Retirement Answer Man

My financial records are a mess. Are yours?In this episode, I'll outline the framework I'm going to use to get my recording keeping in order. Could you find that important docuement if you needed to?If not, listen and we can get organized together.In the Retirement Tip of the Week, I'll give you a framework for lending money to friends or family so you can help out without ruining the relationship.

Is the stock market correction here?  In the last week of July the S&P 500 index lost 2.7%. The worst weekly loss in over two years. It didn't take long for the sensationalist headlines to pop up. Here are two of my favorites. Warning: That plunge in stocks is just the beginning MarketWatch.com 3 market warning signs predict 20% stock tumble Insight: When these indicators flash together, it’s time to sell MarketWatch.com Strategies to Help You Handle Market Corrections I'm all about investing wisely for retirement. If you are a trader, market timer, trend follower, etc. you might want to click away. For the rest of you, here are my suggestions to help you invest wisely and sleep better at night. 1. Have a Plan Sounds simple but most people don't. They invest based on intuition, emotion and trust rather than facts, process and purpose.  Your plan doesn't have to be elaborate it just needs to be clear and actionable. It should include:Goal for investment assetsInvestment timeframeRisk/reward targetTarget investment allocationRebalancing policyCommunication and evaluation schedule2. Have adequate cash reserves More than anything, this may the most practical strategy to weather market corrections. One of the biggest mistakes you can make is  to sell an investment at the wrong time because you need the money.With interest rates on savings accounts near 0%, it is tempting to put all your money "to work". Don't. Cash reserves give you the flexibility to weather uncertain times in your life as well as the markets. (in episode #17 I discuss cash reserves). Here are the basics of cash reservesEmergency fund (3 months to 2 years living expenses) + Expected expenses within the next 12 months=Less emotional decisions 3. Have at Least a 3 Year Investment Timeframe Anything under a three year time frame is speculating not investing. Investing wisely requires time. 4. Be Well Diversified Every time I say this I feel like the teacher in the Peanuts cartoons...Blah, Blah, Blah. Diversification and asset allocation help you avoid the trap of trying to pick winners and losers. They position you to participate in the economic growth of the world. That is the point of investing.  The more you try to game the system, the more likely you'll miss out (Here is a recent episode on investing mistakes).One thing you can do right now is make sure your allocation is rebalanced back to the target you should have set in the beginning. Over the last 4 years, the stock markets have done quite well. If you haven't rebalanced to your target you probably have a lot more equities than you originally intended. This could mean you have more volatility than you bargained for. Studies have shown that rebalancing your portfolio regularly helps you achieve better results. Rebalancing Feels bad, but works good. 5. Understand Market Corrections are Healthy for the Markets and Your Portfolio You've heard it said that investing is like gambling. In a sense that's true. If you invest based on intuition, emotions and the advice of the financial press, you're just one of the suckers walking into the casino. If, however, you invest based on history, research, process and prudence you are more likely to have the odds of the casino over the long-term. That is investing wisely. Retirement Tip of the Week Try it Before You Buy it You need to be very careful when you are in the Retirement Nesting stage of life. Retirement Nesting occurs during the 3 years prior to retirement and the 2 years after you retire. This is the time of retirement lifestyle dreams. AND a time when you are susceptible to marketers selling the retirement dream.The Retirement Nesting stage is a danger zone for poor financial decisions. Don't fall for the emotional urges to buy an R.V., vacation lot, condo or big toy. They can be great but you need to be certain, very certain, that it is something you will truly use. Just recently, I had to help a gentleman unload a beach condo he purchased on a whim 5 years ago. He lost over $100k on the deal (and only used once). Don't be that guy.Here are some tips to avoid the same mistake:Do LOTS of research over  a 12 month period before you buyAlways pay cash.Rent the object of your desire for the first 2 years to see how much you actually use it. It is easy to rent anything anywhere nowadays.Test drive vacation homes, R.V.s and resorts over the first 5 years of you retirement. It can be great fun and save  you from making a costly mistake.Resources Discussed A Field Guide to Market CorrectionsVacation Rentals By Owner (VRBO)Episode on the Importance of Cash ReservesCommon Investment Mistakes

