ago, I was confronted with the option of joining an HMO plan, back when they were first invented. At first blush, the possibility of ever being powerless to switch to the doctors and facilities I believed would save my life was intolerable. We have always paid more to have more flexibility. This is a personal preference.

Lots of times, the centers of excellence—premier health care institutions—are simply not covered by Medicare Advantage plans or HMO’s. (Know your own plan; this essay does not replace information you need about your situation!) Care at the Mayo Clinic, Cleveland Clinic, etc. is not inexpensive.

The only point we want to make is that Medicare Open Enrollment Season, when you might switch from HMO-type Medicare Advantage Plans to Traditional Medicare, runs through December 7th. If you switch in this period, you may purchase supplemental or MediGap coverage with no questions about pre-existing conditions, regardless of health.

The moral of the story is, if your health has changed for the worse and you want more choice of medical providers, NOW is the time to dig in and figure it out. Open season comes but once a year on Medicare. You might start at www.medicare.gov to begin your education.

Clients, we usually end our stories with a request to call or email us if you want to talk more. In this case, please do not! We just told you all we know. (If you are in an employer plan, not yet on Medicare, you may face a similar situation. Talk to your HR department or benefits people.)


The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.

Invest Wisely, Spend Well

© Can Stock Photo / bpm82

A client came in, hat in hand, apologizing profusely for requesting the withdrawal of a few thousand dollars. He seemed sure the request would upset me.

I’m opposed to clients giving their hard-earned money away to scammers or nephews buying bars, so I inquired as to the use of the funds. It turns out that his home needed a modification to accommodate his wife’s changing health.

Of course, I told him that I would be upset if he didn’t use his wealth to make the home improvement. Relieved, he told me that his previous advisor would get agitated about any withdrawals from his investment accounts. It sounded as if that advisor forgot whose money it was.

We devote most of our time and attention and thoughts and words to our version of investing wisely. But what is it all for? There is no reason to be the richest person in the cemetery.

A more balanced view is captured in the short phrase, ‘invest wisely, spend well.’ We aren’t suggesting that you chop down the orchard to sell it as firewood. But it is OK to use the fruit crop to make life better for you and people you care about.

The same lesson was driven home by other friends. In their 70’s, this couple took their extended family on a vacation to a fabulous destination. In the telling, she raved about how great it was while he silently shook his head. I asked him if he had a different opinion. He said they should have started those trips twenty years before.

Many of us need to be diligent about saving and cautious about spending in our working years. Building toward financial independence in the face of everyday expenses can be a struggle. If we do it right, the struggle fades away as the years go by. At a certain point, we may need to warm up more to the idea of spending well.

Clients, we are always thinking about your long term financial position. Your situation seven or fourteen years from now matters—we plan on being here, and we plan on you being here too. But the idea isn’t to pile up the most money you can—it is to strive to have the resources to do what you want and need to do.

Invest wisely. Spend well. If you would like to discuss how this applies to you, please email us or call.


The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.

All investing involves risk including loss of principal. No strategy assures success or protects against loss.

Can I Afford to Retire?

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Perhaps the biggest financial issue people try to understand is their own retirement situation. Will you have enough cash flow to live as you would like in retirement? Will you be able to retire at an acceptable age? Are you on track to retire when you want to?

We use a straightforward process to help people answer these questions. It isn’t rocket science, but it does take some thought. Our process has some fine points, but the basics are simple:

First, how much cash coming in every month will it take for you to feel like you have what you need?

Second, what will your sources of monthly income in retirement add up to? We are talking about Social Security or Railroad Retirement, pensions, rent, and other recurring monthly payments. This step does not include money from your portfolios or 401(k) type accounts.

Third, what is the monthly gap between your needs in Step One and your sources from Step Two?

Fourth, multiply that monthly gap from Step Three by twelve to get the annual shortfall. Then multiply that by twenty to understand how much permanent lump sum capital you will need in order to retire. For example, if you are short $18,000 per year, you’ll need $360,000 (which is $18,000 times twenty).

We like to estimate that you can probably earn about 5% of your investment capital each year in income and gains. So if you have capital equal to twenty times your desired income, you can potentially afford to take out 5% (one-twentieth) per year without having to spend down your capital.

About those fine points: we factor in the rising cost of living, we make estimates about future changes in Social Security and other monthly benefits, we make assumptions about rates of return. There are no guarantees on any of these things. But it always pays to take your best shot at it and plan accordingly. As retirement gets closer, your estimates will get better and better.

There are other factors as well. Sometimes spouses do not retire at the same time. Often there are plans to change residences or move. Retirement may trigger a lump sum purchase of a boat, RV, or second home. We strive to understand all the pieces of your puzzle, and plan for your specific objectives.

Clients, if we may help you improve your understanding of your retirement plans and planning, please email us or call. We love to work on this topic.


The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results.

No strategy assures success or protects against loss.

