retirement planning

What Are We Going To Do With All This Future?

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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.

Special Relativity

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A friend wrote to me recently about the two kinds of time. The time that gallops onward in an undistinguished blur, versus the time that resolves itself into perfect crystal moments that stretch on to forever. Haven’t we all had those kind of peak moments?

We seem more prone to the ‘undistinguished blur’ sort of time as the years go by, and routines get set. Perhaps breaking the routine, new experiences, are what sets those forever moments apart.

My friend concluded that if there is a secret to keeping time in a bottle, it must involve moving forward – a special kind of special relativity. This notion has some interesting aspects, including one that bears on our work for you, I believe.

Many financially independent retirees have noted that they spent much time when younger worrying about having enough money in later years. Then, when they get there, they discover that money is abundant, compared to time, which is finite.

If we spend our working years on a treadmill of accumulating a fortune for enjoyment way down the road, perhaps we live life in a routine, in which time is an undistinguished blur. This shortens the subjective experience of our lives.

Alternatively, we can work to understand and perhaps moderate what “enough” means, and balance living in the moment against our longer-term objectives. Would this leave us open to more new experiences, new ways of thinking and being, and that sense of moving forward that might bring about more of those ‘forever’ moments?

Hey, I don’t know either. But I’m in favor of more special moments, and less undistinguished routine. Clients, if you would like to talk about this or anything else, please email us or call.

Rule Change: IRA Required Distributions

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Legislation intended to ameliorate the effects of the COVID-19 pandemic changed the rules on IRA required minimum distributions.

The SECURE Act passed in December 2019 changed the beginning date for required distributions to the year after you turn 72. This applies to people who turn 70 and a half after last December 31st. Otherwise the old rule applies.

However, the CARES act signed in March wipes out any required minimum distribution for 2020. IRA owners may still take distributions at their option, but the Required Minimum Distribution does not apply. Taken together, these laws give IRA owners new flexibility.

Your personal situation may be affected by these changes. Your cash flow strategy, Roth conversion strategy, or tax strategy may need additional thought. Or you may want to revisit your retirement account investment strategy. Retirement accounts may be a significant portion of invested assets.

Bottom line: clients, if you would like to talk about how these changes affect you, please call or email us.

New Lifestyles, New Plans

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It seems that life used to be plainly segmented. First we got educated, then we worked, then we retired.

Financial plans followed suit: first we accumulated during our working years, then we spent in retirement – hopefully, not running out of money before we died.

Increasingly in the 21st century, life is sliced and diced. Periods of education may happen at any age. People remake themselves to meet the needs of the marketplace, or their own preferences. Stretches of leisure may be mixed in with periodic bouts of consulting or other work in the golden years.

Some people choose to retire to volunteering or a new business venture or employment in a more enjoyable field, or seasonally, or part-time. There are a lot of ways to live life these days.

In addition to changing lifestyle patterns, people are living longer than ever before.

In this new environment, financial plans and planning need to be more flexible, and serve different purposes. The key theme: flexibility.

1. Investment products that tie your money up for years are less appropriate than before, as changing circumstances could mean an unforeseen need for liquidity.

2. The accumulation of funds in traditional retirement accounts still makes sense. Adequate funds make work optional in later years, or enable volunteer work or even a business start-up.

3. It may pay to pay more attention to tax brackets, as shifting circumstances could change tax status from year to year. Techniques to take advantage of low-bracket years may reduce lifetime total income taxes.

The key, of course, is not what the trends are or what many people are doing, but what YOU want to do. Clients, if you would like to talk about this or anything else, please email us or call.


Content in this material is for general information only and 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.

20/20 Foresight

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The New Year is upon us. Like Opening Day of baseball season, the first day of school, or any other beginning, it is a good time for plans and planning.

We’ve been able to focus on strategic issues in recent weeks, ones that will shape our work for you in the years to come. The general theme? Build an enterprise that will serve you well, and be durable enough to outlive me.

While we work ON the business, of course, we also need to work IN the business, taking care of things for you. Fortunately, we know exactly what the stock market and the economy are going to do: go up and down, same as always. Time tested principles and strategies will always be the foundation of our work with you. They do not eliminate the ups and downs, but they improve the odds we will survive them and come out on the other side.

