retirement saving

How to Live in Your Life

photo shows a red pencil and two options with checkboxes that read "today" and "tomorrow"

In the spring, we checked in with friends and family as work and school and much of life was in upheaval. Some folks were struggling more than others. We talked with one friend who sat through meetings in the office about how the switch to remote work was going to be handled when (not if) the team went that direction.

“I heard what they were saying, but I didn’t believe it,” our friend said. Within days, the team was out of the office. The friend was home three weeks before it finally sank in: work had gone remote.

Have you ever felt that way? Like your body has moved somewhere but your mind is refusing to catch up?

“It just feels like I’m waiting for Monday, like we’ll be back any day now,” the friend said.

The shock of change can have lots of effects on us, and we do not fault anyone going through this thought process. It made us wonder, though… What is the pandemic teaching us about time horizons?

You’ve heard this from us before: “long-term investing” is a little redundant. as we believe better chances for success lie in longer time horizons. It’s easy to outperform a strategy for short-term goals if you’re playing the long game.

2020 has been a months-long lesson in this perspective, hasn’t it? As spring turned to summer, a lot of folks had to come to grips with the idea that we could be in this situation for a while.

We are all about taking things one at a time, about taking life one day at a time—but how would our day-to-day change if we were geared toward the long term?

“I could be here a while…”

How could that phrase change your home life? Your retirement goals? Where you want to wake up each day? Your grocery and shopping routines?

Clients, what a time of change and reckoning we’re living through. But we’d like to help you do just that: live through it. Live in it.

When you’d like to talk about this or anything else, please write 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.

HOW TO RETIRE: PANDEMIC EDITION

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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.

Simple or Complicated? You Choose

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The object of a household budget is to end up with control of your finances.

If you Google “steps in budgeting” you will find results ranging from three steps to ten steps. Each one involves accounting for all of your outlays to the penny. The process must be repeated every month, and requires ongoing work to maintain.

Budgeting works well for some people, particularly when money is tight. If you might not be able to afford food unless you pay careful attention, you probably better pay careful attention.

But another, far simpler method works for many others. You pay yourself first, and spend or save what is left over. Paying yourself first can take many forms, but the most fool-proof methods are automatic.

• 401(k) plan contributions at work, by payroll deduction.
• IRA or Roth contributions, by automatic monthly bank account transfers.
• Investment account deposits by automatic bank debits.

You may need to do some arithmetic to see if your monthly investment amounts are likely to get you where you want to go. (We can help with this.) After that is done, all you need to do is pay yourself first!

Some of you enjoy keeping careful records of spending, and we would not discourage that. At a minimum, being mindful about our outlays makes sense. But for others, the simpler method may fit in better to your real life. It is a personal choice.

Simple or complicated? You choose. Clients, if you would like to talk about this or anything else, 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.

No strategy assures success or protects against loss.

Building a Retirement Fund: Two Simple Things

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As a rookie in business, I impressed myself with how much knowledge the work required. It was complicated! It did not take long to figure out that many people believe the same thing about their work.

The point was driven home when I made the mistake of suggesting that working in the ice cream factory must be pretty simple—to a fellow who worked on the production line. “Are you kidding me? You got all your different flavors, plus the ones with nuts or candy mixed in… it’s complicated!”

Like any field of endeavor, retirement planning has those who seek to impress with how complicated it is. But if you get just two simple things right, you can put yourself on the road to progress.

Your Savings Rate. The money you put away is the raw material of your future retirement. The first thing is to set aside money every payday. 401(k) plans make it easy, but you can do it with or without one. It seems like many people starting out cannot save 10% or 15% of their earnings—one needs to buy groceries and electricity, too.

But wherever you start, even at 1% or 4%, you can increase that 1% per year until you get to 15%. Or put half of any raise into the plan—if you get a 4% raise, add 2% to your contribution rate.

Your Long Term Strategy. Put your long term money into long term investments. Various investments offer short term stability or long term returns—but not all of both. If your retirement is decades away, investments that promise a stable value tomorrow or next year do nothing for you in your real life. You might aim for higher returns instead.

(Some people are unable to live with the ups and downs of long term investing. We aren’t suggesting that living with volatility is right for everyone. But if you require stability, you will probably need to save more in order to reach your goals.)

Clients, if you figured these things out long ago, you might pass this along to younger folks. To talk about these ideas or anything else, 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 performance referenced is historical and is no guarantee of future results.

