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The New Retirement – “No Rules” Apply

Published January 27, 2017

Our concept of retirement is undergoing a metamorphosis. Demographic, societal, and workplace trends have all converged to offer a stage of life—at mid-life and beyond—that is much more fluid and flexible than we previously thought possible.  When planning for retirement, we are discovering that the “old rules” have been thrown out and that “no rules” apply. 

In other words, our retirement experience has become a matter of personal definition.  Because of increasing longevity and more active lifestyles, many individuals are viewing this time in life as an opportunity to explore their potential. 

Instead of “not working,” retirement has come to mean emancipation, the freedom to choose the activities and pursuits they find the most satisfying and rewarding. 

Not-So-Powerful Powers of Attorney

Published January 13, 2017

Everybody should have a power of attorney—that is, a legal document that gives a designated individual the right to act on their behalf when making financial decisions. The power of attorney is most often used by adult children to make decisions on behalf of aging parents when they are no longer capable of making sound decisions on their own.

The most common decisions that the adult children will make relate to money, and this is beginning to cause problems in some states.  Banks are starting to see cases where the power of attorney is abused by adult children seeking to enrich themselves at their parents’ expense—a form of elder abuse that Alzheimer’s sufferers are particularly vulnerable to.  Wary of being held liable for customers’ losses, some financial institutions have stopped accepting power of attorney documents.  In some cases, adult children with the best intentions have had to take legal action to enforce a document executed and followed in good faith.

Higher Rates: The Tempest in the Teapot

Published January 11, 2017

Anybody who was surprised that the Federal Reserve Board finally decided to raise its benchmark interest rate last month probably wasn’t paying attention.  The U.S. economy is humming along, the stock market is booming and the unemployment rate has fallen faster than expected.  The incoming administration has promised lower taxes and a stimulative $550 billion infrastructure investment.

The rate rise is extremely conservative: up 0.25%, to a range from 0.50% to 0.75%—which, as you can see from the accompanying chart, is just a blip compared to where the Fed had its rates ten years ago.

How to Achieve the Highest Quality of Life in Retirement

Published November 4, 2016

Today’s retirees are finding that retirement requires at least as much psychological and emotional preparation as it does financial preparation. Retirement planning needs to include a thorough assessment of human assets and liabilities along with an assessment of financial assets and liabilities. It is no longer enough for retirees to know how much money they will need to live; they need to know how they will be able to make the most of this new life stage.

By focusing primarily on financial issues, traditional planning reduces retirement to an economic event with its financial objectives marked by a finish line. The dangerous misconception it perpetuates is that, if you hit the finish line, on time and on goal, your planning is done and you’ll have a successful retirement. While it may address the financial goal of creating a sufficient standard of living, it doesn’t address the larger, more important issue of the quality of life.

There is clear evidence that shows the majority of retirees who try to step completely away from work eventually grow despondent, while those who stay engaged and productive, are happier in all aspects of their lives. Many people find the sudden loss of interaction to be especially difficult, and are saddened and disoriented by being separated from “the tribe”.

How to Increase Your Returns with Tax-Savvy Investing

Published October 28, 2016

After market-risk and inflation-risk, which investors take great strides to mitigate through sound investment practices, taxation-risk presents the biggest obstacle to building wealth. A sound investment strategy not only seeks to generate returns on your capital, it also seeks to preserve as much of your capital as possible to keep it working for you. One of the surest ways to preserve your capital is to reduce the amount of taxes you pay on investment income and gains. By incorporating tax-saving strategies into your investment plan, you can minimize the impact that taxes have on your capital-at-work.

With your asset allocation it’s all about location

One of the first rules of wealth accumulation is to sock away as much of your income as possible into a tax-qualified retirement plan, such as a 401k, 403b, or an IRA. This gives you an immediate and long-term tax advantage. However, in terms of an overall asset allocation strategy, the placement of various types of investments among your tax-qualified plans and your non-qualified investment accounts is nearly as important as the selection of investments for meeting your particular investment objectives. At its simplest, you should place your tax efficient investment in your non-qualified investment accounts, and your non-tax efficient investments in your qualified accounts.

