How to Invest in a Volatile Market in Retirement

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Are you wondering how to invest in a volatile market? If so, you’re not alone. A lot of people are struggling to find solid advice on investing in 2022, where there are multiple factors impacting markets, such as: fear of a recession, Ukraine and Russia being at war, and inflation.

Investing is a little different today than in 2019 and before.

Retirement planning can be very difficult because people are now seeing their 401(k) and IRA retirement accounts lose value. If you’re in retirement and the market is going down or sideways, it’s scary because you’re not working and funding your retirement accounts any longer. Traditionally, the closer someone is to retirement, the more concerning volatility is for them.

We’re going to share some of our strategies and approaches to investing in a volatile market to help you sleep better at night and relieve some of your anxiety along the way.

Quick Downturn Example in 2020

Downturns can be short-term or extended, and the approach you take to investing at these times must be adjusted. In most recent memory, we had a short downturn in March 2020 when the world first started to really pay attention to the Coronavirus.

The market fell 34% for the year, and by the end of 2020, the market was up 17%.

Because of the fast downturn and recovery, the event wasn’t a major issue for the market. There was actually a lot of opportunity to be had in 2020 despite lockdowns and people being stuck at home for two years.

Downturn of 2022

In 2022, we’re dealing with some of the repercussions of the measures taken in 2020 to bring markets back to stable levels. The government pumped a lot of money into the markets to help us get through the pandemic, but it has led to 2022 being a down period.

The only day that the market experienced gains was the first of the year.

In June, the major indexes hit their yearly lows, and then they rallied and recovered to being down 10%. At the time of this posting, we’re back to experiencing lows of:

  • S&P 500 being down 24%
  • NASDAQ being down 31%

Even the bond market has been decimated by the high interest rates. Using bonds to de-risk your portfolio to reduce volatility hasn’t worked at all in 2022. Combatting inflation and the war in Ukraine have both caused major issues in bonds, oil and gas prices.

Global economics have remained rattled throughout 2022, and it leads to the question of how to navigate the markets.

We haven’t dealt with markets like we have now since 2008 when the last major recession hit. Navigating markets using common strategies is more difficult because of:

Pricing is running up, so we have to look at ways to change our approach to investing. 

Two Funds We’re Sitting in with 2% Gains

Right now, we’re investing in two main funds that are offering 2% gains with a high level of security. We are investing in:

  • Government obligations
  • Treasury obligations

These funds pay a floating rate of return based on short-term treasuries or other factors. Every seven days, the rate changes. Due to the current state of the market and interest rates, the return we’re seeing is a little over 2%.

Since these are funds, every 15th of the month, the account is credited with a dividend payment for the interest earned.

We avoid the volatility in the market and work to protect our clients’ principal while providing a very modest return.

However, we’ve also started to put money into structured products, and they’re backed by large banks, such as JP Morgan. The purpose of these is to put together a fund that offers an interest rate based on environments with high volatility and interest rates.

We basically go shopping and put together an offering.

The offer paid a 9% coupon, and we’re working on one with an 11% coupon. We don’t want to put all of the money into these accounts because the coupon rate can change every three months. Banks can also choose to close these accounts at the end of the term, so while the rate of return is great, it is also a lot of work.

We invest 2% to 24% in these accounts and use other tactics to keep money growing, even if it’s not at the rate people are used to when putting their money in the stock market. When markets start to balance out, using these products may not make sense.

Investing right now, for us, means investing in products that:

  • Are low risk
  • Have no stock market correlation
  • Do well in rising interest rate markets

Of course, investing using the strategy above is more complicated than investing in an index, but it’s what we’re personally doing to help manage risk right now.

Are you looking for more answers, or are you unsure of how to invest in these types of low-risk products that do well in rising interest rate markets?

Click here to schedule a call with us today.

October 17, 2022 Weekly Update

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We do love it when someone refers a family member or friend to us.  Sometimes the question is, “How can we introduce them to you?”   Well, there are multiple ways but a very easy way is to simply forward them a link to this webpage.

Here are this week’s items:

Portfolio Update:  Murs and I have recorded our portfolio update for October 17, 2022 

CLICK HERE TO WATCH THE UPDATE

This Weeks Podcast – Federal Reserve and Inflation

What exactly is causing the current inflation, and how does it affect your retirement?

The supply chain issues we experienced during the pandemic majorly contributed to the current global inflation we’re now experiencing. The Fed has increased rates on a few major product categories raising the cost of inflation.

CLICK HERE TO LISTEN TO THE PODCAST

 

CLICK HERE TO WATCH ON YOUTUBE

This Weeks Blog -Federal Reserve and Inflation

The Federal Reserve and inflation are something that everyone is dealing with, from the gas pump to food prices at the supermarket. Of course, if you’re a retiree on a fixed income, your major concern right now is ensuring that you have enough money to pay for your everyday needs.

