retirement planning

Have You Heard About Unretirement?

© Can Stock Photo / photography33

Retirement is a fascinating topic. New ideas about it seem to pop up regularly.

For nearly all of human history, we worked while we could and stopped only when we couldn’t. The average person had no reasonable chance to accumulate capital on which to live.

But by the middle of the 20th century, things began to change. With Social Security and greater amounts of private savings, most people retired from work at some point. A new lifestyle was born.

Now, anecdotal evidence suggests that some people plan to work as long as they are able—at one thing or another. One client tells us of her plans to do something she enjoys. Another likes working at the state park. Consulting offers some a way to stay engaged, but on a less-active basis, either part-time or seasonal.

We also know people who simply never left their primary occupation after they reached normal retirement age. They enjoy the work and their coworkers, and could not see the point in quitting.

Obviously, this form of “unretirement” is not for everyone. Some go back to school, pick up new or old hobbies, volunteer for causes in which they believe, or spend time helping with family. Travel, reading… the list of things one might do in retirement is limited only by one’s imagination.

Although we each have our own ideas about what retirement means, we all have one thing in common. Our choices will be richer, more varied, and better if we have money. The option to continue working is a better situation than not having a choice because of financial necessity.

Clients, if you want an assessment about the money end of your retirement, 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.

Made It! Age 62, Eligible for Social Security

© Can Stock Photo / AndreyPopov

Yes, at age 62 I could claim Social Security benefits. But I won’t.

After talking with you for decades about your Social Security benefits and the tactics you might use in claiming benefits, I’m looking at my own situation. There may be lessons in it for others, so we’ll talk about it here.

Suppose my benefit at age 62 would be $1,500. That’s $18,000 a year! Why wouldn’t I claim it?

1. If I wait until later, my benefit will be larger. That’s $2,128 monthly at full retirement age (66 and 4 months) or $2,856 at age 70.

2. If I claim now, since I want to keep on working, my benefits would be reduced by 50 cents for every dollar I earn over about $17,000.

3. My benefits would be partly taxable because I would have other income of over $23,000 for the year, basically. (It’s complicated—consult your own tax advisor.)

4. Flexibility: A decision to defer claiming Social Security can be changed at any time in the future, if circumstances change.

Since I want to work to age 92, my guess is that I won’t claim until age 70. But that’s just me. Under what circumstances would it make sense to claim at age 62?

A. If your spouse qualifies for benefits twice as large as yours, check into claiming on your record at age 62 and changing to a claim on your spouse’s record at full retirement age. This gives you some benefit from your earnings record, which might otherwise go unused.

B. If you have an impaired life expectancy, an earlier claim might make more sense. A person who plans to claim at age 70 but dies at 68 ends up collecting nothing.

Clients, this is intended to illustrate some of the basic considerations about Social Security strategy. You can learn more at www.SocialSecurity.gov, where you may sign up for a personal account and obtain personal benefit estimates at any time.

Please email us or call if you would like to discuss this at greater length.


Content in this material is for general information only and not intended to provide specific advice or recommendations for any individual.

This is a hypothetical example and is not representative of any specific investment. Your results may vary.

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.

Can I Afford to Retire?

canstockphoto3351708

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.

Case Study: Home Sweet Home

© Can Stock Photo / irina88w

Quite a few clients are reaching the twentieth anniversary of starting in business with us. So the sixty year olds then are eighty now. A lot can happen in those twenty years!

Mr. and Mrs. Q retired successfully a few years into our relationship, a major transition that ended up well. Then they surprised themselves and me when they decided to build a home in a suburban community and leave their city home of more than forty years.

After thoughtfully considering what they wanted, the Q’s built a beautiful new home and never looked back. It was a great move for them.

A dozen years later, the home may not make the most sense for them. Senior living apartments with some services and meals may be a better option in the near future.

In every transition, we look at four kinds of numbers: lump sums coming in, lump sums going out, recurring monthly income, recurring monthly outgo. And we do the arithmetic to sort out how much invested capital will be available after the transition. Then we can figure out the size of ‘the fruit crop from the orchard.’ (By which we mean the cash flow from invested capital, of course.)

We have gone through this process three times for Mr. and Mrs. Q. First they needed to determine if they could afford to retire. Later, the home-building idea had to be framed up so they could make a good decision. Now, we are working on the next move.

