April 9th, 2021

By Austin Villodas, Financial Advisor  

Saving for retirement is confusing. From saving too little to claiming Social Security too early, there are plenty of ways retirees mistakenly sabotage their golden years.  Specific planning needs will be unique based on the individual, but there are several overarching themes retirees often look back on and wish they understood before making this transition:

1. Failing to create a plan

Creating a financial plan is one of the best ways to spot potential hurdles to long-term goals.  Financial plans should consider your expected lifespan, planned retirement age, retirement location, and the lifestyle you aim to lead.  A solid financial plan should serve as the foundation when determining your retirement goals, and these plans should be updated regularly as your needs and lifestyle change.

2. Spending savings before retirement
 
Emergencies happen, and we always recommend that clients set aside a portion of their savings for these situations.  However, people often tap money from their retirement accounts when it’s not absolutely necessary.  Doing so triggers taxes, potential penalties, and prevents us from fully realizing the benefits of compound interest over time.
 
3. Disregarding long-term tax consequences

We unfortunately cannot avoid taxes, but we can diversify and take advantage of both taxable investment accounts and after-tax retirement accounts.  In taxable investment accounts, you may owe taxes annually on capital gains or dividends, but those rates are often lower than regular income tax rates.  On the other hand, Roth IRA’s are funded with after-tax dollars but your money, including investment earnings, can be distributed tax-free in retirement.  Owning a taxable account or Roth IRA, in addition to tax-deferred accounts, can help us manage taxes in retirement.
 
4. Claiming Social Security too early

The longer you wait to file for Social Security, the higher your benefit will be (up to age 70).  Your monthly income per year will increase by roughly 8% per year for each year you delay claiming (up to age 70).  Unless you are in poor health, it’s usually best to wait until age 70 to file to receive maximum benefits.  Claiming strategies can differ for couples, widows and divorced spouses, so it’s important to weigh all of your options and consult a financial advisor when making these decisions.

5. Ignoring the impact of inflation

Avoiding the stock market is one of the biggest mistakes that risk-averse investors can make when saving for retirement.  Obviously the market has had plenty of ups and downs, but stocks have returned an average of about 10% a year since 1926.  Bonds, CD’s, and savings accounts cannot compare with these returns.  Asset allocation is key, but don’t risk the possibility of your money not keeping up with inflation, thus causing a retirement shortfall, by avoiding the stock market entirely.

Planning for retirement can be scary, but it doesn’t have to be.  A solid financial plan and the outside perspective of a financial advisor can be especially helpful if your financial life is becoming more complicated over time.

Keywords: retirement, Roth IRA, Social Security, inflation

March 25th, 2021

By Jim Rankowitz, CFP®, CSRIC™, First Vice President - Investments

Let's keep this simple.  5 financial concepts that all high income earners should know are:

1. Income doesn't define wealth, net worth does.
2. Taxes matter - it's not what you make, it's what you keep.
3. Maintaining an expensive lifestyle in retirement requires saving additional amounts now.
4. Have a plan - a goal without a plan is just a wish.
5. Take full advantage of your employer savings vehicles and employer benefits.

February 18th, 2021

by Austin Villodas, Financial Advisor   

Can we still apply the 4% Rule today?

As previously discussed, our goals must be quantifiable or measurable.  When do I want to reach my goal? How much will it cost? How should I plan to invest my money now, to ensure I’m in the best position to reach this goal when the time comes?

For most of our clients, the most pressing consideration when planning retirement saving goals is determining the amount we want to be able to spend/withdraw once we stop working.  The classic guideline is the 4% Rule, which essentially says that retirees should aim to withdraw 4% of their assets annually.  Assuming portfolios are also rebalanced and adjusted for inflation on an annual basis, the rule says retirees can expect their portfolios to last at least 30 years at this rate.

Every situation is unique, so there’s certainly not a one-size-fits-all solution to this question.  We need to first consider our pre-retirement spending level, then what we expect to spend in retirement.  At this point, we can assess the income we’ll be receiving outside of retirement accounts (social security, pensions, etc.) and determine whether the 4% rule should really be applied.

