Frequently Asked Questions (FAQ)

Why are you a planner (or why do you do what you do)? I enjoy working with numbers, teaching and solving each client’s unique planning puzzle, which is why I enjoy the day-to-day work.  My true passion, however, results from my belief that planning does not need to be complex nor expensive.  So, my goal is to help each client achieve their goals through a simple yet holistic plan and at the same time help them avoid the traps and expensive sales pitches inherent in the financial industry. What does a typical holistic plan include? A typical holistic planning engagement involves goal setting, cash flow analysis and projections, investment and portfolio analysis, asset allocation, tax planning and minimization, estate document review, risk management or insurance coverage recommendations, employee benefits review and debt management.   Certain engagements may also include portfolio Monte Carlo analysis, Social Security maximization, and portfolio withdrawal strategies. What is your investment philosophy? I am not a stock or mutual fund picker, and I do not time the market. I believe in and advocate a buy and hold passive strategy that involves investing in a diversified, low-cost, tax-efficient portfolio of index funds.  Research done by organizations like Morningstar and S&P consistently demonstrates that over the long term passive investing beats active investing over 80% of the time. How do you get paid? I am a fee-only, hourly investment advisor, which is fairly unique in the market.  I do not sell any products, earn any commissions or charge you a fee each year for holding your assets.  Instead, I get paid on an hourly rate, based upon the amount...

Do You Have Retirement Insurance?

We all pay thousands and thousands of dollars every year for insurance.  We buy insurance to protect our health, to protect our car and to protect our house.  But what about our financial wellbeing?   In particular, our retirement wellbeing. Think about it. Retirement, based upon average longevity, can last 20+ years and for those lucky to live beyond the average age, 30+ years.  So, why not buy some protection.  Protection in the form of a holistic financial retirement plan prepared by an hourly, fee-only, fiduciary financial planner, a planner that will work with your best interest in mind. A thorough financial plan should evaluate your resources, identify the potential financial risks and help you understand the tools available to maximize the potential for success.   The plan should incorporate investment management, cash flow budgeting, tax minimization, social security maximization and estate planning. A good plan, by an hourly planner, may cost up to $3,000 -$4,000 but that is modest in compared to other insurance and over 20 years is only $150 per year, a bargain.   In the end, it should provide you with some peace of mind and protection against the...

How I drive my wife nuts so we can spend more.

Retirement is all about resting, relaxing and enjoying, which is why you should care about your core expenses.  Core costs are those mandatory month-in and month-out expense that you must pay to live, e.g. property tax, food, utilities, insurance, healthcare, etc.  Discretionary expenses, on the other hand, are costs you can manage and reduce, either over the short or long term if necessary.   Typical discretionary expenses in include recreational costs (golfing), eating out, travel, charity, and personal care. Core expenses in retirement (according to recent research) will continue to grow with inflation as it is what you need to live, while discretionary expenses (the “fun” expenses) tend to increase at first, peak and then decline in retirement as you age. So, to maximize your fun in retirement and reduce your exposure to inflation, and at the same time help your retirement nest egg last longer, you should seek to reduce your core expense as you head into retirement.  And by doing so, as a bonus, you may be able to increase your discretionary (“fun”) expenditures. Looking at it another way (and this is where I drive my wife nuts), let’s figure out how much money you need in your retirement portfolio to pay core expenses, for example, property taxes.  In my case, I pay about $8k a year in property tax each year.  Now, if I pay $8k a year (ignoring any increases) for 30 years and I use a relatively conservative 3.5% annual retirement portfolio withdrawal rate, I would need to have $228k in my portfolio when I retire just to fund my future property tax.  Wow, that...

What is My Longevity and Why Do I Care?

Longevity is the length or duration of your life, and it is important in retirement planning because it determines how long your assets need to support you after you stop working.   Underestimating longevity is one of the most consistent mistakes my clients make when thinking about their retirement. According to a 2012 report from the Society of Actuaries, if a male makes it to 65 there is a 40% chance he will live to age 85 and a 20% chance of living until age 90.  A female, on the other hand, has a 53% chance of making it to 85 and a 31% of making it to age 90.  And if they are a couple, at age 65 one of them has an almost 20% chance of making it to age 95. So, to put it in a slightly different context, if you go to work at age 25 retire at 60 and live until 90.  You will spend almost as much time retired as you do work, which means longevity is critical in retirement planning.  If you do not save enough while working or if you spend too much in retirement you could outlive your resources. If you would like to learn more about longevity or if you want to get a better idea of your longevity explore the links below. Longevity Calculator:  www.Livingto100.com All about Longevity – Stanford Center on Longevity:  http://longevity.stanford.edu/ Life Expectancy Data – CDC –  https://www.cdc.gov/nchs/fastats/life-expectancy.htm Society of Actuaries Report –...

What is the Ideal Age to Apply for Social Security?

My standard answer is you should wait until age 70, or at least as long as possible.  Social Security is an inflation-adjusted annuity that increases (in addition to inflation adjustments) every year you wait after age 62.  As a retirement planner, I advocate waiting to help my clients mitigate longevity risk (outliving your money) and the impact of inflation on your living expenses. The Social Security Administration (SSA) will calculate your payment at your Full Retirement Age (FRA) based upon an adjusted average of your highest 35 years of earnings.  FRA has traditionally been age 65 but was indexed in the early 1980’s to recognize longer longevity and to help boost the system.   If you apply for SS before your FRA your payment will be discounted, but if you wait it will be increased each year.   In my case, since I was born in 1958, my FRA is age 66+ 8 months which is when I will receive 100% of payment.  On the other hand, if I apply at age 62 I will receive 72% the payment, and if wait until age 70 my payment will be 127% of my calculated benefit at my FRA. There are a couple of additional considerations.  First, the survivor’s benefit of a married couple is based upon the higher of the two individual payments.  So, to maximize survivor benefit (which would keep my wife very happy) it is advantageous to delay the higher of two wage earns to age 70.   The second consideration is longevity.  The above advice is based on the belief you will lead a full life – the average longevity...