Sometimes new clients visit our office with apologies ready: they don’t exactly know what they want or what they might need in the future. And that’s okay. Plans and hunches and visions… It’s all welcome.
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We are in the business of talking, and nearly all of that talking is with you: we’re in the pursuit of connecting your money to your life. Often, we talk about saving for and spending in retirement. You’ve heard us talk about the strategies available with Roth IRAs, in particular, a few times before.
We still believe there are advantages available here for many investors (never being taxed on gains, of any size? yes, please). But we want to add to the mix another idea. We’re recognizing a trend that merits consideration.
Life for some can seem quite linear: each milestone follows in turn. You’re born, you go to school, you work, retire, and that’s that. A straightforward path, right? Now, we’re seeing more journeys that look like they swoop around, like life is written in cursive.
Some of these deviations have been becoming more common, like a “gap year” to gain more experience out in the world after high school but before college. This is a swoop we can choose and plan for.
Other deviations are more like being thrown for a loop. On short notice, some of us find ourselves stepping away from work to care for a parent—or other family member—due to a growing health concern. Others may discover what we want later in life and find ourselves taking on seasonal work, with long stretches for travel or other passions.
The traditional retirement savings vehicles were engineered for more traditional retirements. They are likely to assess a 10% penalty for withdrawals before you turn 59½-years-old. While you can take contributions out of a Roth IRA penalty-free, doing so also takes away the chance to grow more tax-free income for the future (the opportunity for growth, not a guarantee of such).
If there’s a chance that Future You would like to retire in stages or in a unique order, this swoopy life may be something to start talking about now. We have friends who are preparing to travel the world while they still can; we have friends planning to be available to a loved one when they need it.
What’s on the horizon for you?
It could be that a balanced taxable account may be a useful complement to traditional retirement holdings. You would pay tax on capital gains, but if you won’t be earning income—or will earn considerably less for a spell—your tax rate may be lower anyway.
Want to talk through what this could mean for you and yours? Let’s talk, anytime.
A Roth IRA offers tax deferral on any earnings in the account. Qualified withdrawals of earnings from the account are tax-free. Withdrawals of earnings prior to age 59 ½ or prior to the account being opened for 5 years, whichever is later, may result in a 10% IRS penalty tax. Limitations and restrictions may apply.
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Play the audio version of this post below:
Sometimes life’s big milestones arrive in a neat, straight line. And sometimes that’s just not what happens—or what we want to happen. How do we plan for a swoopy life?
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They say you can’t have your cake and eat it, too. Once you eat the cake, the cake is gone. No surprise, right?
The same thing might be said of your retirement fund. It is there for you to spend as you see fit—but once you spend it, it is gone.
How quickly you go through your retirement savings is a much bigger decision than how quickly you go through a cake. No one can tell you what the right answer is. Your retirement lifestyle might look very different from your neighbor’s retirement lifestyle.
Some people hope to leave as much possible in their estate to provide a legacy for children and grandchildren. Others plan on spending as much as possible to enjoy the fruits of their own labors.
Some people might plan to save the lion’s share of their savings to offset the healthcare costs they anticipate in their later years. Others plan to spend a big chunk up front, while they still have the good health to enjoy some options.
None of these plans are inherently superior to any of the others. It is your money, after all. For many of you, retirement savings are the sum of an entire lifetime of work, and you alone get to decide how to direct them.
What’s our wish for you? That you navigate these choices with your eyes open to the consequences.
So here’s one important difference between your retirement savings and a cake: when you set aside a certain amount of cake for later, you will have exactly that much cake in the future: no more, no less. When you invest your nest egg, over time it may generate extra income and potentially appreciate in value, giving you more to spend in the future.
There are no guarantees, of course. Depending on how aggressively you invest, you risk losing some of your value. This is just another tradeoff you need to weigh in planning your retirement.
When we make our retirement choices carefully, the consequences are never a surprise. You can have your cake. You can eat your cake. Your call.
Clients, when you have questions about this or anything else, please call or email. Let’s talk.
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COVID-19 has caused shifts and pivots across organizations and even whole industries. Along the way, many folks have decided to delay or cancel what would’ve been some wonderful milestones: a long-awaited family trip, a wedding, a move across country.
Some families will still be wrestling with such decisions for the months—and maybe years!—to come.
A college education is a common enough savings category, but some are rethinking their investment goals with so many changes coming for institutions.
We realize it can be hard to get perspective right now. The stress of the upcoming school year is looming, and prospective students will be making huge decisions based on information that seems to keep changing.
We wouldn’t dream of suggesting the “right answer” for you or your family. Here, however, we’d like to offer a little distance on some of the issues at the heart of this topic.