The items on our list are wide ranging. The more significant ones: finding and developing more good people to join the team, figuring out office space, determining whether we need to form our own Registered Investment Advisor, guiding the evolution of our offerings, and building a more robust financial planning process.

But enough about us. What about your strategic issues? If you want to talk about retirement, changing where you live, sorting out who should get what after you are gone, or simply where to invest for the long run, email us or call.

Hammer or Pliers?

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Recently a client asked us a common question. With a little room in the budget, should more money be added to retirement savings, or a regular investment account? Which one is better?

Of course, the answer depends on the situation. In the early and middle career stages, one might not put funds to be used before retirement into a retirement account. Saving for intermediate term goals like buying or trading homes, or buying a boat or camper, perhaps should be done outside of a retirement account.

But getting it down to fine points, some retirement plans have provisions for using money before retirement without penalty. We believe you can gain an edge by paying attention to the fine points. We like to outline all the alternatives so you can make a good decision.

On the other hand, money to be devoted to growing the orchard – a pool of capital that you may someday live on – should almost always be sheltered from taxes, if possible. This typically means into some form of retirement plan. The tax advantages may make a big difference over the years and decades ahead.

And retirement plans come in different flavors. Individual retirement accounts, employer plans of various kinds, Roth… there are many options.

Just as one cannot know whether the better tool is a hammer or a pair of pliers, one cannot know the best way to invest without understanding the job the money is supposed to do for you. That’s why we talk back and forth! You ask us things about our area of expertise, we ask you things about yours. A meeting of the minds is just the thing to make progress, with a collaborative process.

Clients, if you would like to talk about this (or anything else), please email us or call.


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

 

Saving for a Successful Retirement

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When you picture a successful retirement, what does that look like to you?

To some people a successful retirement means luxury cruises, European vacations, and a big house with a pool for the grandkids. To others a successful retirement might mean a quaint cabin with a porch to watch the wildlife from. Some people picture retirement as never having to work again, others might view retirement as a new stage in their working career where they can focus on their hobbies and passions.

The answer to this question is going to have a lot of impact on your retirement planning. If you want to build your dream house and have a second vacation home on the beach, you will need to save a lot more than if you just want a quiet cabin near the fishing hole.

When you go looking for financial planning advice some sources will recommend saving as much as 25% of your earnings for your entire working career. We have known some impressive savers in our day and watched them build incredible nest eggs through the magic of compound returns. We know many more who saved far less than that, though, and not many of those would consider their retirement a failure.

A cynic might conclude that financial planners have a vested interest in trying to convince you to save and invest as much money as possible with them. A more charitable interpretation might be that they want to make that luxury retirement lifestyle possible for you. That takes a lot of money, and if that is the retirement you want you would do well to heed those aggressive saving recommendations. But you might also consider whether that is the retirement lifestyle you want or need and adjust your financial plans accordingly.

There is no one size fits all plan for retirement, and you might not even know what you want to do with your retirement at this point. Obviously, the more you save, the more options you will have in retirement. But we think it is also important to have a little fun every day. You never know how long you have left, and it does you no good to live like a monk to fund a retirement you may not get a chance to enjoy.

Clients, if you would like to discuss your financial planning, please call or email us.


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

Letters To Our Children #3: The Outlines of Planning

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The object of planning is to figure out your primary aim or goals in life, and what you need to do to get there. The habit of rethinking these things from time to time and assessing your progress keeps you on track.

It is helpful to think in terms of narrative – stories – that describe what you are thinking about. For example, if your story involves retiring to a home in the mountains, your life between now and then will be shaped by that goal. You might vacation in your intended destination, get a feel for the lifestyle, the real estate market, activities, how your life might look in retirement. The narrative may motivate you to do what you need to do to make it a reality some day.

No matter how distant your goal, you’ll be better off if you know how much wealth you might need to get where you want to go. So there is some arithmetic and financial planning to do.

Getting down to details, we think there are several broad categories that need attention in a comprehensive plan. People are better off when they think about and manage:

• Human capital, or earning power, and careers.
• Investing wisely, managing financial assets.
• Spending well, managing the budget and liabilities.
• Residential plans, where do you want to wake up every day?
• Educational funding plans for children or other relatives.
• Retirement intentions.
• Exposures to loss.

In subsequent letters, we will get down to details in each of these areas. Clients, if you would like to talk about this or anything else, please email us or call.


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