This is a hypothetical example and is not representative of any specific situation. Your results will vary. The hypothetical rates of return used do not reflect the deduction of fees and charges inherent to investing.

Investing involves risk, including possible loss of principal.

What We Learned from You

© Can Stock Photo / ScantyNebula

One of the privileges of working with you is the opportunity to get to know your life stories. Over the decades, we’ve met a lot of people and heard many stories. We learned a lot about about productive financial habits and instincts from you, our clients.

We have noticed that people who are successful in retirement have some habits that helped them get there. These factors do not guarantee success, of course, but there seems to be a strong correlation. Here are three habits that seem to be key:

1. For all or most of their working careers, they invested regularly—every month, every payday. 401(k) plans, automatic deposits to Roth or other accounts…these put wealth-building on autopilot.

2. They spent less than they made. One client told us, it isn’t how much you make, it is how much you keep. We all know people who make good money and spend all of it–and others who manage to save on modest incomes.

3. They adapted to unexpected surprises without impairing their long term financial planning. Having an emergency fund, realizing that life has uncertainties…these are key to getting back on track through all kinds of times.

The three habits go a long way towards building financial security. In addition to those, some clients were apparently born with helpful investment instincts:

A. A native sense of confidence that the country works through its problems, that economic slowdowns give way to recovery sooner or later. Those who believe that seem to have an easier time waiting for markets to rebound.

B. An aversion to needing to do what everybody else is doing. Fads (or stampedes, as we call them) can be a dangerous way to invest.

We got done at the university a very long time ago. Thanks to you, however, we are always learning. One of the gratifying aspects of our work is the opportunity to pay it forward—to deliver the good news to the next generation. Clients, please email us or call if you would like to discuss this or any other topic.


The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.

Case Study: The Looming Retirement of Mr. & Mrs. C

© Can Stock Photo / lucidwaters

We recently were consulted by folks who are just a few years from retirement. Mr. and Mrs. C had a chance to make a major purchase that they had long considered and would really enjoy. Some people want a camper or a boat, others a cabin…you get the picture. They wanted our help to figure out if it would fit with the rest of their plans and planning.

The process we used to help them is the same framework we use to help people understand how retirement will work for them, financially speaking. Perhaps it will be of interest to you.

There are four kinds of numbers that figure in.

  1. Monthly outgo—how much will it take to run the household in retirement, to live as you plan to live?
  2. Monthly income—what are the pieces of recurring monthly income? Monthly pension benefits, Social Security, and rental income are in this category.
  3. Planned lump sum purchases or obligations to pay. This was the thing that stumped Mr. & Mrs. C. They had a chance to lay out some money that could improve their lives a lot, and needed to know whether it would work out.
  4. Lump sum resources available. Long term savings, 401(k) plans, IRA’s, investments, and money from planned sales of assets are the main categories here.

Fortunately, Mr. & Mrs. C have expected retirement income sources that should sustain their lifestyle in retirement. Once that was determined, we could move on to sorting out the best way to handle the purchase they planned.

There are tax considerations to withdrawing retirement plan dollars, cash flow considerations from taking on debt, and opportunity costs to cashing in investments. We framed the costs and benefits of each alternative so they could figure out what they wanted to do. If you would like to talk about your situation, please call or email us to set a time for discussion.


The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.

Two Ideas About Time

© Can Stock Photo / Klementiev

Two ideas about time affect our plans and planning when it comes to investing. There is conflict between these ideas, so we need to examine them more closely.

The concept of compounding wealth over time is alluring and powerful. Something that doubles every eight years would be sixteen times the money in thirty-two years!

What does thirty-two years mean in the context of planning for a lifetime? It is the distance between age 30 and when people begin to retire. Of two people at age 60, one of them might reasonably expect to be alive thirty-two years later. You may think that thirty-two years sounds like a very, very long time. But 62 year olds will tell you that age 30 seems like yesterday. Thirty-two years clearly is a pertinent time frame for life planning.

This is key because long time horizons are generally tied to long term investment results.

The other idea about time rests in one of the ultimate truths of our existence. We may think about the past, or plan for the future, but where we live each second is RIGHT HERE, RIGHT NOW! The survival of the human species in earlier ages probably required us to be vigilant of potential threats and lurking dangers at all times. There was nothing to be gained by thinking about tomorrow if a lion was going to eat you today.

So human nature has a bias toward focusing on the present. This manifests itself in unhelpful ways in modern society. We tend to think that current trends or conditions will persist—even when they are unsustainable. Some of us seem to believe there will always be time later to take care of longer-term priorities or goals. We have trouble picturing future changes.

The focus on the present also may explain why so many lack the context and background that history can provide. We have heard people say “This has never happened before” about many things that are a recurring feature of our history. By not understanding challenges overcome in the past, today’s problems may trigger an unwarranted sense of danger.