We’re going to discuss a lot of key issues in this article and how you should think about these topics rather than listen to the doom and gloom you’ll hear in the media.

CLICK HERE TO READ THE BLOG

Federal Reserve and Inflation

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The Federal Reserve and inflation are something that everyone is dealing with, from the gas pump to food prices at the supermarket. Of course, if you’re a retiree on a fixed income, your major concern right now is ensuring that you have enough money to pay for your everyday needs.

We’re going to discuss a lot of key issues in this article and how you should think about these topics rather than listen to the doom and gloom you’ll hear in the media.

What are We Talking About When We Say Inflation?

Inflation is occurring across the world right now, and when we say “inflation,” it’s best to look at some of the bigger items that are being affected right now. However, before we provide a few examples, it’s important to know why inflation is happening right now.

Unfortunately, the pandemic is the main driving factor of inflation. For example:

  • Stores and shops closed down
  • Material shortages began

A snowball effect happened with these two points, and then government spending increased, causing what is now an inflationary period in our economy. Many areas of your daily life are experiencing inflation and rising costs, but some of the most noticeable include:

  • Transportation: Car prices are high, primarily due to high demand and a low supply. 
  • Fuel: Gas and heating costs are rising due to inflation and what’s happening in Ukraine.
  • Grocery: Food prices have risen drastically in the past year due in part to supply chain issues and rising food costs.
  • Housing: Almost across the board, housing prices are much higher than they were a year ago, even in areas far outside of major cities. Low mortgage rates, the tight housing market and other factors impacted the housing market. Even rental prices are going up, sometimes significantly.

With all this in mind, the Federal Reserve is working to bring inflation back down to modest levels.

Understanding the Federal Reserve’s Approach to Inflation

The Federal Reserve has been adjusting interest rates to help fight inflation, but what does this really mean? When you raise interest rates on money that people will borrow, you restrict buying opportunities.

For example, if a person is looking for a new car, they’re far more confident with their purchase when it’s at a low rate. However, raising interest rates slows demand because customers aren’t going to be confident with their purchases.

Since supply is low, the lower purchases will allow inventories to build back up and leads to:

  • Lower prices
  • Lower profits for businesses

If we go back to the pandemic, there was too little supply and demand for cars. Car dealerships raised the prices of some cars by $10,000 – $15,000, and the increase in price was all profit. Many vehicles remained on the lot from before the pandemic hit and even used car prices skyrocketed.

Since people still needed cars and bought them, there was no incentive for dealerships to lower prices back to normal rates.

Even with buying a house, if you look across the country, people were paying higher than the listing price and bidding wars occurred. With higher interest rates, maybe buyers will pay the asking price or below on a home and bring the market down to more affordable prices. 

The Federal Reserve is in a difficult position because they need to:

  • Pull back on inflation
  • Experience a soft “landing,” where the economy is still growing

Sometimes, rising interest rates will cause a major recession, but the Fed is trying to hit the “soft” landing mark to make the impact less dramatic.

How Retirees Can Adjust to Inflation

Retirees have a little more control than a non-retiree because they are less susceptible to inflation. In most cases, these individuals:

  • Already have a home
  • Already have a vehicle

You can choose to stay out of the market until inflation and the risk of a recession passes. If you want to travel, you may want to travel when pricing comes back down. Retirees have more flexibility than someone who is working and tied to a family. You can wait for slow seasons and better travel prices compared to someone who has kids and needs to travel during busy seasons.

Food is one of the areas of inflation that will still impact a retiree.

You may need to eat out less often or change your diet to save some money. Unfortunately, food prices are hitting everyone hard.

When we develop a financial retirement plan for our clients, we account for inflation in the plan. Since we account for inflation, people are impacted less than someone who is just playing the market.

Inflation isn’t a new thing, and in the 70s, the Fed raised interest rates to help tame inflation. However, the Fed raised and cut rates over and over again without a clear direction. The end result was 10 years of inflation during the 70s that went from 5% to 12%+ inflation before it came back down and then hit 12.5% in 1980.

A lot of our listeners know that in the 70s, inflation was all over the place.

The Fed doesn’t want to make the same mistake. In the last 100 years, inflation has had an average rate of 3%, which is what the Fed is trying to target. We definitely won’t have 6% inflation for the next 30 years.

We’re in a period where there’s a bump in the financial landscape, but we will get through this period. 

Click here for our 4 Steps to Secure Your Retirement video course.

Why You Should Use a Fiduciary

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Volatility and inflation are major concerns for anyone who has their money in the market. One thing that keeps popping up when we talk to clients is, “are you a fiduciary?” If you don’t know what a fiduciary is or why you should use one, we’re going to explain everything in the guide below.

