Does the financial news media help or hurt investors?

I am of the opinion they mostly hurt investors.

Let’s just take a look at some headlines from 2016 and I will also put the value of the S&P 500 Index* next to each one for that day…truth be told I could take headlines from every week going back 30+ years and you would see the same things.

Could The Economy Tank In 2016 ( – January 3, 2016) – S&P 500 closed at 2043 points

US Recession Cries Get Louder ( – January 26, 2016) – S&P 500 closed at 1903 points

Zika Virus A Global Health Emergency ( – February 1, 2016) – S&P 500 closed at 1939 points

Business Bankruptcies May Double: “The carnage is going to be terrible” ( – February 19, 2016) – S&P 500 closed at 1917 points

And then things get real crazy…

Brexit Slams US Markets. SELL! ( – June 24th, 2016)  –  S&P 500 closed at 2037 points

The Summer of Selling: Brexit Slams the Dow Jones ( – June 27th, 2016) –  S&P 500 closed at 2000 points

And where are we now as of 9/26/2019 –  S&P 500 closed at 2977 points

So, from the start of 2016 to the day I am writing this the S&P 500 index is up 45.72% – not counting dividends.  But what did the media try and do every step of the way – Scare the you know what out of you.  Did the market go up and down since the beginning of 2016?  Sure.  Is that abnormal?  Absolutely not!  It is completely normal.

The real question I am trying to get people thinking about is: why does the media do this, day in and day out?  Are they bad people?  No.  But they are people and they are in business to make a profit.  Nothing wrong with that, but just remember what is going on when you watch or read the news.  They know BOLD statements get a lot more eyeballs than “the market is up (a lot) today or down (a lot) today or didn’t move too much today and this is perfectly normal and to be expected so don’t worry and get back to your lives”.  They can’t say that.  If they did, who would tune in day after day or buy their magazine, newspaper or investor report.  And if nobody was watching, reading or buying then they couldn’t sell advertising which is typically their main source of revenue.

Again, they aren’t bad people.  They are just trying to get as many people watching or reading so they can sell more advertisements and make more money and boost their ratings and on and on it goes.  They are not there to give investment advice and make sure you reach your financial goals.  They are not there to guide you on saving for your kids or grandkids college.  They are not there to make sure you can retire someday.  They are there to sell advertising and keep eyeballs attached to their stuff – to sell more advertising at higher and higher prices.  Again, nothing wrong with that.  Just be forewarned that the headlines and “experts” they bring on are there for ratings, first and foremost.  And scary predictions sell more than the simple truth.

The S&P 500 Index is an unmanaged index of 500 stocks that is generally representative of the performance of larger companies in the U.S. Please note an investor cannot invest directly in an index.

This material represents an assessment of the market environment at a specific point in time and is not intended to be a forecast of future events, or a guarantee of future results.  This information should not be relied upon by the reader as research or investment advice regarding any funds or stocks in particular, nor should it be construed as a recommendation to purchase or sell a security.  Past performance is no guarantee of future results.  Investments will fluctuate and when redeemed may be worth more or less than when originally invested. 2486627/DOFU 8-2019

Retirement Plan vs. Retirement Income Plan

One of the questions I am asked the most lately is “what is the difference between a retirement plan and a retirement income plan?”

In my practice, I define “retirement plan” as a strategy to accumulate the wealth needed to retire at a certain age, with a defined income goal.  I work with people to identify their projected budget at retirement, how much they need to start saving today, where they should be saving those dollars and then recommend the investments vehicles that could work with those saved dollars.

Often times, the dollars don’t match their goals.  By that I mean, they have lofty ambitions and either don’t have the money they will need to set aside each month to realistically achieve that goal or they have the money but they don’t want to stop spending today to free up that money for saving and investing.  So we work through more realistic scenarios to find a happy medium.  Once a plan of action is decided on, then we work through where and how to invest the savable dollars they are willing to commit to their retirement plan.  For this work I charge a fee of $600.

When someone is close to or at retirement, then we start talking retirement income plan.  I define “retirement income plan” as a strategy to turn one’s lifetime of savings into income that is meant to last their lifetime.  In fact, I wrote a guide with virtually the same title – see the right margin of this site for how to get a FREE, no obligation, electronic copy of that guide.  So now we are using a different set of tools and strategies to not just focus on growing ones assets, but preserving them and making sure one doesn’t run out of money.  This requires a specialized skill set which I have studied and honed for over 20 years.