The focus on the present is in conflict with the idea of compounding wealth over time. Our role is to try to make sure that people have what they need for the present, have a cushion for emergencies, and keep a long term focus for their long term investments.

In other words, balance is key. Call or write if you would like to talk about the balance in your plans and planning.


The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.

A Money Plan that Fits You

© Can Stock Photo / wrangler

For 2017 we have resolved to do a better job of listening to our clients and developing plans that suit their needs and desires. We are ready!

Our new short presentation, ‘A Money Plan that Fits You,’ approaches the topic in a step by step way. It can help you understand the three main buckets or portfolio layers that we offer:

• Our core long term investments are intended to provide total returns over the long term. We research opportunities and threats to choose where and how to invest. Inherently and unavoidably, these investments fluctuate in value. That is part of good stewardship.

• Many people need or want a certain amount of ‘money in the bank.’ With this in place, they can tolerate some volatility in the rest of their plan.

• In between ‘money in the bank’ and market-sensitive investments, some people desire a balanced or middle of the road approach. This might produce medium risks and medium returns.

Your circumstances and attitudes are different from those of the next person. By using varying mixes of these three portfolio elements, we can develop a Money Plan that fits you.

Of course we do the arithmetic on your planning issues. Having a portfolio that is easy to live with may or may not get you where you want to go; we won’t kid you about the numbers. But we never forget whose money it is—yours—so decisions on how to invest properly belong to you.

We are excited (as always) about the new year and the improvements we are making. If you would like to see ‘A Money Plan that Fits You’ simply ask. We will send you the short presentation in both PDF and slideshow format. It only takes a few minutes to view.

As always, call or write for a longer discussion, or how our work might apply to your situation.


The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results.

No strategy assures success or protects against loss.

Fruition, What a Wonderful Word!

© Can Stock Photo Inc. / gregepperson

We’re inspired by recent conversations with clients and friends whose plans, as they say, have come to fruition. Fruition—the realization or fulfillment of a plan or project—scarcely begins to describe the satisfaction and joy we’ve seen.

The recent retirees after downsizing to a maintenance-free home, going to art festivals instead of pulling weeds, having more dinners with their descendants, seeing more ball games… people going on that Alaska cruise or the tour of Italy… hobbies becoming true avocations. These are some of the plans we’ve seen come to fruition for people we are close to.

A wise person once said that a plan is a dream put into writing. We are in the business of trying to make the arithmetic work for people who would like to try to make their dreams come true. We’ve written before about the best way to retire and the point is, dreams are personal. What are you trying to do? Where do you want to wind up?

One of the privileges of long experience in our work is seeing the realization or fulfillment of plans made long ago. But life sometimes throws curve balls. So we’ve also seen adaptations and adjustments made by people who would have preferred to avoid the need for adjustments. Not everyone we love lives as long as we wished, health may be fleeting, and circumstances often present a mixed bag. The point is, sound plans usually put us in better shape to deal with the unanticipated.

Money is not the most important thing in the world. But it is also true that resources give us options we might otherwise not have. Wealth may free up our time, and time is what life is made of. Dreams and arithmetic working together may make the best things more likely. If you would like to discuss your dreams and plans in greater detail, please write or call.

The Next Best Thing to Free Money

© Can Stock Photo Inc. / turk12

We are always gratified when clients find themselves with money to invest and their first thought is to put it to work with us. We pride ourselves on our ability to help clients work towards their financial goals, and believe that we provide a compelling service. But regardless of how good we might be at what we do, there are some situations where you can definitely do better with your money elsewhere.

Occasionally, younger clients who find themselves with extra money to invest will ask us whether they should contribute to their brokerage accounts or their employer retirement plan. Sometimes, their employer plan has an employer match they have not yet maxed out, which makes this question a real no-brainer. A dollar-for-dollar employer match is essentially a guaranteed, instant doubling of your investment. We might be good—but we’re definitely not that good. Even if you are unhappy with your employer plan’s performance, an employer match lets you take quite a lot of losses and still come out ahead of a more successful portfolio that doesn’t have the match.

Another situation where it makes sense to put your money elsewhere first is debt. In today’s low interest environment, you might not feel a lot of pressure to pay off cheap loans. However, if you have debt you’re paying 8, 10, or even 12% on, you should put some serious thought into paying off that debt before you invest that money in the markets.

If you pay off $5,000 of credit card debt that you are paying 12% interest on, your $5,000 “investment” will save you $50 a month, $600 a year, like clockwork. You’d be hard pressed to find any other investment that will pay you that kind of return—and if you did, it would likely have many risks associated with it. But once you pay off your debt, those interest payments are gone forever. We can’t really compete with that.

This is basic financial literacy you can use to improve your financial situation before you think about investing. As always, everyone’s situation is a little bit different, and we’re more than happy to discuss the particulars of your situation with you—even if the obvious conclusion turns out to be that you have more important places to put your money.


Investing involves risk including loss of principal. No strategy assures success or protects against loss.