Keywords: 4% Rule, personal finance, retirement calculator, social security

February 5th, 2021

By Jim Rankowitz, CFP®, CSRIC™, First Vice President - Investments 

Sustainability has already become one of the big buzz words of the 2020s, and rightfully so.  There is a growing understanding of the necessary balance between maximum utilization and sustainable usage that is driving both businesses and government to reassess centuries old economic models.  Almost all major corporations now consider sustainability in their business, and most release data on their environmental, social and governance efforts.  Younger generations such as millennials and Gen Z don't debate the legitimacy of climate change or the appropriateness of income equality as previous generations did, and as these groups build wealth through savings and inheritance, they are speaking with their wallets.

As an investor, you should think about implementing sustainability into your portfolio in five ways:

• Avoiding companies or government entities that are engaged in activities that are in opposition to your values or concerns
• Investing in companies or government entities that are engaged in activities that are in support to your values or concerns
• Hiring managers who utilize their scale to directly engage with decision makers in companies or government entities in an attempt to affect their operational practices
• Investing in debt that directly finances specific activities of companies or government entities that align with your values or concerns
• Utilizing firms that engage in philanthropic and community outreach efforts that align with your values or concerns

As the interest in this space grows, so have your investment options, but watch out.  Many firms have noticed this trend and are quickly putting out products which may be sustainable by name only, and don’t truly put in the effort or resources to properly invest according to these principles.

Keywords: investments, sustainability, ESG, sustainable, responsible, impact

January 17th, 2021

by Jim Rankowitz, CFP®, CSRIC™, First Vice President - Investments  

How are you going to achieve these goals?

Picture this....

You are on one cliff looking out over a river.  This cliff is your current financial situation.  On the other side of the river is another cliff, your goals.  We need to create a bridge that will take you from your current finanicial situation to your goals.  Easy!

If you know where you stand financially, and you know where you want to get to financially, well then we can mathematically figure out what is the most efficient way to get there.

Keywords: personal finance, planning

January 17th, 2021

by Jim Rankowitz, CFP®, CSRIC™, First Vice President - Investments  

What are your financial goals? 

Everyone has different goals, values, concerns and considerations.  There are never two individuals who have the same goals, yet there are many common goals that most people have.  Goals need to be financially quantified, meaning we have to figure out how much that goal will cost, and when it will cost that amount to figure out how much you need to save now, and how you need to invest that money to have the highest likelihood of achieving that goal.

Retirement (or Work Optional, as we prefer) is the life stage when you are permanently no longer working.  This often occurs in your 60's or 70's, and hopefully is on your terms.  For many people, the timing may not be exactly on your terms due to forced retirements.  If you are 45 now, and your goal is to retire by 65, then you know you have 20 years to amass a certain savings to help to supplement this life style.

Other goals often include education savings for children or grandchildren, a second home, extensive travel, hobbies, large purchases such as a boat or RV, charitable giving and a legacy for future generations.  Each of these goals has an amount it will cost and a time frame which they may happen in.

Keywords: personal finance, planning, life goals, savings

January 17th, 2021

by Jim Rankowitz, CFP®, CSRIC™, First Vice President - Investments  

Planning your finances can be a complicated matter, and you could go down many rabbit holes digging into details.  My suggestion is to keep it simple.  Focus on a few simple questions: what is your current financial situation, what are your financial goals, how are you going to achieve these goals.

What is your current financial situation?  Understanding your current financial situation can be achieved in two steps.

First, you need to understand all of your assets (investments, real estate, cash, etc.) and then you need to understand your liabilities (debts, loans, lines of credit, etc.).  Subtracting your liabilities from your assets is called your Net Worth.  Your net worth is a primary measurement of your current financial situation.  Successful planning and implementation of strategies should increase your net worth over time.

Second, you need to understand all of your income sources and then you need to understand your expenses.  This can be done by utilizing an expense worksheet or a budget sheet.  Subtracting your expenses from your income sources is show on a Cash Flow Statement.  This is an assessment of your spending habits.  Someone on the right track will have excess cash flow each year.

Keywords: personal finance, planning