After spending about 25 minutes or so with someone on the phone, we can usually determine if a retirement income plan is a good fit at that time.  If it is, I get started crunching numbers to see what they can realistically spend in retirement.  Determine if there are any income gaps.  Educate them on strategies to increase their retirement readiness.  Work to find out which Social Security claiming strategy would be a good fit for them.  Provide advice if retirement is not in the cards at their desired stage based on their goals and spending habits.  That entails solving for how much more they need to save, how much longer they may need to work or show them how much they can afford to spend from their assets and let them decide if they can make it work if they truly want to retire right away.  For this work I charge a fee of $600.

I wish I could say that every person that comes to me is ready to retire right away and start enjoying their Golden Years.  Thankfully, many come in before they quit their job or make other irrevocable decisions with things like a pension plan.  Sadly, some come in after they are done working and ask how I can make a small sum of money provide a large income and do it for 30 years.

There are many other things that go into setting up a retirement income plan – such as cash flow, debt management, how the estate should be handled should they pass away, how will very large bills like assisted living, in-home or nursing home care be handled, etc. But in summary, I break the retirement income plan into 3 parts. An income plan, a tax plan* and an investment plan.

So there you have it.  Hopefully now you know the difference between a retirement plan and a retirement income plan – at least as how I define them.

Separate from the financial plan and our role as financial planner, we may recommend the purchase of specific investment or insurance products or accounts.  These product recommendations are not part of the financial plan and you are under no obligation to follow them. 2486607/DOFU 08-2019

Is Stock Market Volatility a Bad Thing or a Good Thing?

Is Stock Market Volatility a Bad Thing or a Good Thing?

Spoiler alert – it’s a good thing.  There, I just saved you a few minutes of reading. : )

For the A students, let me elaborate.  Volatility is one of the key drivers of the historical higher returns of stocks.  People have to be rewarded for the bumpier ride that stocks usually take over say bonds or savings vehicles from the bank, like Certificates of Deposit (CD’s).  If it was always a smooth ride then there would be no need for the reward – historically higher returns – in stocks.  Everybody would want them if it was just a smooth ride up…but since it’s not a smooth ride the returns have historically been a lot higher than bonds and CD’s to reward investors for the volatility they had to endure.

Key point: volatility is in no way synonymous with risk.  Risk is when you could lose all your money, volatility is just the short-term fluctuations of an assets price.  You may be mistaking normal equity volatility for loss, which it isn’t, unless you sell in fear during a down market.  Obviously, one must consider their risk tolerance, and ability to handle these types of fluctuations in their investments.

Let’s look at history to show this – I will reference the S&P 500 index as my proxy for “the market”.

There have been thirteen bear markets with an average decline of 30% since the end of World War II[1].  The first one started on May 29, 1946.  That day, the S&P Index closed at 19.5.  Today, thirteen “ends-of-the-world” or bear markets later, the index value is 2813 – the day of my writing this.  Stocks are up nearly 144 times over those seven decades and guess what? Earnings are up nearly 144 times over that same time frame.

(To see a Fact Sheet on the S&P 500 index, put out by Standard and Poor’s, follow this link: )

That’s a heck of a lot of volatility to endure since 1946.  Yet, if someone just left their money alone in an S&P 500 index fund their portfolio would be up nearly 144 times (gross of any fees and expenses)   So it’s not the volatility that creates a loss for investors, as just illustrated by their investment being up nearly 144 times, it’s their own behavior.  Selling is how a real loss is created, not riding out the volatility.

One more historical point.  The average intra-year decline since 1946 has been 13.8%[2].  There has been a 15%-20% decline on an average of one year in three.  The last one occurred in 2011 and was 19.2%.

Takeaway, markets are cyclical.  And those of us that BUY during corrections vs. sell, generally speaking, reap the rewards of volatility.  Because without that volatility, the returns wouldn’t have been as great.

So that is why volatility is a good thing and should be embraced if you are investing for the long term.  After all, it is one of the reasons for the historically higher returns.