PS. If you would like to have a quick conversation with us, click here to schedule a call with us.

What are You If You’re Not a Fiduciary?

If someone is not a fiduciary, they likely work under what is called “suitability.” What this means is that the investment advisor or broker will recommend investments that they deem suitable to you.

However, what’s “suitable” for you may not actually be in your best interest.

For example, if you work with an insurance agent, they may sell you life insurance, annuities or other products. These agents will often receive a commission for the transaction. Since the agent is making a backend commission, the question arises:

  • Is the agent selling me the best product for me?
  • Is the agent trying to maximize their profits?

Of course, the product may be perfect for you, but under the “suitable” category, it only needs to be good enough. In other words, it may not be the best. A good example of this is some insurance agents can only sell insurance products from one company.

Under this example, there may be better products available from other entities, but they will not be offered to you. When a broker or agent is affiliated with a company and must sell only their products, it becomes a question of “Is this really the best product for me?”

A fiduciary works much differently.

What is a Fiduciary?

A fiduciary is something you’ll see a lot of headlines and buzz about online. Most people agree that you should be working with a fiduciary. The problem is that some advisors will say, “I treat all my clients as if I were a fiduciary.”

And while this isn’t a bad thing, there’s a difference between being a fiduciary and treating someone as if you were a fiduciary.

When someone is a fiduciary, they’re bound by a legal duty to recommend the best financial advice, products, investments and so on to you. A few examples of this are:

  • Certified Financial Planner, or a person who must vow to be a fiduciary to a client
  • Licensing, such as a registered investment advisor, who is bound by law to act as a fiduciary

A fiduciary who provides advice to you must:

  1. Meet a professional standard of care
  2. Never put their own interests above your interests
  3. Avoid misleading statements of conflict of interests
  4. Follow policies and procedures to ensure the advice given is in your best interest
  5. Not charge more than a reasonable amount for services

Imagine a person needs something that will provide lifetime income through an insurance product. As fiduciaries, we must go out, research and find the best product for them. We will often recommend 2 – 5 solutions, all of which have pros and cons to look through.

A broker, on the other hand, can sell you a mutual fund, and they may receive a commission on it. For many clients of ours, they want the peace of mind of knowing that we make the best decision for their goals rather than looking at the highest commission.

Working with a fiduciary like us, we will charge an upfront fee but will not receive a brokerage commission. Essentially, we work for you without the risk of looking at the commission and maximizing our own profits.

Let’s look at an example where a client wants us to provide them with the best ETF options on the market. We would then:

  • Search for the best product using software that offers an abundance of information and metrics for us to work through
  • Since we’re not tied to any affiliation, we can look at performance, volume and value
  • Review expenses and fees for each product

Since we’re not working with any individual company, we do not get a hidden cut of commissions.

We are full disclosure fiduciaries, and we’re not saying someone who works in suitability is bad. We believe that working with someone who is required to put your best interests first makes sense to us.

You can learn who is a fiduciary by asking them:

  • Are you bound by a fiduciary standard?

It’s crucial to use this phrase because a lot of people will use wordplay. The response may be “I treat my clients as a fiduciary would,” but this holds no weight. Treating someone in a fiduciary way is different than being bound by a high level of standards.

You just never know if a big commission can sway this individual’s recommendation.

We always approach every question by going through the person’s retirement plan. If we don’t know any information about your goals, it’s impossible to recommend the best product. Each decision has an effect, and it’s our job as fiduciaries to look through your goals and plans rather than say, “XYZ product is the best life insurance.”

Now that you know what a fiduciary is and why so many people planning for retirement recommend them, you can make a sound decision when securing your retirement.

Do you want to learn more about how to secure your retirement and retirement planning? 

Click here to view our books on securing your retirement.

October 10, 2022 Weekly Update

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We do love it when someone refers a family member or friend to us.  Sometimes the question is, “How can we introduce them to you?”   Well, there are multiple ways but a very easy way is to simply forward them a link to this webpage.

Here are this week’s items:

Portfolio Update:  Murs and I have recorded our portfolio update for October 10, 2022 

CLICK HERE TO WATCH THE UPDATE

This Weeks Podcast – Why You Should Use a Fiduciary

Should you work with a fiduciary, and what does it mean to be a fiduciary? A financial advisor working under the fiduciary premise is bound by certifications and licenses to make transactions in the client’s best interest.

CLICK HERE TO LISTEN TO THE PODCAST

 

CLICK HERE TO WATCH ON YOUTUBE

This Weeks Blog -Should You Choose a Fiduciary Financial Advisor?

