retirement planning

We’re in the Orchard for the Fruit Crop

The idea of an orchard is useful in illustrating some of the basic concepts we use in investing and planning. (The metaphor is even among our greatest hits on the blog!) Orchards are long-term endeavors. The payoff from planting trees now arrives years in the future—not unlike retirement contributions.

During our working years, we tend to focus on our account balances—the value of our orchard, so to speak. But in retirement, the key factor is probably the size of the fruit crop, not the value of the orchard. We pay our bills in retirement with monthly cash flow from our accounts, not the statement value.

After all those years of watching the value of the orchard, this is a big shift in thinking. In our working years, the fruit of the orchard goes to plant more trees. When we retire, it is okay to live on the fruit crop.

Further, if we are living on the fruit crop, it doesn’t matter what the neighbor would pay for the orchard, or if the latest offer is higher or lower than the one before. The orchard is not for sale. This is the same way an investment portfolio works. Regular cash flow can come out, even as statement values go up and down.

We were reminded of this story recently, in working with retired clients who are considering a change in lifestyle. Their idea will take a lump sum of capital, plus an increase to their monthly expenses. They wondered whether their financial security would be impaired by the outlays.

The answer for them: the size of the remaining orchard should easily provide a fruit crop large enough to meet expenses. And in retirement, there is no compelling reason to plant more trees every year, to continually reinvest the fruit crop. It is okay to live on the fruit crop—and leave the orchard for the kids.

Clients, if you would like to talk about your orchard, please email us or call.


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We're in the Orchard for the Fruit Crop 228Main.com Presents: The Best of Leibman Financial Services

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Keeping Up with the Joneses’ Retirement Plan

photo shows person looking at watch and holding coffee

Half our staff here at 228Main.com is under 40 years of age, and as you may realize, I’m… not 40.  

And I plan to work to 92.  

Suffice to say, my “retirement” plan won’t be the right model for everyone. But that doesn’t mean these younger staffers—and many clients their age—aren’t working on their own plans and planning. 

A client’s age or generation matter to a certain extent in our line of work. What we’ve noticed, however, is that the most important part is how each person relates to their age.

Think about my goals again. Of course my age is a factor in my planning, but my intention to continue working changes things more. If I were only working for 2 more years, my strategy would require a totally different gear than my plan to earn an income for 20 more years! 

Clients, I don’t mean to suggest you need to know your retirement date now—or even have an exact vision of your retirement lifestyle. In fact, what I want to suggest is that it’s okay if it feels like you’re saving for a fuzzy future self. 

“But how do I know whether I’m track? I should’ve started years ago, right?” We’ve heard this before.  

No guarantees, but if you’ve made it into a conversation where you’re asking someone you trust this question, you’re on your way. From here, it’s about working toward your goals. How your parents retired, how the plan goes in a chart in a pamphlet that gets stuffed into your hand… if you compare your plan to those examples, they can add more anxiety than applicability. 

Reframe. Retirement planning is about your goals, your timeline, your lifestyle. No external marker. 

Feeling behind? Arianna Huffington calls this sense of a ticking clock being in a “time famine,” a state where “your feeling is that it must be later than you think it is.” Feeling starved for time to do what you need to do is no foundation for a strong plan. 

“Yeah but how will I…” 

Ooh, good question! That’s where we come in, and we’d be honored to help you shape this vision. Reach out when you’re ready. 


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‘Tis the Season

photo shows a paper saying "Tax Day"

People of every age and income have them—among the genders, about equally. The average one nationwide is worth $157,000, but you can start one with $100. About 30% of all taxpayers have one, according to the Tax Policy Center Briefing Book

And IRAs (Individual Retirement Accounts) are at the heart of a lot of financial plans and planning. 

We can vouch for their popularity. Just over half of your assets in our care at 228 Main are in IRA accounts of one type or another, totaling more than $60 million (per LPL Financial’s January records for Mark Leibman). 

This time of year is IRA season. Although you may contribute any day of the year, you can still make contributions for the previous year up until Tax Day.  

Here are some basics about IRAs. You’ve got… 

  • Two ways to contribute: put money in or transfer from 401(k) plans by rollover. 
  • Two basic flavors: Traditional and Roth. 
  • Two fundamental uses: save for retirement or draw income from them in retirement. 

People use them partly because they are one of the most widely available tax shelters. How you might best take advantage depends on your situation, but these plans offer thousands of investment options. The maximum contribution is $6,000 per year—or $7,000 if you are over 50. (Rollovers from employer retirement plan have no limit.) 

If you would like to review your IRA plan, see what you are eligible for, check out the conditions and limits, or just talk retirement planning, ‘tis the season! Email us or call. 