[2]   (Page 13)

The S&P 500 Index is an unmanaged index of 500 stocks that is generally representative of the performance of larger companies in the U.S. Please note an investor cannot invest directly in an index.

This material represents an assessment of the market environment at a specific point in time and is not intended to be a forecast of future events, or a guarantee of future results.  This information should not be relied upon by the reader as research or investment advice regarding any funds or stocks in particular, nor should it be construed as a recommendation to purchase or sell a security.  Past performance is no guarantee of future results.  Investments will fluctuate and when redeemed may be worth more or less than when originally invested.

2156482/DOFU 7-2018

When Should I Retire?

Few decisions in your life are as complex and fraught with significant consequences as the decision on when to retire. For most of us, this decision will affect more than just ourselves. Your decision cannot be made in a vacuum if you have a significant other, spouse, or others that depend on your paycheck. Many will consider issues such as the size of their retirement and investment portfolios, age, physical health, and the state of the economy. Still, others look to stagnation and boredom with their careers, the availability of a pension or social security, or even an inheritance.

Many books have been written about retirement and there is a wide spectrum of opinion on when people should retire, especially given that people are generally living longer. It was not so long ago that people rarely lived into their 70’s. Today, it is common for people to live to their 90’s or beyond. The fact that our lifespans are increasing with advances in medicine and technology begs the question: should we retire at all?

A very large segment of the country retires at age 62, which coincidentally is the earliest age you can qualify for social security retirement benefits. However, for the eager beavers who decide to do so, they should know that those benefits could potentially be permanently reduced by about 25 percent. For someone who might be around until age 92, that’s a lot of income to forgo. It is possible you may spend three decades in retirement. What the heck are you going to do with yourself for all those years? Visit the grand-kids, play golf, or work in the garden?

Before you even consider the idea of when to retire, engage the services of a financial and retirement income advisor team. Ideally, you will want to work with individuals who have decades of experience working with people similar to you. You will want to look for someone who is not close to retiring themselves.  Imagine how hard it could be to find someone you can trust 10 years from now when your advisor retires.  That is the last thing you will want to do while enjoying your Golden Years.

With all this said, remember that the decision as to when to retire does not just affect you. Your loved ones deserve to be part of the conversation and the decision-making process. Make sure your planning takes into account the financial aspect of retirement and also the life and living parts. You may have bid your spouse goodbye five days a week at 8:00 am for decades. But when that stops, things will change. That change may be for the better or worse, and you need to plan for that, too.


1930518/DOFU 10-2017

Lessons From Multi-Millionaires

I read lots of articles, listen to several interviews, consume many, many books a year and a theme I have noticed from those who are financially successful is that change is necessary.  The way many describe the process is that there are four ways to change anything in your life:

  1. You can start doing something you are not currently doing.
  2. You can stop doing something you are currently doing.
  3. You can do more of something.
  4. You can do less of something.

Many of the topics I hear and read about include goal setting and planning, personal and business development, the power of focus and clarity, as well as the many keys to leading a successful life. I would like you to consider four keys to change as it relates to your own goal of preparing for a financially successful and secure retirement.

You can start doing something you are not currently doing.

Have you made an IRA contribution for the year? Are you a participant in an employer-sponsored retirement program?

If you are a business owner, have you established a retirement program for yourself and your employees?

Have you met with a financial professional to map out a strategy for retirement savings, or are you just winging it?

In other words, are you being proactive in securing your future or waiting for Bernie, Hillary, or Donald to come to your rescue?

You can stop doing something you are currently doing.

Are you ready to stop procrastinating and begin developing a plan for the day your paycheck stops?

Are you ready to stop trading stocks because you realize you are not a Wall Street trading genius?

Will you finally admit that you do not possess the skill set to design a retirement income plan that can see you through a potential three-decade retirement with your expenses rising 2% to 4% each year?

Are you ready to take your head out of the sand and ask for help? We have one shot in life to make it a good one. Will you risk it on your ego and the fact that you know everything and don’t need help?

You can do more of something.

You can save more for your retirement. Studies show that saving 10% to 15% of your income will work wonders over a career length savings program. Are you placing one half of bonuses and tax refunds in your own financial fortress to super charge your savings program? Are you teaching your family the importance of savings? Your children are very keen observers of watching what you do, in addition to listening what you say.