Volatility and inflation are major concerns for anyone who has their money in the market. One thing that keeps popping up when we talk to clients is, “are you a fiduciary?” If you don’t know what a fiduciary is or why you should use one, we’re going to explain everything in this blog.

CLICK HERE TO READ THE BLOG

September 26, 2022 Weekly Update

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We do love it when someone refers a family member or friend to us.  Sometimes the question is, “How can we introduce them to you?”   Well, there are multiple ways but a very easy way is to simply forward them a link to this webpage.

Here are this week’s items:

Portfolio Update:  Murs and I have recorded our portfolio update for September 26, 2022 

CLICK HERE TO WATCH THE UPDATE

This Weeks Podcast – Will I Avoid IRMAA Surcharges on Medicare?

Are you going to be able to avoid IRMAA surcharges on Medicare parts B and D? IRMAA stands for Income-Related Monthly Adjusted Amount, and there are charges on both parts B and D based on where your income lands.

If you’re thinking about retiring any time soon, there are ways to manage your income to stay at a lower amount to avoid surcharges on your Medicare premiums.

CLICK HERE TO LISTEN TO THE PODCAST

 

CLICK HERE TO WATCH ON YOUTUBE

This Weeks Blog -IRMAA Medicare Surcharges–

Medicare Part B and D have something called the IRMAA Medicare surcharges. When retirement planning, it’s crucial to consider the impact that the additional costs will have when trying to secure your retirement.

CLICK HERE TO READ THE BLOG

IRMAA Medicare Surcharges

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Medicare Part B and D have something called the IRMAA Medicare surcharges. When retirement planning, it’s crucial to consider the impact that the additional costs will have when trying to secure your retirement.

Medicare kicks in at 65, and there are premiums and surcharges that you need to know about.

What is IRMMA?

Income-related monthly adjustment amount (IRMAA) is an essential part of your Medicare because it’s a sliding scale percentage, which you’ll be required to pay based on your income. Depending on your income, you may or may not have this additional surcharge.

IRMAA is on top of the Medicare premiums that you pay, so it’s something to consider.

Note: We also have a flow chart, which will show you how much you’ll be required to pay for IRMAA based on your income. Call our office at (919) 787-8866 and ask Laura or Morgan for the chart.

IRMAA Medicare Surcharges FAQs

What is modified adjusted gross income?

Modified adjusted gross income is your income minus deductions and then added back items, such as your student loan interest or retirement account contributions. You’ll find this value on your tax form.

Did your modified adjusted gross income surpass $91,000 filing single or $182,000 filing jointly in the previous two years?

  • If you answer “no,” your premium for Part B will be $170.10 per month.
  • If you answer “yes,” your surcharges will be on a sliding scale, but there are a lot of additional questions to be asked.

You Answered, “Yes.” Now What?

If you answer “yes,” then the following questions will be asked:

  • Have you or a spouse experienced a life-changing event that significantly impacts your income? This includes marriage, divorce, widowing, retirement, loss of pension or income-producing property. If you answered “yes,” this will mean that you’ll submit a form to the IRS office to show that this income is no longer accurate. You’ll need to file form SSA 44, which shows your income has dramatically changed, putting you back to the previous premium.
  • No life-changing events but your modified adjusted gross income exceeds the figures above. Now, we’ll look at your tax return two years ago to find your modified adjusted gross income. Depending on this figure, you will pay:
    • $91,000 – $114,000 (single); $182,000 – $228,000 (married filing jointly): Additional surcharge is $68 per month for Medicare Part B and $12.40 per month for Part D.
    • $114,000 – $142,000 (single); $228,000 – $284,000 (married filing jointly): Additional surcharge is $170.10 per month for Medicare Part B and $32.10 per month for Part D.
    • $142,000 – $170,000 (single); $284,000 – $340,000 (married filing jointly): Additional surcharge is $272.20 per month for Medicare Part B and $51.70 per month for Part D.
    • $500,000+ (single); $750,000 (married filing jointly): Additional surcharge is $408.20 per month for Medicare Part B and $77.90 per month for Part D.

IRMAA is per person, so if you’re married and filing jointly, you’ll need to pay these additional surcharges for each person in the household on Medicare.

Strategizing for your Medicare is a smart decision because there are ways to reduce income to help save on these premiums.

Note: This will look back two years, so for 2023, your 2021 modified adjusted gross income will change.

If you liked this blog post, we highly recommend that you sign up for our podcast, where we share other great financial information with you.

Click here to listen to your Secure Your Retirement podcast.

September 19, 2022 Weekly Update

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We do love it when someone refers a family member or friend to us.  Sometimes the question is, “How can we introduce them to you?”   Well, there are multiple ways but a very easy way is to simply forward them a link to this webpage.