One of the interesting parts of our work is that we never make decisions for you. Usually, the key part of a major decision is feelings, not arithmetic. We strongly believe in doing all the arithmetic that can be done. But no computer can decide where you want to wake up every day, or if you sense that maintaining a home has become too great of an effort.

Just as we never forget whose money it is, we never forget whose life it is, either. We will never kid anybody about the arithmetic, nor kid ourselves by thinking we can make better life decisions than you.

Clients, if you face a transition and want to begin framing up a better understanding of it, please email or call us.


Securities offered through LPL Financial, Member FINRA/SIPC.

This is a hypothetical example and is not representative of any specific investment. Your results may vary.

Case Study: The Life of Mr. S, and Working to 92

© Can Stock Photo / Leaf

Long ago, I met a man in his late forties. He had just resigned one position and accepted another. Needing a place for a 401(k) rollover, he agreed to do business with me. Our methods and access to investments were quite limited then (I was still in my twenties!), but I did the best I could.

Through the years his life evolved and changed; like all of us, he had his share of joy and pain. His wife began to suffer a chronic illness. His industry consolidated which caused some moves from town to town. But his children all ended up in successful marriages and careers, and grandchildren came. I advised him on wealth management throughout, helping him manage challenges from family health expenses and other things.

At sixty-six he retired, fearing he had not saved enough. The size of the fruit crop he needed each year seemed too large for the orchard he had grown, so to speak. We devised a plan that gave him a chance for things to work, although without any guarantees.

Of course, through these years, our knowledge and experience and confidence and capabilities flourished. We grew together.

Mr. S is pushing eighty-one years old now; poor Mrs. S had her disease go from chronic to acute and she succumbed a short while back. Mr. S stays busy helping with grandchildren and keeping up his home.

His retirement finances have worked out well, although this is not evidence of anything to anyone else. Good fortune played a role, past performance is no guarantee of future results, and all that. But I still want to tell you what happened so far.

Over fifteen years, Mr. S has withdrawn more than he retired with—and he also still has a current account balance that is larger than when he started. He tells us it is like the endless coffee refills they have at the café.

I call Mr. S when I need a pick-me-up; his gratitude is boundless. This, friends, is why I want to work to age 92.

That gives us a little more than thirty years to help many more of you get to eighty with more confidence than you ever thought possible. If you are fifty or older now, we will do our best between now and then to earn your gratitude when you turn age eighty. Clients, if you would like to talk about this or anything else, please email or call us.


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

This is a hypothetical example and is not representative of any specific investment. Your results may vary.

Crab Claws, Sustainability, and Your Money

© Can Stock Photo / connect

Perhaps the most sustainable crop in the world is the stone crab claw, a seasonal Florida delicacy. You see, stone crabs are caught in live traps, a claw is removed, and the crab is returned to the water. The claw regenerates, usually growing back larger than before—an ability they evolved to escape predators, which now supplies Florida fisheries with a sustainable catch.

We have come a long way since 1883, when a keynote speaker at the International Fisheries Exposition in London proclaimed that “all the great sea fisheries are inexhaustible.” We later learned to our chagrin that it is, in fact, entirely possible to harvest anything to the point of extinction.

Fortunately we also figured out how to nurture fisheries to produce more fish, and to limit harvest to sustainable levels. You can take out the entire population of fish just once…but you may be able to harvest some fraction of the population, year after year, until the end of time.

A pertinent comparison may be made to your stock of wealth in retirement. Like a fishery, a portfolio can be over-harvested until it inevitably declines and disappears. But with sustainable management, it may produce a recurring crop. This is the endowment principle in action. A dollar may be spent one time only—but if invested, the income from it may be spent every year, in perpetuity.

Decades ago, our life expectancies did not extend long past retirement age. Planning for a short retirement, one could aim at a target sum and figure that it would be spent down over a few years, then there would be a funeral. But with many life expectancies extending decades past retirement, the arithmetic of planning has changed completely. Not every financial planner has kept up with the change.

Sustainable fisheries assure the world that it will not run out of fish. Sustainable portfolios reduce the chance that you will run out of money in retirement. One of our objects is to help you understand what part of your resources may be considered permanent capital, to be invested on a sustainable basis.

This is a process that has some nuances; each of you has a different situation and specific goals. Clients, if you would like to talk about your situation, please write 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.

Investing involves risk, including possible loss of principal.

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.

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.