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

 

Working? Here’s Some Basics.

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What has been the biggest factor in helping people end up financially sound in retirement?

In our opinion, it is the availability of retirement plans in the workplace. This article is a primer on the high points. If you are on the job, this may be key information for you.

Employer-sponsored retirement plans have a number of features that may help people build wealth. They go by different names (401k, SEP, SIMPLE, 457, TSA, 403b etc.) but generally share these features:

1. Once you sign up, you invest automatically every payday. It takes no effort or thought month to month—you put your asset-building on autopilot when you enroll.

2. The arithmetic of pre-tax retirement plans can be compelling. For some, for every $5 they contribute, their paychecks may only go down by $4. Taxable income goes down, so your income taxes go down. A potential tax break for the working person—imagine!

3. Some employers match your contributions to some extent. A fifty-cents on the dollar match means if you put in $5, your employer will add $2.50. That’s like a 50% return on Day One! (Employer contributions may be subject to vesting, so you might not keep the whole match unless you stay on the job for up to five years, for example.)

We are always happy to talk to you about your situation, and how you might use an employer plan to get you where you want to go. But here are a couple of rules of thumb. These are general pointers that may or may not fit you, but some have found them useful:

First, saving 10% of everything you ever make is a good way to start on a sound retirement. If you aren’t there and cannot contribute that much, ratchet up your savings rate by 1% a year if you can—every year. Some clients make a habit of putting raises (or half of them) into the plan, or increasing their contribution rate by 1% per year.

Second, if you are a long way from retirement, you can afford to take a long view with the investments you choose for the plan. Why take a short term view on money you probably won’t spend for many years, or even decades? But the choice is yours—most plans give you options.

Clients, call or email if you would like to talk about your situation or any other pertinent 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.

This information is not intended to be a substitute for specific individualized tax advice. We suggest that you discuss your specific tax issues with a qualified tax advisor.

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

Clothes, Money, Wealth–Simplicity

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When I graduated from college just before my 21st birthday and went into business, I dressed to appear more experienced than I was. Suit, tie, wing-tip shoes—you know what I’m talking about. As the years went by, ‘trying to look experienced’ ceased to be an issue, somehow.

Over time, my wardrobe evolved into a new kind of uniform. Doc Martens casual shoes, gold socks, khaki slacks, polo shirt. In winter, add a sweater. When something wears out, replace it with like kind. I might be spending about $150 or $200 per year on my business wardrobe these past many years.

One of the byproducts of this simplified wardrobe is pure efficiency. I spend no time working out what to wear. My socks are all the same color. Choice of slacks is easy: the clean ones. And the polo shirt I select each day is the one whose ‘turn’ it is. My conscious thoughts run more to how to grow your bucket, and not so much trying to match colors on my fashion plate.

Mark Zuckerburg, billionaire social media pioneer, is famous for wearing the same modest clothes every day. Steve Jobs, cofounder of Apple, had the same habit. Anybody who has seen television talent show personality Simon Cowell has noticed his ever-present trademark black T shirt. Many decades ago, scientist Albert Einstein owned a number of suits—all grey.

Some of these luminaries are on record with the notion that the simplicity of standard routines creates time for them—and time is money.

Friends, I am not promoting the idea that you should be as boring as I am, sartorially speaking. There is a different way that standard routines can replace conscious choice and enrich you.

By making your periodic investments automatic instead of the product of a deliberate, recurring decision, you accomplish two things. First, the investment actually happens on schedule, every time—it is automatic. And second, you spend no time working on it or thinking about it every month—and time is money.

This is the way 401(k) and other retirement plans work. We know people who signed up for them, paid no attention for some period of years, and were surprised to find out later that they had accumulated tens or hundreds of thousands of dollars.

Roth IRA’s, college savings plans, and other forms of investment can be set up the same way. Automatic monthly investments may be drafted straight from your bank account, without the need for thought or action on your part.

Clients, if you would like to simplify more parts of your financial life, or talk about any other pertinent topic, 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.

The Roth IRA offers tax deferral on any earnings in the account. Withdrawals from the account may be tax free, as long as they are considered qualified. Limitations and restrictions may apply. Withdrawals 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. Future tax laws can change at any time and may impact the benefits of Roth IRAs. Their tax treatment may change.

The Next Best Thing to Free Money

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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.