Here are this week’s items:

Portfolio Update:  Murs and I have recorded our portfolio update for September 19, 2022 

CLICK HERE TO WATCH THE UPDATE

This Weeks Podcast – The GPS Retirement System

When you think about the GPS in your car, you think about how it will direct you to the right destination. The most important part of your GPS is knowing where you are so it can help you get to your destination.

Our retirement program is similar to a GPS designed to help you get to your retirement destination without any worries.

CLICK HERE TO LISTEN TO THE PODCAST

 

CLICK HERE TO WATCH ON YOUTUBE

This Weeks Blog -The GPS Retirement System–

The concept of GPS – the same way you get from point A to point B on a road trip – is something we believe can be used to secure your retirement. In fact, we want to talk about what we call the GPS Retirement System.

CLICK HERE TO READ THE BLOG

The GPS Retirement System

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The concept of GPS – the same way you get from point A to point B on a road trip – is something we believe can be used to secure your retirement. In fact, we want to talk about what we call the GPS Retirement System.

We really like the GPS analogy because you can use it to find your way to financial security and wealth in retirement.

However, before we begin, let’s start with a question that we ask when using this system.

What’s the Most Important Part of a GPS System?

If you said “the destination,” that’s true, but you also need to know where you’re at currently. When trying to find your way to a secure retirement, you must know where you are in this very moment.

During the journey, there may be accidents and detours along the way, and our GPS Retirement System will help you get back on track.

How We Identify Where You Are

Where we are today is very important, and we start working with every client by finding out exactly where they are financially so that we can figure out how to get them to their retirement goal.

A lot goes into this initial process to ensure that we help you get to the retirement you want.

We start by asking:

  • Are you currently working?
  • When do you plan to retire?

These two questions allow us to know when income will stop coming in from your job and when you’ll need to dip into your retirement. Of course, we will also want to know about other forms of non-employment income that you have, such as:

  • Pension (potential survivorship)
  • Social Security
  • Rental property
  • Business sale income
  • Part-time or consulting that you may consider

If you’re not taking Social Security, we’ll also run an analysis to determine when the optimal time for you to take Social Security is.

We will work to understand your full income potential so that we know how much money you’ll have coming in during retirement. Next up, we’ll also need to know about the assets that you have accumulated over time.

Asset Considerations

Assets can also help you get through detours and roadblocks on the way to retirement. Some assets include:

  • 401(k)
  • IRA
  • Brokerage accounts
  • Annuities
  • Insurance policies
  • Savings and checking accounts
  • Property 

Assets are so important because they help fill in the blanks for us. You may have properties that generate a positive net income every month and annuities that can help cover a large chunk of your expenditures each month.

There’s also the possibility that you may sell a home or downsize to help fund your accounts or save more money each month.

Once we consider all of your income and assets, it’s time to look at expenses.

Expense Analysis

Now we have all of the information in the GPS System to understand how you can get to your destination, but we have to consider roadblocks. One of the major roadblocks people experience during retirement planning is their expenses.

If there’s one area that can make or break a retirement plan, it’s going to be your spending.

We need to know:

  • Flat expenses: Mortgage, car payment and any account with an end date.
  • Needs: Pay the bills, go out to eat, entertainment, etc.
  • Wants: Travel, second home and other fun things.

We often create a “fun fund,” and this would be the fund to travel heavily when you first enter retirement and want to travel or whatever “fun” you want to have.

Knowing what you “must” spend is time-consuming. Often, people know they have enough income to pay their expenses, but when you hit retirement, you will be drawing from retirement accounts, so it’s crucial to know what you’re spending your money on.

Plugging These Figures into Our Retirement System

At this point, we have a lot of retirement information available that can help you get to your retirement goal. And through our system, we’ll plug all of these figures in to have a better idea of how to get to your retirement goals.

Unfortunately, there is always one variable that we can’t account for fully: retirement length.

We can always base the retirement length on life expectancy, but there are some people who will be retired for 40 years and some 1 year – we just don’t know.

Our goal is to make sure your account will last until you’re 90.

We’re extremely conservative with these estimates and will account for:

  • Inflation
  • Healthcare
  • Investment growth (very conservative rates used)

Now, looking at this information, we can determine if you can get to the retirement destination on your GPS.

We like to create scenarios and adjust them to find out the best way to reach your goals. For example, you may find that you need to cut back expenses by $500 a month, and instead, you would rather go into consulting a few hours a week instead.

Unfortunately, getting to your destination is never easy.

There are roadblocks, detours and other issues that pop up along the way. However, when we have all of these baselines in place, we can then run simulations every year to ensure that you’re doing everything right, year by year, to reach your goals.

If you have a long-term care scenario occur, your plan will obviously change a lot.

