For decades, business owners and investors have been taught to follow the 4% rule. By never withdrawing more than 4% of the portfolio value in a given year, they could make their funds stretch far into the future. Sounds great, right? So, what’s the problem? No two people are exactly alike and we all have unique financial needs. Let’s take a closer look at how business owners can avoid the dangers of the 4% rule.
Finances are a very personal aspect of our lives. How we handle our money can be extremely revealing as to the type of person that we are. Because of this, having someone else involved in our financial lives can leave us feeling exposed and vulnerable. This is why having a financial advisor that you can trust is so important. A trusted financial advisor can be one of your most valuable assets.
Traditionally, financial advisors tell their clients, “Don’t take any more risk than is necessary to achieve your goals.” Following that advice, when you turn 70, 80, or 90-years-old, you should move your money into conservative investments with guaranteed low returns rather than keep your money in riskier investments that could potentially provide higher returns. Essentially, advisors say that it’s more important to protect your money at that age than to double it. Yet, is that always true? Is this conventional wisdom ever flawed? Should you stop making any potentially risky investments when you reach a certain age? Well, you will find the answer to that question by asking another: Are you investing for yourself, or are you investing for your legacy? Read more
If you’ve received a letter or phone call about your financial advisor retiring, you may be scratching your head, thinking, “What do I do next?” For the last several years, the number of financial advisors has steadily been decreasing. In 2008, there were roughly 325,000 financial advisors. By 2014, that number decreased to roughly 285,000. Read more
It’s an age-old question when it comes to retirement accounts. Should I use a ROTH or a Traditional IRA? Both are great vehicles to prepare for retirement. However, neither are ALWAYS a perfect fit for everyone. Let me break them down a little further to help you understand the differences and when you might want to choose one over the other. Read more
If retiring early is a goal you hope to achieve, you are not alone. The FIRE (financial independence/retire early) movement is growing at a rapid pace; and why not with markets hitting all-time highs? However, have you really examined whether retiring at or near the peak of a bull market is the wisest decision? What will it mean for your portfolio if the market crashes? Maybe not as much as you would think with some expert planning. Read more
Recently, one particular client was looking for someone to help them reach their goals before retirement. With a seven-figure portfolio, he has done quite well for himself. But he was now interviewing for help from a few brokers in town, and us. They decided to go with another firm. Read more
You may be eligible to start drawing Social Security as soon as you turn 62, but this doesn’t mean you necessarily should. By waiting a few years, you will get a higher monthly payment and potentially more total income. So how do you decide?
If you need Social Security to get by, then the decision is easy: take it when you can. If you’re in the much happier situation where your family is earning good money without Social Security benefits (say your spouse is working a well-compensated job), then the decision is also fairly easy. Your Social Security, in this case, is going to be pretty heavily taxed, so don’t take it yet.
But if all you care about is drawing the most Social Security you can before you die, the calculation is fairly simple:
Let’s say you’re eligible to draw $1,100 a month when you turn 62, but you would get $1,500 a month when you turn 67. In this case, by starting at 62 you would make $66,000 before you reach 67 (that is, $1,100 a month multiplied by 60 months). On the other hand, you will make $400 a month more by starting at 67.
So how long does it take, at $400 a month, to reach $66,000? The answer is $66,000 divided by $400, or 165 months. At 12 months per year, this means you would be even after 13 years and 9 months, when you are 80 years and 9 months old. If you die before you get to 80 years and 9 months, you would have gotten more by taking Social Security early; if you live beyond this age, you will get more by taking it later.
So how lucky do you feel?
This is a pretty typical case; for most people, it will take anywhere from 13 to 17 years to break even. If you come from a family where everyone seems to make it into their 90s, then you may want to take Social Security later. If you come from a family where no one seems to make it past their 70’s, it may be better to take the payment earlier.
But for most people, there’s more to the decision than this bottom line. As a CERTIFIED FINANCIAL PLANNER™, I’m in a position not only to help you take care of your needs, but also to help you consider the lifestyle. In other words, the decision becomes less about how you maximize your Social Security payoff and more about how you want to spend your retirement.