Is it worth it? Schools are being forced to experiment with how they will structure classes and campus life, so as consumers, many families are questioning the value of the experience they’re paying for. To zoom out, we recommend remembering what a degree will mean for a person after they’re done with it.
Yes, we want students across the country to enjoy a safe, rich, and rewarding couple of years at school, but both the journey and the destination should be part of the equation.
One thing that the pandemic won’t suddenly change? The long-term value of a college degree.
“The lifetime payoff to earning a college degree is so very large, in health and wealth, that it dwarfs even high tuition costs,” writes economist Susan Dynarski. “College is an especially smart choice during a terrible job market.”
An education is not armor against all the problems ahead, but it may still be a sound investment and worthy savings goal for you or your family.
Clients, if you want to talk through this or anything else, call or write.
It is tempting to think of the future as a place of endless possibilities, fulfilled dreams, unleashed potential. “What are we going to do with all this future?” is the work of Spanish artist Coco Capitan, in collaboration with the Gucci fashion brand. It seems to capture that spirit of possibility.
Our work together with you is about the future. But when you get down to it, saying yes to one goal might mean saying no to others. We cannot do everything.
Resources are finite. As we think about retirement destinations or second home locations, choosing a Rocky Mountain high might mean that finding your beach is out of the question. Relocating may mean less time with family. Retiring at a younger age could mean getting by with less money.
This is why we invest so much time in striving to understand and clarify your priorities.
Of course, creative thinking may let us meet apparently contradictory goals by making thoughtful adjustments. A more modest home in one location may free up money to travel other places, or even have a second home. (This is the strategy I employ to live in Floribraska, Florida and Nebraska.)
Clients have chosen to retire and work at the same time by making the retirement-age job a part-time or seasonal or flexible hours arrangement in a field they enjoy.
Some couples choose to spend weeks each year pursuing different interests. Golf in the sunshine is hard to reconcile with watching grandchildren play winter sports up north.
So your own answer to ‘what we are going to do with all this future’ may take a lot of thought to get your priorities defined. Some creativity or adjustments may be needed to make the most of it. This really is the first step in long term planning.
Clients, if you would like to talk about this or anything else, please email us or call.
I’ve been electrified by James Clear’s book, Atomic Habits. Examining the central message, you may be able to see why:
“Small habits don’t add up. They compound. It’s remarkable what you can build if you just don’t stop. The business you can build if you don’t stop working. The body you can build if you don’t stop training. The knowledge you can build if you don’t stop learning. The fortune you can build if you don’t stop saving. The relationships you can build if you don’t stop caring. Small habits don’t add up. They compound. Tiny changes. Remarkable results.”
This might help explain the wealth I’ve seen you build with lifetimes of work, the stellar careers and businesses so many of you have had, the warm network of relationships so many of you enjoy.
I’m heartened by this message when I think of building a sustainable enterprise to serve you more reliably, staying healthy so I can work to age 92, and meeting other, more personal challenges.
It is exciting, too, to think about bringing the message of effective habits to generations just beginning to save and invest and make career decisions.
Clients, if you would like to talk about this, or anything else, please email us or call.
The narrow part of our duties here at 228 Main is striving to grow your buckets. (By this we mean trying to help you build your financial wealth.) But a much broader range of topics comes into play.
The next layer out from investment research and portfolio management, equally important, is effective investing behavior. Some of you seem to have been born with great instincts; others have proved to be trainable. We invest energy and time into describing what effective investing requires, as accurately as we are able, to help you be sure we are all on the same page.
Then there is the matter of how to connect your money to your life. What do you need in terms of portfolio cash flow or withdrawals to meet your goals in the real world? Which forms of investing for retirement are likely to get you to your goals? How much of an emergency fund is optimal for you? We work with you on nearly any money question.
If you take a step back from that, you find a whole philosophy of money and life. We attempt to provide perspectives on things that will help you and us find confidence, comfort and happiness with the choices we make. Achievement, reaching goals, spending wisely (as vital as investing well), perspective on events of the day, economic history, biographies of giants who have come before us… all find their way into our communications.
We get paid for managing wealth. All this other stuff is intended to help you have the resources you need to live as you would like to live. (We have longed believed that the better off you are, the better off we are likely to be.) Whatever counsel you need from us is free; anyone may read our essays, watch the videos, and follow us in social media.
Speaking of that, if you have reason to wish others could see our perspective on money and investing and life, you may point them to our digital communications. Better yet, we will add anyone you want to the list for our weekly short email—friends, children, whomever. Of course, we are too busy trying to grow your buckets to bother them, so being on the email list is a low-risk proposition. Just let us know.
Clients, if you would like to talk about this or anything else, please email us or call.
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