Running simulations allow us to predict what will happen in the future based on numerous variables, such as a spouse passing away, long-term care being needed, more money coming in or going out, or other scenarios.

The GPS Retirement System considers all of these variables, including the fun ones.

Once we have a baseline set, that’s when we can see all of the great things that come out of our hard work today. Perhaps you’ll have enough money to travel the world for a decade, and this is something we can simulate.

All throughout retirement, we can run simulations on things like:

  • Going into a continuous care community
  • Remodeling your kitchen
  • Buying or selling your home
  • Helping pay for your grandkids’ education
  • Moving overseas
  • Virtually anything

If you want to secure your retirement, the GPS System works very well and allows you to account for the unknown variables that inevitably pop up in the middle of retirement.

Did you like this post and want to learn more about retirement? 

Sign up for our free 4 Steps to Secure Your Retirement video course.

September 12, 2022 Weekly Update

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We do love it when someone refers a family member or friend to us.  Sometimes the question is, “How can we introduce them to you?”   Well, there are multiple ways but a very easy way is to simply forward them a link to this webpage.

Here are this week’s items:

Portfolio Update:  Murs and I have recorded our portfolio update for September 12, 2022 

CLICK HERE TO WATCH THE UPDATE

This Weeks Podcast – Beneficiary Designations – What You Need to Know

Have you been wondering whether to do a beneficiary and how to do it? There are different accounts that require you to have beneficiaries, including your retirement accounts.

A beneficiary is a person you assign while you’re living to receive the benefits of your accounts after you pass.

CLICK HERE TO LISTEN TO THE PODCAST

 

CLICK HERE TO WATCH ON YOUTUBE

This Weeks Blog -Beneficiary Designations–

Beneficiary designations are so important. You’ve set up accounts for estate and retirement planning, paid your dues, and you want to be sure that the right person is left these accounts. Sometimes, you might not even know about designations for certain accounts, so this is an article that we think can help a lot of you that trust in our Secure Your Retirement podcast.

CLICK HERE TO READ THE BLOG

Beneficiary Designations – What You Need to Know

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Beneficiary designations are so important. You’ve set up accounts for estate and retirement planning, paid your dues, and you want to be sure that the right person is left these accounts. Sometimes, you might not even know about designations for certain accounts, so this is an article that we think can help a lot of you that trust in our Secure Your Retirement podcast.

If you haven’t subscribed to our podcast already, we highly recommend you do here.

In this episode, we’re going to cover everything you need to think about, including:

  • Beneficiary designations
  • Taxes
  • More 

Beneficiary Designations 101

First, it’s important to know which accounts are almost required to have a beneficiary. These accounts include:

  • 401(k)
  • 403(B)
  • IRA
  • Life insurance
  • Etc.

These accounts will often require a beneficiary or a person to who you want the account to go to upon your demise. You’ll be able to choose a primary and contingent beneficiary, too.

Retirement accounts are the most common accounts that need beneficiaries.

Other accounts that you should add beneficiaries to include:

  • Brokerage accounts
  • Bank account
  • Savings account

You may find a name other than the beneficiary, such as “transfer on death,” and you should be filling these out.

What is a Primary and Contingent Beneficiary?

Primary and contingent beneficiaries were mentioned previously. What do these things mean?

  • A primary beneficiary is the main person who would gain control of these accounts upon your demise.
  • Contingent beneficiaries are the person(s) who will receive the account if the primary beneficiary isn’t alive.

You can even have multiple beneficiaries, all of which will receive a percentage of the account. For example, you can have four beneficiaries, all of which receive 25% of the assets in the account, or whatever percentage that you choose.

What Happens If You Don’t Have a Beneficiary?

When no one is listed on your accounts as a beneficiary or the only person listed is no longer alive, the account will go to your estate. The problem with the account going to the estate is that a large chunk of the money will be lost to upfront taxes.

Instead, if a beneficiary receives the money, they can leverage tax strategies to save money.

Gaining Greater Control Over the Money

You can gain greater control of the funds and the way they’re transferred by using certain designations. Thankfully, there are only two that you really need to know about:

  • Per Capita: The default on beneficiaries. For example, if you have two primary beneficiaries with 50% of each asset divided equally among the two. If one beneficiary dies, all of the money will go to person number two as your primary beneficiary. The shares of a beneficiary that is no longer living is split equally among all primary beneficiaries listed, no matter how many there may be.
  • Per Stirpes: You can also choose per stirpes. A powerful and useful tool, this means that the assets will go down your lineage. So, if you have two people as beneficiaries and the first beneficiary dies, the funds they would receive will go to the next person in their lineage. So, the money would go to the person’s kids instead of the remaining beneficiary.