You can do less of something.

You can spend less. You can decide to forgo the $3.85 cup of coffee. You can decide that a used car is a smart economic substitute for a new car. You can stop purchasing things you do not need and instead place the funds in retirement and investment accounts to grow for the future. Remember, there are always a limited amount of resources and you must make intelligent decisions on how you will allocate the resources you have. Make good decisions and your chances of a better outcome will increase. Make poor decisions and you will find yourself hoping that public assistance programs pay more because you can’t live on the small amount they provide.

Put these millionaires keys to practice in your own life and imagine the possibilities for change

As always, if you need any help I am just a phone call or email away.

#1907442 / DOFU 9-2017

As We Head Towards Dow Jones 20,000 And Turn The Page On 2016…

Disclaimer:  I wrote this article in early January 2017, but this information should still provide value.

As we head towards Dow 20,000 and turn the page on 2016, now is the perfect time to map out your financial resolutions for the New Year and beyond.  Here are a few suggestions for making 2017 healthy, happy and successful:

  1. Create emergency savings

Life is full of unexpected emergencies, and having extra cash on hand can help keep a serious illness, home repair, or other sudden financial need from derailing your finances.  Prepare for unpredictable expenses by putting aside the equivalent of three to six months of expenditures.

  1. Make a monthly budget and stick to it

Budgets may sound like a lot of unnecessary work, especially if you’re financially comfortable.  But if you’re not tracking your spending, you may be surprised by how quickly it adds up – and which expenses are costing you the most.  As 2017 begins, set a budget and work on sticking to it for three months.  Track your performance and revise the budget, as needed.  Don’t aim for perfection, instead, try for incremental improvement.

  1. Save more for the future

Creating a disciplined savings strategy is an important way to stay on track for your retirement and other goals.  We recommend keeping separate “buckets” of savings for short- and long-term goals.

  1. Make retirement plan contributions regularly (instead of all at once)

Even if you’re diligently saving, you may be among the 71% of Americans who haven’t put aside enough money for retirement.  One key change you can make is to take advantage of “time in the market”.  Instead of waiting until the last minute to make your annual contributions, give your money more time to potentially grow by making automatic contributions to your account every month. (Source: Washington Post)

  1. Maximize your retirement-plan contributions

Tax-managed retirement accounts are one of the most powerful ways to save for a more comfortable retirement, because they allow you to control your tax liabilities today – while potentially accumulating assets for the future.  Make the most of these accounts by contributing as much as you can.

  1. Pay down high-interest debt

Did you know that 54% of Americans believe they will never pay off their debts?  Don’t let high interest debt keep you from getting ahead financially.  If you’re carrying a significant amount of debt, make paying it down a top priority. (Source: Associated Press)

  1. Create a powerful legacy for the world

We believe that a rich life involves more than financial success and a comfortable lifestyle.  Whether you want to leave something to your loved ones or support causes you care about, take time to address the legacy you’d like to leave.

  1. Review your estate planning and legal documents

Your core legal documents need regular reviews to ensure they keep up with any changes in your life.  If a few years have passed since you looked at your documents, dust them off and make sure that they still represent your wishes.

  1. Stay on top of your health

Healthcare is a major expense for most Americans, especially if serious illness strikes.  Take steps to protect your well-being by building a healthy lifestyle and prioritizing preventative care.

  1. Involve your children and grandchildren in your finances

Fostering financial wisdom is a powerful way to help your children and grandchildren build a solid, stable life – and help ensure you’re able to pass on your values and wealth in the future.  Rather than keeping your finances private from your loved ones, we recommend including them in conversations about your goals and priorities.

Think long-term, not short-term.  Recently, we’ve spoken to many clients who want to ride the post-election growth train.  Just as we’re here to help you from despairing when stocks tumble, we also want to help control the euphoria when markets rally.  This has been a narrow rally, and rallies don’t usually continue forever.  Impulsive choices can challenge your long-term objectives.  As always, it’s important to take the right amount of risk for your unique circumstances and stay focused on the long-term goals that we are pursuing together.

Have a Safe and Happy New Year!


2011373 /DOFU 02/2018

The 3 Keys to Successful Retirement Preparation

The very first question you need to ask yourself when you decide to retire is, “What will it cost to continue to live the lifestyle I am accustomed to and WANT for the rest of my life?”  That may seem like a difficult question to answer, and it can be if you don’t go about it the right way.

