The Most Important Number You Need To Know When Thinking About Retirement


When meeting with clients who are about to retire I inevitably come to the question of how much money do you need each year to live on? Very few people have an answer to that question. If you don’t know how much you need how can you ever expect to know if you are ready to retire? Let me give you an example: if someone asked you to help budget how much gas they might need for an upcoming road trip what would you ask them? Obviously you’d ask where they are going.  Now imagine they said they didn’t know.  There would be no way for you to help them because you don’t know if they are driving across the country or across town. Knowing how much you need to live on is vital to preparing for retirement.  Unfortunately this means you need to budget, which is one of those things we...

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Spring Cleaning For Your Retirement


It’s the time of the year where we all go through our stuff to clean out the things we no longer need.  We organize our closets and garages but often neglect to organize our financial lives.  Your personal finances are incredibly important because the amount of stress money troubles can put on a person is enormous.  As you approach retirement it becomes even more important to get things cleaned up.  Here are four tips to help with your retirement spring cleaning: Get Organized Knowledge is power so if you don’t know what your big picture financial situation looks like then it’s time to get organized.  Use a spreadsheet or one of several popular software services like to pull together all of your information.  Once you know where everything is, what the totals are and where your money is flowing, you will have the information you need to take the next step. Consolidate...

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3 Ways To Reduce Your 2016 Taxes (There’s Still Time!)


It’s tax time again (collective groan).  But it doesn’t necessarily have to be painful, especially if you can find some tax savings that result in a nice refund.  Most people believe once December 31st passes there is nothing else that can be done to reduce the taxes owed for that year.  Fortunately, that isn’t true.  Here are three ways to reduce your taxes for 2016: 1) Make a Traditional IRA Contribution – You can make an IRA contribution up until April 18th, 2017 and have it count for 2016.  To be perfectly clear, there are two types of IRAs – traditional IRAs and Roth IRAs.  Traditional IRAs provide an upfront tax deduction but you will owe taxes on the money you take out in retirement.  Roth IRAs don’t provide an upfront tax deduction, but the money you take out in retirement is tax-free. The 2016 contribution limit is $5,500 and if you...

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The Problem With Your Gut Feeling


Over the last few months we've heard many clients express concern that they have a feeling something bad is coming.  Very few are able to articulate exactly what they mean by "something bad" but the feeling remains. The reasons have been various: An increasingly polarized political environment Concern over the prospect of rising interest rates Concern over the economy/stock market being overheated Inevitably, the conversation comes down to one thing - selling stocks now before a downturn occurs, despite mountains of research suggesting that no one in history has been able to time the market reliably. The math of selling and getting back in later The first argument against selling now and getting back in "when things look better" is purely mathematical.  Not only do you have to correctly predict when the decline will start but you also have to get back in before the recovery happens. If we simply assume a 50% chance of getting...

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4 Ways To Give Thanks (And Save Money)


Thanksgiving is upon us, and with that, many people take the time to reflect on the things they are thankful for.  I, for one, am thankful for the health and happiness of my family, especially our newest member, Piper (our Havanese puppy).  Beyond that, I am thankful for the ability and means to help others, which can mean financial planning to help someone save money or through the ability to donate to my favorite charity.  In light of that, here are four ways to give thanks and save money at the same time. 1) The old fashioned way – donate cash.  Charities can always use cash to fund their budgets and cover their expenses.  It is as simple as writing a check or a few clicks on their website.  Remember to keep your receipts though so you can deduct your contribution on your tax return if you itemize. 2) Donate old stuff. ...

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IRS Announces New Rules to Avoid IRA Rollover Penalties


Imagine this scenario: you’ve left your old employer and you want to roll your $100,000 401k to an IRA you have elsewhere.  You file the appropriate paperwork and the 401k provider mails you a check in your name for the $100,000.  Then, unexpectedly, your brother in California dies.  You rush out to be with your family during this difficult time.  Meanwhile, you forget to deposit the check to your IRA and more than two months pass before you remember. Under this scenario, the IRS would consider the full $100,000 as a taxable withdrawal because you did not deposit the check in an IRA within 60 days.  The taxes and penalties alone could amount to more than $25,000.  In the past, you would have to request a private letter ruling, which doesn’t guarantee a waiver and costs $10,000 just to file. The new IRS rules announced on August 25th, allow for a “self-certification”...

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Envestnet Calculates An Advisor’s Value-Add At 3%


Envestnet, a leading provider of financial solutions to advisors and institutions, estimates that hiring a financial advisor can be worth around 3% more in value compared to a do-it-yourself approach. This is accomplished through financial planning, asset allocation, investment selection, systematic re-balancing and tax management. In practice, I’ve seen this to be an accurate estimate. I regularly see prospective clients with the following issues: • Extremely concentrated in US large stocks • Lack of defined financial goals • Letting emotions and “gut feelings” drive bad investment decisions • High-cost mutual funds that under-perform their benchmarks • No plan or discipline in regular re-balancing • Inefficient placement of investments causing higher taxes than necessary Dealing with your finances and money can be difficult for many people. We regularly let our emotions, biases, and busy lives interfere with properly managing our money. Just like a personal trainer can help someone define, and ultimately achieve, physical goals by holding them accountable and providing expertise...

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Budget Deal Eliminates Valuable Social Security Strategies


As President Obama signed the budget deal today,  two popular Social Security strategies that allow retired couples to maximize their benefits were effectively eliminated.  The new budget takes away the ability to file a “restricted application” for those under age 62 as of the end of 2015.  Also, starting six months from today, any person who “files and suspends” their Social Security benefit will also suspend any benefit eligible to be paid to their spouse or dependent child. Millions affected These two strategies combined will affect millions of retirees who can no longer collect tens of thousands of dollars in additional Social Security benefits. Here’s how it works: John and Mary are both 66.  John is the higher earner and would immediately “file and suspend” his benefits and continue to delay until age 70, allowing him to maximize his own Social Security benefits.  This allowed Mary to file a “restricted application” for spousal benefits...

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