The cost of a financial misstep in retirement can be devastating. During retirement it is hard to "earn" your way out of poor decisions. Poor planning or a big loss during retirement can ruin your financial security. In this episode I discuss the most common retirement "screw ups" I've seen and how you work to avoid them. 7 Ways to Screw Up Your Retirement Having unrealistic return expectations for your investment assets (too high in 1990s, too low in 2007-08) Crazy as it sounds, in the 1990s people retired thinking they could earn 15%-20% per year and take 10% from their assets for retirement income.Today, we see the opposite extreme. After 2008-07, people aren't so optimistic about retirement. In fact, they are down right pessimistic. Not sticking to a spending plan and reviewing it annually When you  retire it is essential that you become more intentional about your spending. In retirement your earnings power diminishes. You'll have less opportunities to earn your way out of poor spending choices.Set a spending plan and review it annually. This will allow out adjust as your situation changes. Falling in love with an investment or investment strategy Real estate; Gold; Rental houses; Tech stocks; Dividend stocks. I've seen it all over the last 23 years. Just because you've had great success with a particular investment or strategy doesn't mean it is the be all end all.  Managing assets during your retirement years is more about consistency and protection than stellar returns. The past is littered with "sure thing" investment that have gone bust. Just look at the list above. Financially supporting/enabling adult children I'm not sure where the line is between occasionally helping a child out and enabling them. We've seen retired parents destroy their financial security by bailing out their children from there poor choices. A good litmus test is to ask yourself: Are you preparing your children for the path, or the path for the child? Starting or investing in a small business Starting a business or investing in a new venture is exciting. Be careful. They all sound exciting at the start but most small businesses fail. Retirement is not the time to invest a lot of money in an entrepreneurial dream. Buying expensive lifestyle toys (vacation home, R.V. or land) Go ahead and dream big but be careful about spending big money on your retirement toy. It's very common to see older retirees saddled with debt on an expensive R.V. or vacation lot that isn't used and worth a fraction of the loan amount. Sticking your head in the sand when it comes to your financial life Not being aware and willing to address the financial realities of your retirement is a sure way to screw it up. Retirement Tip of the Week Complete your estate plan. Yeah it's boring and can cause some uncomfortable conversations, but get it done. PleaseTips to getting the estate planning questionnaire done:Don't try to do it at homeSet an appointment with your spouse outside of the house to completeHave your advisor or a trusted friend interview to complete itTips for Keeping it up to date:Review it once a year with your spouse and trusted advisorReview the same time each year (like a holiday or annual family gathering)[button_2 color="red" align="center" href="https://itunes.apple.com/us/podcast/plan-well-invest-wisely/id834314596"]Subscribe in iTunes[/button_2]

This week I speak with Burt White, Chief Investment Officer of LPL Financial. Burt and I discuss LPL's mid-year outlook Titled: The Investor's Almanac. Burt and his team do a great job simply communicating the economic and investing environment.  Their Investor's Almanac is a great tool to help us invest wisely.  No bold predictions or market calls here, just easy to understand insights you can use to make better informed investing decisions. If you'd like a free copy of their Investor's Almanac you can access it in the Retirement Answer Library. In this episode we discuss:how to use investment outlooks to Invest Wiselywhere the U.S. is in the economic cyclewhere they see potential risks and opportunitieshow international markets are not in sync with U.S. marketswhy you should consider harvesting high quality bondspossible alternatives to traditional fixed incomeplaces to find incomesuper themes that should provide a benefit the U.S. economythe importance of turning off the worry factory of financial mediaRetirement Tip of the Week:  Designating a Trust as a Beneficiary of an IRA Last week a client called requesting the beneficiary of his Individual Retirement Account (IRA) be changed to a trust. This planning strategy has become more popular over the last few years. This strategy for IRAs can has some benefits if the ultimate beneficiary is:a minor childsomeone with special needsa spouse from a second marriagea spendthrift with poor financial skillsThe trust can help protect the inherited assets and better control how those funds are used by the beneficiary of the trust.Be careful using this strategy though. Done incorrectly, the strategy could conflict with IRS rules and possibly create big tax problems. It is important the attorney drafting the trust be familiar with certain aspects unique to inherited IRAs.  Some things to consider are:Make sure the beneficiaries of the trust are people. They cannot be non-persons (like a charity)Consider adding language specifically prohibiting distributions to non-personsMake sure it is a Conduit Trust. It should include language that requires the distribution from the trust to the beneficiaries of the Required Minimum Distributions coming from the inherited IRA.If there is more than one beneficiary, consider having a separate trust for each. This will also each trust beneficiary to use their own age for required minimum distributions