The very first step to answering that question is to lay out your current expenses, including your household budget and any other basic, daily living expenses you have.  Once you have determined your household budget and other daily living expenses, the next important question should be…

“Where is the income going to come from?”

In order to retire safely and stay retired, I believe every retiree needs to consider the following 3 things:

  1. A Source of Income to Cover Expenses

This may seem obvious but you would be surprised at how many families I have worked with who didn’t account for the loss of some social security benefit after one person in the couple passes away.  Or, the reduction in pension income if the person who the pension is tied to passes away.  You will benefit greatly from a financial strategy that aims to create an income stream that you will not outlive no matter what, and one that can support your needs in retirement.  This will take care of the basic expenses that you will encounter in retirement (i.e. house payments, utilities, insurance, etc.)

  1. An Emergency Fund

You will need to determine the right amount of capital needed to account for any unforeseeable emergencies in your future.  The purpose of this surplus money is to be used in the event of an emergency such as medical expenses, natural disaster, car or appliance repairs, etc.

  1. A Strategy for Inflation

This may be the hardest part to prepare for, because inflation happens every single day…and we never know how much it will be year to year.  This can make it difficult to determine the exact amount needed to prepare.  However, this money is set aside to compensate for inflation over the period of your retirement.  It can be beneficial to break down your basic expenses and account for each one that will be affected by inflation.

Once you have identified these things, then comes the next step of putting a strategy together to accomplish everything.  Resources on that topic are throughout this website and also in my book, How to Turn a Lifetime of Savings into Income for Life which you can requested on the right hand side of this site.

As always, if you feel I can be of help on your journey please email or book a 25 minute phone session with me – a link to my online calendar/scheduler is also on the right hand side of this page.  I will do my absolute best to help and if I can’t, I will try and point you in the right direction.

1373822/DOFU 12-2015

Retirement Income Strategy – Case Study

The case study you will read below is just one example of the hundreds of people I have worked with.  Their situation is unique to them and although you may find similarities between their situation and yours please don’t take the recommendations we made as recommendations for your situation. Every investor is unique and requires a personalized strategy for their particular situation.  My purpose in sharing this is to hopefully convey that many tools are often used in the accumulation phase of life, but turning ones savings into income for, hopefully, the rest of your life can require different tools and strategies.

We meet with people who come from a wide variety of backgrounds, different careers, and various goals for their life and differing amounts of money to help pursue those goals.  The one thing we hear from almost everyone is this; please help me set up a strategy to spend my retirement dollars in an appropriate manner so I don’t outlive my money.  In a nutshell, what they are saying is “don’t let me go broke before I pass away”.  There are numerous studies and surveys out there that say the primary concern amongst retired people is outliving their assets.  This is a very real fear for many.  This can cause a lot of stress and anxiety during a time when you should be relaxing and having fun.  With a proper retirement income strategy, we can hopefully turn that stress and anxiety into strength and comfort.  This is one of the things we enjoy doing the most.  Here is a real life example of how we did this for one family.

When I first met with this couple, the husband was 59 and his wife was 58.  I will call them John and Kitty (not their real names) and they both wanted to retire in the next 12 months.  They had a sizable nest egg but it was scattered around in a lot of different places.  John had money in a few different retirement accounts that were at various banks invested in Certificates of Deposit (CDs), money held in his employers retirement plan invested in various bond investments, more CDs not held in retirement plans, a few savings accounts and some collectibles, for example gold and silver.  Kitty had money in a couple different retirement accounts invested in stock and bond investment options and a large percentage of the money in her employers retirement plan was invested very heavily in her company stock and other investments.  When I asked them what their plan was for their assets, they stated they always thought they would move everything to CDs.  I believe this was their plan since they were most comfortable and knowledgeable with how CDs worked and liked the interest they had been earning on their existing, older CDs.