As you can see, designations when adding beneficiaries are very powerful tools that can help you gain greater control over who receives your assets.

Many clients of ours are concerned about the future and their assets. For example, many of our clients ask, “What happens if a grandchild is born?” Using per stirpes, the assets will include them in your lineage.

For example, let’s assume that you have a son, and they have a child. The child automatically becomes part of the per stirpes designation. 

Most people will list their spouses as a primary and their children as contingents on their accounts because it’s a way to ensure assets are passed on to the people you care about the most.

Power of Per Stripes Example

Let’s assume that you have passed away, and you have a substantial amount of money in an IRA or 401(k). You might also leave money to your son or daughter, who is a good income earner. Due to their high income, per stirpes can be very beneficial.

Why?

Your children can disclaim their inheritance to allow it to flow down to your grandchildren.

Why is this beneficial?

If the grandkids don’t have large incomes or maybe are even too young to work, they’ll be in a much lower income bracket than someone who is a high earner. In this scenario, more of the money will go to your family and less will go to the government for taxes.

But the per stirpes designation must be present for this to work.

Annual Beneficiary Review

Conducting an annual beneficiary review is something we recommend all of our clients do, and we highly recommend that you do a review, too. The main reason for a review is that it’s just too easy to forget about beneficiary changes.

You may have been divorced, a beneficiary died, or you may have been married.

Annual beneficiary reviews will ensure that the right people benefit from the assets you leave behind.

We have a story of someone who divorced, then remarried.  The beneficiary was never updated.  When they passed away, all of the funds in the account went to the ex-spouse and there was nothing that the current spouse could do to challenge the transfer of assets.  Due to the strength of the beneficiary form, there is no way to challenge the form or beneficiary listed.   

This is why we recommend annual beneficiary designation reviews.

You can also list charities as beneficiaries, which is something you may want to do if you’re passionate about certain charities.

It’s very easy to adjust beneficiaries, and you can even do the process online for some accounts. Offline changes require a simple form submission to change beneficiaries.

Tip to Help Beneficiaries

One thing we recommend is that you sit down and make a list of all accounts that you have. Your estate will have a difficult time trying to find all of the accounts you have if you don’t create a list for them.

Additionally, we’ve had some clients find out about accounts well after a person’s death because no one knew they existed.

If you don’t create a list of accounts, you’re putting any of the beneficiaries you use at a significant disadvantage. Also, this same list can be used by you to update and review accounts annually, so it’s a win-win for everyone involved.If you have any questions about beneficiary designations, feel free to schedule a 15-minute complimentary phone call with us.

September 6, 2022 Weekly Update

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We do love it when someone refers a family member or friend to us.  Sometimes the question is, “How can we introduce them to you?”   Well, there are multiple ways but a very easy way is to simply forward them a link to this webpage.

Here are this week’s items:

Portfolio Update:  Murs and I have recorded our portfolio update for September 6, 2022 

CLICK HERE TO WATCH THE UPDATE

This Weeks Podcast – Dr. Doug – Hormone Optimization Therapy

Have you given thought to the possibility of having the hormonal replacement therapy conversation?

As we age, hormones will inevitably decline and it’s something that everyone will have to deal with.

CLICK HERE TO LISTEN TO THE PODCAST

 

CLICK HERE TO WATCH ON YOUTUBE

This Weeks Blog -Hormone Optimization Therapy–

Hormones are something a lot of people see as being controversial, and it’s sad because men and women will both experience a drop in their hormones. Discussing your issues with a physician is necessary, even if it’s something that feels uncomfortable.

CLICK HERE TO READ THE BLOG

Hormone Optimization Therapy

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Hormone optimization therapy is something we think everyone should know about and understand. This week, we had the pleasure of having Dr. Doug Lucas back on our podcast to discuss hormone optimization with you.

Note: You can listen to the full episode on our podcast here.

What is Hormone Optimization Therapy?

Hormones are something a lot of people see as being controversial, and it’s sad because men and women will both experience a drop in their hormones. Discussing your issues with a physician is necessary, even if it’s something that feels uncomfortable.

Today’s hormone therapy is not risky as was thought in the past.

Doctors are helping with hormone optimization therapy daily, and healthcare providers can perform optimization in a safe and healthy manner.

Hormone optimization therapy helps restore your hormones, and it’s something that may benefit all older adults.

  • Men lose testosterone as they age
  • Women lose estrogen and progesterone

For men, testosterone declines slowly over time, but women experience a much more rapid decline in these key hormones, causing some uncomfortable symptoms in the process.

Signs That You May Need Hormone Optimization Therapy

Men’s testosterone slowly begins to decline over time, but women have a major drop off in hormones when they hit menopause. Hormone optimization is often not something men realize they need right away because their hormones do decline gradually.