In this episode, I'll show you how to come to terms with your worry and the uncertainty about retirement. "I worry" I talk to a lot of people about retirement. Not only clients but most everyone I meet over age 50.  I'll always ask them what their #1 thought is on retirement. I've learned a lot from this exercise. The most important thing I've learned is that people worry about retirement....alot!.They worry about:all the uncertaintyliving without a paycheckinflationrunning out of moneymaintaining my standard of livingmy health and healthcare costsbeing a burden to my childrenlong-term care costslosing money in the marketsthe economymy countryIn this episode, I'll show you how to come to terms with your worry and the uncertainty about retirement. Once you've done that, you'll be free to build a system to manage through the uncertainty in your life. I discuss:Market uncertaintyEconomic uncertaintyUncertainty in your lifeHow to begin to manage it by:Scheduling "little conversations"Using checklistsMaking lots of little adjustments as your life unfolds during retirementBuilding this structure is really what this blog, the Retirement Answer Library and podcast is all about. Retirement Tip of the Week The importance of tax diversity on your balance sheet as you near retirement. If you're within 5 years from retirement, why it may make sense to significantly lower the amount you save in your 401(k) retirement plan. Resources Discussed The Retirement Answer LibraryTax Deferred vs. Taxable Savings CalculatorEnjoy the Podcast? A big THANK YOU to Dean for sending me your kind note, thanking me for the podcast and Retirement Answer Library. So glad it's been helpful to you. It really means the world to me.[button_2 align="center" href="https://itunes.apple.com/us/podcast/plan-well-invest-wisely/id834314596"]Subscribe in iTunes[/button_2] 

“How do I understand Social Security and Medicare?”  This is a question I hear most often from people planning for retirement. It's understandable. Social Security and Medicare benefits will play a big part in your retirement. In this episode we begin to unwrap both and begin to build a framework for you make decisions about your Social Security and Medicare benefits. I say we “begin” intentionally. These are BIG subjects. In future episodes, we’ll continue to improve your understanding of your Social Security and Medicare. Announcements If you enjoy the podcast, I would consider it a great favor if you subscribed in iTunes and leave a review. This helps others discover the show. Last week I announced my Retirement 2.0 project. This is an initiative to redesign the retirement planning process to serve you better.  To help, go here and share your thoughts on retirement.Retirement Tip of the Week I suggest you visit and explore our government's Social Security website. It is an easy to navigate, useful resource to help you manage your Social Security benefits. YES, I just said “useful” and “government” in the same sentence. They did a great job designing the site. You can easily: Apply for benefits,Check the status of an applicationSet up direct depositEstimate your Social SecurityEstimate your spouse’s benefitSign up for your Social Security benefitSet up direct depositAccess their Retirement Toolkit (a great PDF document that outlines key dates for Social Security and Medicare) Unwrapping Medicare: The Basics This week I talk with Misty Kimbrough, a local insurance expert about the basics of Medicare. She outlines the basic parts of Medicare and the 3 most common missteps people make when planning medicare benefits for retirement.Part A “major medical” coverage covering health care costs at hospitals Part B Covers the costs of health care outside of a hospital. Doctor visits, outpatient procedures, x-lab test and related servicesMedicare Supplements (Medigap)Part C Medicare Advantage PlanPart D Prescription Drug Plan3 Common Medicare Missteps Resources Discussed Social Security websiteMedicare websiteMedicare Plan FinderRetirement Answer LibraryRed Apple Insurance

I Hate Keeping a Monthly Budget. Yes, I know that keeping a monthly budget is personal finance 101.  Over the years I've tried, repeatedly, to track every expense in a monthly budget. Each time I failed after a few months. It's just too much work. I have better things to do than be a part-time bookkeeper. Do You Hate to Keep a Monthly Budget? Tracking all your expenses is easier than ever. Programs like Quicken and Mint have powerful accounting tools in simple to use packages. Still...most of us don't track monthly expenses or keep monthly budget for one simple reason; We have better things to do than being a part-time bookkeeper. In this episode, I walk you through my budget system which gets you 80% of the benefits of detailed budgeting, without all the work. In just four easy steps you can take control of your spending and capture the excess income as savings. I Call It the Cash Flow Bucket System.The advantages of the Cash Flow Bucket System:1. You don’t waste time tracking every transaction.2. You have less stress deciding how to spend money each month.3. You don’t spend money just because it’s there.4. You easily capture (save) excess income as savings.5. You can make smarter decisions on allocating savings.6. You maintain flexibility for unexpected expenses. Try It and Stop Feeling Guilty About Not Keeping a Monthly Budget I've added a worksheet to the Retirement Answer Library to walk you through the process. It's free, just sign up here. The Retirement Tip of the Week I give you Sammy's 5 secrets to living a happier retirement. These are worth listening to!