Many times, through the course of investigating a client’s current situation and investment strategy, we are able to spotlight some potential flaws or roadblocks.  Often times these potential roadblocks are based on either outdated market information or investor emotions.  For John and Kitty it was a combination. We did some simple math and tallied up all their investments and savings and determined if, hypothetically, they could find a CD that would yield them 5% per year this would, theoretically meet their income needs in the first couple of years and would allow them not to touch their principal at all.  Unfortunately, the current reality of CD rates are such that John and Kitty will be hard pressed to find anything yielding above 1%, leaving John and Kitty with a theoretical 4% shortfall.  They shared with me they never really thought what they would do if CD’s weren’t earning in the neighborhood of 5%.  They had been saving just enough money to make retirement a reality for them using that 5% number.

Unfortunately, they never anticipated lower rates and as I talked with them further they never really considered the rising costs of goods and services as time went on.  They failed to realize they may possibly need more than 5% interest per year to pay for inflationary increases in things like food, gas, property taxes, utilities and health care.  Thankfully, they had a nice nest egg and we looked at a variety of options to see how close we could help them get to their income goal.  In the end, their new retirement income strategy had a lot of moving parts, not just buy a CD every year or two and then buy another one when it matured.  In an effort to meet their needs for retirement but still keeping in mind their risk tolerance, time horizon and general suitability, our recommendations for their new strategy involved:

  • Choosing a different social security timing strategy, in order to help maximize income in the later years.
  • Spending down some of their existing cash leaving the other assets to potentially grow at a conservative rate.
  • Pushing back retirement just one extra year (which we were really hoping to avoid but that extra year of saving money and not spending their assets made a big difference in their retirement income projections).
  • We recommended that Kitty sell her shares in her company stock as that investment no longer met John and Kitty’s current risk tolerance. Also, we felt the money should be invested in in something that was more in line with their goals and objectives.
  • Putting some money into a joint fixed annuity with an optional living benefit, for an additional cost, that carried a guarantee to provide income of a set amount per year, every year, as long as one of them was alive. They still have control of the assets in case things changed and they needed flexibility.

We explored various types of fixed annuities that allowed some growth potential but had that all important guaranteed income for life provision as well (either via annuitization or the guaranteed annual income provided by the optional living benefit rider).  We recommended using a fixed annuity with a living benefit rider.  This helped secure a place for growth of principal long term, while also providing, through the rider, certainty that there would be a minimum amount of income at some point in time.

In the end, by recommending a variety of changes to their savings and investment line up and working for one more year, they were able to retire and perhaps more importantly, they have been enjoying retirement ever sense.  In developing their retirement income strategy considerations were made to account for the rising costs of goods and services.  We accounted for one or both of them living well into their 90’s.  Lastly, we helped make sure when they both pass away, their wishes to leave a legacy to their children and grandchildren can be fulfilled.

Over the years the more and more of these strategies that we’ve developed, we have learned many people approach retirement as having a certain amount of money set aside and while that is very, very important, there is a lot more that goes in to setting up a retirement income strategy.  The strategy should account for things like longevity, taxes, the rising cost of goods and services, when to take your social security income and your wishes for what happens to your money should you be taken from us.  We hope this one real life example gives you a glimpse into some of the aspects of setting up a retirement income strategy and may help provide you with some considerations on your journey.

Article Written By Larry Tate

This is a hypothetical example for illustrative purposes only. It is not indicative of any particular investment or guarantee of future performance.  Investments will fluctuate and may be worth more or less than originally invested.  Past performance is not indicative of future results
Financial Advisors do not provide tax or legal advice and this should not be considered as such. Please consult a tax or legal professional for advice regarding your specific situation.
An annuity is a long-term, tax deferred investment vehicle designed for retirement.  Earnings are taxable as ordinary income when distributed, and if withdrawn before age 59 ½, may be subject to a 10% federal tax penalty.  If the annuity will fund an IRA or other tax qualified plan, the tax-deferral feature offers no additional value.  Not FDIC/NCUA insured. Not bank guaranteed.  Not insured by any Federal Government Agency.  There are charges and expenses associated with annuities, such as deferred sales charges for early withdrawals.  Living benefit riders and agreements are available for an additional cost and are subject to fees and restrictions.
All guarantees are based on the financial strength and claims paying ability of the issuing insurance company.
1992019/DOFU 2-2018