Disability Insurance Tips for High Income Earners

Published October 24, 2016

Disability insurance is very important during your working years to protect your income stream in the event you cannot work due to injury or illness.  The insurance is designed to replace a percentage of your earnings, not 100%.  The replacement percentage is typically between 60% - 66%, as the insurers want there to be some incentive for plan participants to return to work.  Benefits generally stop at retirement age (65), as they’re designed to replace earnings not retirement benefits.

Most disability insurance is provided by employers through group plans.  However, group plans typically have an income limit cap that may fall well below 60% of income for a high income earner.  In order to carry adequate insurance, a private policy can be purchased to cover the benefit gap and provide coverage up to 60%-66% of income.

It’s not enough just to buy a policy; It’s important to know that it will pay the benefits you expect when it’s needed the most. Each of these tips provides a vital piece of the disability insurance puzzle when you’re purchasing a disability policy.

The Harm in Financial Journalism

Published October 7, 2016

In most areas of our lives, the more information you get, and the more up-to-the-minute it is, the better we can do business and make astute decisions.  It is interesting that investing is one area where the opposite is true.

We’re not talking here about the second-by-second blips on a Bloomberg terminal that traders and computer algorithms use to make quick-twitch buys and sells.  We’re talking about the normal news reports, cable TV investment reports and investing articles that you’re bombarded with on a daily basis.  In general, the news and data supplied by consumer journalists is almost always harmful to your financial health.

How?  Consider profiles of mutual funds and mutual fund managers.  The quarterly profiles in Barron’s and the articles in Money, Kiplinger’s and the Wall Street Journal tend to focus a bright spotlight of attention on the hot funds—that is, funds that outperformed their peers (and the market) in the previous quarter.  Three months worth of track record is statistical nonsense, but the hot fund manager is interviewed with the breathless deference normally given to a certified genius.  It is interesting that seldom if ever is the next quarter’s genius the same as the last one.  Anyone who invests with the fund of the hour is in grave danger of suffering a regression to the mean—which means losses when compared with the indices.

Planning a Family - What to Save for Right Now

Published September 30, 2016

The decision to go forward with your plans to start a family is a joyous one, but it can also lead to increased stress especially if your financial house has not been child-proofed. Considering that on average, the cost of raising a child now exceeds $300,000, there’s little margin for error for most young families that have other important financial goals to achieve. There’s no reason why you should get caught off guard or caught in a cash crunch as long as you plan ahead. The following family planning checklist contains what is deemed by most new parents as being the most essential steps in preparing for a new arrival:

Why You Need an Investment Coach

Published September 23, 2016

If you believe some of the world’s greatest investors, such as Benjamin Graham and Warren Buffet, it’s not investments that cause people to lose money; rather, it’s people who cause people to lose their money. What is meant by that is investing with sound principles and intelligent practices will always have a greater likelihood of success. However, without a solid investment plan and the discipline to stay the course, investors are much more vulnerable to their emotions which, more often than not, can lead to disastrous results. In other words, an investor’s worst enemy is likely to be themselves.

To use a more familiar analogy, consider a business executive who decides to get back into fitness. To ensure that he had a plan and that he would be doing everything correctly according to his objectives, he hired a personal trainer. They customized an exercise and nutrition regimen and began training together twice a week. After two months, the executive felt as if he knew exactly what to do, so he fired his trainer. After all, he had the plan and he knew the regimen, so why pay for more training?

Beware of Bogus IRS Calls

Published September 16, 2016

Most people have seen bogus emails purported to be from the executors of the estate of Nigerian princes or other obscure foreign notables who want to give them millions of dollars, and sometimes they get bogus calls telling them they can win a lottery sweepstakes or receive debt relief.

But apparently one of the most effective and dangerous telephone scams these days involves what appears to be a call from the Internal Revenue Service.  The phone rings, and a very aggressive person on the other end of the line tells you that you owe money to the IRS.  This debt, you are told, must be paid promptly through a pre-loaded debit card or wire transfer.  If you refuse to cooperate (as, of course, you should), you’re threatened with arrest, suspension of a driver’s license or revocation of a business license.  In the case of recent immigrants, the caller may also threaten deportation.

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