Deal with Death By Celebrating Life Last week, I wrote about my sister's passing and her wish that her family have a "Celebration of Life" picnic (you can read it here).In this podcast, I share my thoughts on my sister's choice and how you can do the same. How to Overcome New Car Fever New car fever is a difficult bug to beat. Everyday, driving, you window shop as you drive, imagining yourself in the car models you see whizz by. Once you're bitten, the fever typically ends in you in a shiny new car.Remember your prioritiesDetail your car at least every other monthPay for a complete car wash once per weekBuy a some key accessories to refresh your cars lookA Useful App to Help You Identify Spending Habits Once every two months you should track your spending habits with an app like Expensify to:Create an opportunity to discuss spending habitsReconcile your spending habits with your stated financial prioritiesIdentify wasteful spending habitsKeep you and your partner accountable to each other Resources Discuss Storyline 2.0, by Donald MillerExpensifyHow to BudgetHow My Sister's Death Became a Celebration of Life

This week we discuss:Why you should ask your advisor about their succession planHow to manage cash flow during retirement Less Than 10% of Advisors Have a Succession Plan This is a scary number considering that if your advisor is unable to serve you due to injury or death, the retirement plan you’ve put in place could be in jeopardy. Who will service you?Who will advise you?What communication will you receive?Who will manage your assets? These are just some of the important questions that need to be asked by you to assure your retirement plan is not disrupted. I discuss:the importance of asking your advisor about their written succession planwhat items to look forthe communication plan that should be in placehow to protect your retirement plan in the event your advisor is suddenly unavailable. This month, I’ll post a checklist in the Retirement Library of items you should look for in your advisors succession plan to assure some continuity of service. Listener Question:  Lynn asks, “How do I manage my cash flow during retirement? How to manage cash flow during retirement is one of the questions I’m asked most. Not receiving a monthly paycheck during retirement can be unnerving. In retirement, it is important to have a system to create a paycheck to pay your monthly retirement expenses.  I outline the Cash Flow Reserve system we use to help clients cover their retirement expenses.  The Benefits of the SystemIt can help you feel safer about meeting your needsIt provides a margin of safety during turbulent marketsIt positions you to make smarter financial decisionsIt gives you more flexibility to adjust as conditions changeIt helps you sleep at night How It WorksChecking Account—To pay your lifestyle expensesCash Reserve Account—maintain 2 year’s expected living expenses, distributing a monthly “paycheck” to your checking accountExtraordinary fund—Maintain cash reserves for extra expenses you will incur over the next 12 monthsLong-term Investment—Long-term investment assets that include bonds maturing in 3-5 yearsReview and adjust every 6 months This week I’ll post a detailed outline on how to build your Cash Flow Reserve system  in the Retirement Answer Library. Resources Discussed Retirement Answer Library  Enjoy the Podcast? You can do me a big favor by subscribing in iTunes and leaving your honest review.  This would help bring more listeners and questions so we can all work together to PLAN WELL and INVEST WISELY for retirement. 

Working during retirement could be the best thing you do to find meaning, stay healthy and earn money while doing what you love.  In her book, Second-Act Careers: 50 Ways to Profit from Your Passions During Semi-Retirement, Nancy Collamer has created a great resource for anyone wanting to take their passion and earn income from it during retirement.Nancy Collamer is a speaker, career coach, and author who writes a semi-monthly career column for NextAvenue.org (PBS) and Forbes.com. Her home on the internet is mylifestylecareer.com. In This Podcast We Discuss: Why second-act careers are a second chance to do what you loveHow Baby Boomers will change the concept of retirementWhy it is important to fill your days with meaningHow to blend your passion and work to live more fully during retirementHow part-time income during retirement can allow you to retire earlierHow to take things you love (like travel) and make money doing it during retirementHow to test drive retirement work options before committingExamples of others that are doing what they love during retirement and earning an incomeCommon mistakes retirees make with second-act careersAlso, 4 Reasons You Should Completely Ignore Extreme Market Predictions Want access to the free Retirement Answer Library? Last week, I  introduced a great resource to help you find the answer to your retirement questions.The Library includes worksheets and checklists to help you plan for and live in retirement. Each month new resources are added based on client and reader questions. Together we can build a library to Plan Well and Invest Wisely for retirement.Gain Access Here Resources Discussed My Lifestyle Career websiteSecond-Act Careers: 50 Ways to Profit from Your Passions During Semi-Retirement, by Nancy CollamerThe Retirement Answer LibraryNextavenue.org, online magazine for people over 50