When To Start Your Social Security Benefits Is Not An Easy Decision

We have had the privilege to help many retired people live out their retirement with a sense of pride and independence. The one concern we very rarely see is that they have accumulated too much money in retirement accounts to completely remove anxiety and nervousness from their life. Social Security can play a big role for most retirees and is often times overlooked. There are many different ways to receive your social security payment and for the most part people either receive payments as early as possible or wait until full retirement age. In this article, we will share a case study from a real life client and how they were able to help maximize their social security benefits. Social Security isn’t a “no brainer” like society tends to suggest. Please understand this should not be considered as a recommendation to pursue a particular financial strategy or purchase a particular product, your situation will be materially different and you should consult your financial, legal and tax advisors regarding your particular situation. Instead, this case study is simply here to help educate you on what we see as a common view of social security and the potential benefits should you review your comprehensive financial situation.

In this particular situation, the husband and wife were middle class income earners and they were very good about living within their means. They saved ample dollars for retirement and were rewarded greatly in their retirement, as financial stress was minimal in their home. The husband retired at 62 and thought his best option was to take his social security payment as earlier as possible. His wife worked until age 62 as well but she planned to take her social security payment at age 70. They had sufficient savings to bridge their financial needs until age 70, so delaying her payment was not an issue. They had about 2 ½ years between their ages and had longevity in their family. Both had parents live into their late eighties to their mid-nineties.

Our conversation started with “how did you decide when to receive your social security payment?” With an “I didn’t give it much thought” kind of look in return, we discussed the various ways to receive their payments. With a quick review of the wife’s social security statement and the husband’s payment information (remember, he’s already receiving his payment), we ran a social security timing report. The purpose of the report is to help aggregate both pools together and aim to maximize the amount of money they receive over their lifetime.

What this report detailed was the following:
The husband, though he has already elected his benefit, should consider suspending his benefits at age 66. Eventually, he could resume his benefits once he turns 70. His benefit amount would increase by 8% each year. This is under current social security rules.
The wife should consider applying for spousal benefits once she turns 66. This would be roughly half of the husband’s benefit amount at his full retirement age. She continues to receive this payment until she reaches age 70. At age 70, she applies for her full benefit amount (which has grown by 8% per year since her full retirement age) and the payment she was receiving from her husband stops. The strategy compared to the “both of them receive payments at age 62” could generate over $250,000 more during their retirement assuming they live to age 95. Even if they lived to 85, the additional amount they received was nearly $100,000

This is one of the many stories we could share about working towards maximizing your social security payments; unfortunately, many retirees overlook this one important decision. If you have not already reviewed this piece of your retirement strategy, please contact us to see how much money you may be leaving on the table.

Written by David A. Nordmeier, CFP®,CFS.

This is an example for illustrative purposes only. It is not indicative of any particular investment or guarantee of future performance.
Financial Advisors do not provide tax or legal advice and this should not be considered as such. Please consult a tax or legal professional for advice regarding your specific situation.
2005163/DOFU 1-2018


6 Key Questions Every Retiree SHOULD Answer


A Reality Check for Those Retired or Close To It

The clock is ticking. Baby boomers are getting within a 9 iron of their golden years. Most have finally come to grips with the fact that despite the ideal retirement pictured in glossy brochures and commercials — that retirement for most won’t be close to what they envisioned in their earlier years.

All the best laid plans, calculations and formulas have given way to one glaring reality: This is what I’ve set aside for my retirement. Now, how on earth can I make it last?

In other words, it is time for a reality check and a meaningful conversation about your retirement income strategy.

New research finds the magnitude of the retirement savings shortfall in America today is staggering. The U.S. Retirement Savings Deficits could be as high as $14 trillion*. The “American Dream” of retiring after a lifetime of work will be long delayed, if not impossible, for many.

Acting sooner rather than later can greatly improve your own retirement security.

*Source: The Retirement Savings Crisis: Is It Worse Than We Think? The National Institute on Retirement Security, June 20, 2013

Question 1:  Do you know how long your money will last if you stop working today, invest your nest egg as safely as possible and try to maintain your current standard of living?

One of the greatest fears of retirees today is running out of money before they run out of life. This is an important question to answer and lies at the heart of Retirement Income Preparation. These answers are even more critical given the difficulties in the financial markets and larger economy that have significantly impacted retirement savings over the last decade. While it would be nice to have a one-size-fits-all formula when it comes to how long your money will last, the truth is there are many factors that go into that equation.