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Two Secrets About Money and Time

photo shows a clock sitting in front of a calendar on a desk

“Wealth consists in caring less about what others think about you and more about using your money to control how you spend your time.” — Morgan Housel

We’re fond of the work of Morgan Housel, who strives to help folks change their relationship to money. In his definition of wealth, we notice two key ideas—ideas that could bring some clarity to our financial decisions.

Wealth Isn’t About Anyone But You

It takes only a moment to recognize the potential problems of using wealth to influence how others perceive us. The trappings of wealth can be had with borrowed money: a $10,000 watch for $200 monthly payments, a luxury car for a monthly lease payment. But the watch and the car are not proof of anything.

Ultimately, we do not control what others think. No amount of money gives us that power.

When we focus on meeting our own needs rather than some notion of what might impress others, we require less wealth to gain control and therefore focus. We may be able to retire earlier or work at a more rewarding endeavor on less money, should we choose… which leads us to the second key idea from Housel’s definition.

Time Is Money Is Time

The familiar phrase “time is money” comes to us by way of Benjamin Franklin, writing in colonial Philadelphia. Housel writes that wealth is about using your money to control how you spend your time. In short, he turns the idea upside down: money is time.

Carried to its logical conclusion, when we have enough wealth, we may retire and gain control over the time we formerly spent working. In the form of Social Security and pension benefits, investments and 401(k) balances, the money we’ve earned then buys us time. Money is time!

Housel adds a layer to our understanding of wealth, which magnifies the good it may do us.

When you are ready to talk about your time or money, email us or call. We’ll be ready to talk with you.


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Have Your Cake, Eat Your Cake

photo shows a yellow cake with rainbow sprinkles with one piece gone

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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If These Walls Could Talk (About Retirement)

photo shows four small model houses in the grass in decreasing size left to right

It’s generally a good thing when more cash is coming in than going out.

When our planned retirement income is greater than our expenses, we have the basis for a solvent retirement. The equation could be stated pretty simply: income > expenses.

The bigger part of our work and time and energy is devoted to striving to build your capital. More capital means more cash flow from your capital. We’re trying to get you access to the income you’ll need and want.

But lifestyle decisions may have a bigger impact on our finances, by way of expenses—that other side of our equation.

I recently decided to buy a different home, selling one I had originally purchased for a life chapter now ended. There is no sacrifice involved: the new place thrills me, although it is less than half the size of the old one. It actually feels like an upgrade to my quality of life.

The new place also features less than half the utilities, taxes, maintenance, insurance, and other expenses. Those add up to more than $1,000 in savings per month for me.

When downsizing helps you wipe out mortgage debt, that might improve your annual cash flow by thousands of dollars.

The effect of this lifestyle change on my retirement picture is amazing. Projected Social Security benefits cover a larger fraction of the budget. So a reduction in my need for income produces a much larger reduction in the capital I need to retire comfortably.

Reducing expenses means our money goes farther. Perhaps it means we can retire at a younger age or live with greater flexibility.

Clients, I still intend to work to age 92. And I’m looking forward to a new chapter where my living arrangements make more sense to me.

We are happy to talk with you about your retirement plans and planning, whenever you are ready. Email us or call.

HOW TO RETIRE: PANDEMIC EDITION

photo shows a small wooden wall clock and a calendar with sticky notes and push pins

What a year! The events of 2020 have reached into every facet of our lives. Many careers have been changed or upended.

People working happily at advanced ages have told us they are leery of workplace exposures, so many are on leave or have retired. Others have been displaced from jobs they would have preferred to keep. And some are helping descendants cope with “distance learning” or a loss of childcare options instead of working at jobs.

One friend retired just before the pandemic, planning an ambitious travel schedule. That isn’t happening. And another, who had planned to retire, now works from home: they figure they might as well keep working, since they cannot travel or engage in activities they had planned for retirement.

No matter what 2020 has thrown at you, the basics of retirement planning have not changed. It is a five-step process. We need to figure out…

  1. how much money it takes to run the life we prefer,
  2. monthly income amounts and timing from Social Security or pensions,
  3. lump sums required for one-time goals or needs, like a bucket list trip or boat,
  4. lump sums available from savings, investments, 401(k) plans, and other wealth, and
  5. the sustainable monthly cash flow that might be withdrawn from net long-term investments, after the lump sums are accounted for (we help people with this step).

There are nuances to each step—options to analyze, lifestyle decision to make. Retirement planning works out best when it is a process over time. We have noticed that people learn more about their objectives and their finances as time goes on, and things change. So your retirement plan adapts and changes over time, too.

If the pandemic has shaken things up for you as it has for others—or if it has just gotten to be that time—call or email us when you are ready to work on your plans and planning. Clients, if changes need to be incorporated in your plans, let’s keep talking.

We’re glad to help.