Question 2:  Do you know which one of the 567 ways to claim your Social Security will maximize the lifetime benefits?

The Social Security Administration provides you with 567 ways to claim your benefits. The Social Security handbook has 2,728 separate rules governing your benefits, yet they provide ZERO employees to advise you on the best strategy. Choosing the right benefits at the right time could mean tens of thousands of additional dollars in retirement. Making a mistake COULD cost you up to 72% of your benefits. And it’s absolutely critical that you get it right because soon after you claim, your benefits become permanent. There are no Do Overs. Social Security is enormously complex. For a couple, age 62, there are over 100 million combinations of months for each of the two spouses to take benefits.

Source: 44 Social Security “Secrets” All Baby Boomers and Millions of Current Recipients Need to Know – Revised. By Laurence Kotlikoff, Forbes Magazine, July 3, 2012

Question 3:  Do you know the proper mix of stocks versus bonds in a retirement income portfolio?

Asset allocation is an investment strategy that attempts to balance risk versus reward by adjusting the percentage of each asset in an investment portfolio according to the investor’s risk tolerance, goals and investment time frame. Asset allocation is based on the principle that different assets perform differently in different market and economic conditions. One of the cornerstones of financial preparation for retirement is that an individual’s exposure to higher-risk assets like stocks should decline as his or her retirement date nears. Since risk level and portfolio return are directly related, your asset allocation should balance your need to take risk with your ability to withstand the ups and downs of the market.

Question 4:  Do you know how big of a nest egg you’ll need as you enter retirement if you’ll be retired for 20, 30 or even 40 years?

Have you ever considered how big of a nest egg you’ll need to retire comfortably if your retirement could last 20, 30 or even 40 years? The range of answers is all across the board. The low end suggests you’ll need to have saved 8 times your pre-retirement pay in order to maintain your current lifestyle during retirement, with the high end more like 20 times your annual salary. Estimating what your retirement expenses will be can give you a ballpark figure for the amount of savings you’ll need. It will be imperfect because it requires making assumptions about factors such as how long you will live, what the inflation rate will be and how your investments will perform. Nevertheless, making an estimate is a valuable exercise.

Question 5:  Do you know the appropriate spending rate from your nest egg to insure your savings last your lifetime?

If you thought it was hard to grow a nest egg, try living off one in retirement. A lot is written about how to build a nest egg, but not as much about taking money out. Most have no idea how dangerous it is to withdraw too much from their nest egg each year. As baby boomers make the transition from career to retirement, more and more people are grappling with the question, How much can I safely withdraw from my nest egg each year? In today’s low interest rate environment, that poses even bigger challenges. The presumed safe withdrawal rate of 4% has come under fire in recent years. What’s an investor to do?

The Wall Street Journal said a 2% withdrawal rate is bullet proof, 3% is considered safe, 4% is push­ing it, and with 5% or more, you risk running out of money, especially if you live into your 90s.

Source: The Wall Street Journal: How To Survive Retirement – Even If You’re Short On Savings

Question 6:  Do you know how the rising cost of health care could affect and even decimate your retirement income strategy?

It’s a fact that healthcare costs have increased at a record pace, and many believe they will continue to rise. Everyone knows the old saying about death and taxes. But there’s one more certainty everyone who retires will need to face: the staggering cost of healthcare. Most people don’t appreciate the significant impact healthcare costs can have on their retirement savings. Yet these expenses can overwhelm even the best-laid retirement strategy. Nearly 9 out of 10 are flying blind when it comes to understanding, what could be for many, one of your largest costs in retirement. If you’re like most, you’re underestimating these expenses. Many retirees are not prepared for the high-cost of medical care in retirement when they are no longer part of a company plan. And, too many people believe that Medicare covers most or all expenses. The reality is that Medicare only covers a percentage of your medical bills.

Source: Putnam Investments Lifetime Income Score in collaboration with Brightwork Partners LLC

We have 6 more questions that you should know and answer.  To get the next 6 Key Questions Every Retiree Should Answer, Click Here and get the Guide.  As a bonus, we also included in that guide 6 Steps you can take to get your retirement strategy on track or back on track!  The guide is a PDF file and you can save it or print it and start using it right away!!

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