Women, however, will experience significant symptoms and side effects.

Men’s Symptoms

Men can experience symptoms as early in their 20s and 30s, and the symptoms include:

  • Brain fog
  • Loss of vitality
  • Fatigue

Many men feel like they don’t have the drive or steam they had to get through the end of the day. Of course, some men do lose their libido to some extent, too.

Dr. Doug is noticing that there is a decline in the average age that these symptoms occur. Men are experiencing issues much earlier, and this means a longer life expectancy with these symptoms.

Women’s Symptoms

Women go through menopause at different ages, but they should start thinking about therapy even earlier. Women have a harder time with hormones because there are many involved.

If you’re experiencing menopause symptoms yet still have regular cycles, this is a good time to begin discussing your options with a doctor.

Women will often have plenty of estrogen but low testosterone and progesterone. As a result, they will need to treat the estrogen deficiency to experience results. Low estrogen can cause a variety of symptoms:

  • No or irregular periods
  • Dry skin
  • Irritability
  • Moodiness
  • Breast tenderness
  • Hot flashes
  • Night sweats

Traditional physicians will sometimes be uncomfortable with treating people with hormone therapy. For men who are experiencing an earlier decline in testosterone, issues are even worse.

For example, if a 29-year-old male goes to the doctor with the classic symptoms listed in the previous section, the doctor is unlikely to check his testosterone.

And even if they do test their testosterone, they’ll either:

  • Determine that levels are adequate
  • Not understand men are experiencing a faster decline in testosterone

Due to the declining testosterone earlier, many doctors are seeing people with severely low testosterone as “normal.”

When treating men specifically, multiple avenues may be available, such as:

  • Supplements
  • Medication
  • Lifestyle changes

Often, a mixture of all three treatment options will provide the best results. Medication can help bring levels back up, and in hormone replacement therapy, it will be necessary to continue with hormone replacement indefinitely.

Self-Diagnosing and the Supplement Route

If you have an unlimited budget, self-diagnosing and trying the hundreds of supplements is possible. However, when you have very low testosterone, you need to be realistic with your results.

For example:

  • A 10% boost for someone with an 800-testosterone level is amazing
  • A 10% boost for someone with a 200-testosterone level isn’t good

However, we have seen people that have made significant lifestyle changes and use supplements find great results.

Doug’s Process of Working With Clients

Dr. Doug works with clients who need hormone replacement therapy all the time, and he has processes in place to help clients. The main thing he notes is that you need a base to go off of. If someone isn’t testing your hormone to learn your base, run the other way because you won’t know what’s working or how well it’s working.

Doug handles this in two ways:

  1. Hormone replacement only program. This starts out with an extensive lab panel to see things that can change if you have hormone replacement, such as cholesterol, etc. He continues to test throughout the program to ensure your risks are falling and that the hormones aren’t causing adverse side effects.
  2. Hormone optimization program. The optimization program is more intense and in-depth. Dr. Doug will focus on optimizing your life, including sleep, nutrition, movement, exercise and even stress management. 

During hormone replacement therapy, the average results will vary, but typical results are:

  • Men will notice that a change in vitality returns. They start recovering better, regain their competitive nature and just have their pep restored. Some men will also mention improved libido and function, too.
  • Women will notice changes in body composition, hot flashes and other symptoms that fall off. Progesterone will help with sleep and testosterone is amazing for muscle mass, skin quality and texture. Energy and vitality also return, but not to the same extent as a man.

Hormone replacement therapy is a process, and it takes time to see results. Dr. Doug told us that it takes time to make changes, and you may need to make lifelong changes, too. Men will experience changes in one to two weeks in most cases.

Women will also notice changes, but skin and body composition changes will take more time. However, hot flashes and other symptoms will begin to decline.

Dr. Doug will look at the “whole” person, so he will consider your overall health, bad habits and other areas to help restore your hormones.

Anyone that likes what Dr. Doug is doing and has osteoporosis will also want to read through our article on how to reverse osteoporosis, where we discuss all of these things with him. You can also visit his website and send his team a message. He will discuss multiple avenues to help you feel your best.

If you need help with retirement planning, please schedule a call with us today.

August 29, 2022 Weekly Update

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We do love it when someone refers a family member or friend to us.  Sometimes the question is, “How can we introduce them to you?”   Well, there are multiple ways but a very easy way is to simply forward them a link to this webpage.

Here are this week’s items:

Portfolio Update:  Murs and I have recorded our portfolio update for August 29, 2022 

CLICK HERE TO WATCH THE UPDATE

This Weeks Podcast – Peace Of Mind Wealth Management Retirement Process

Are you considering taking that complimentary call and possibly working with us? Here at Peace of Mind, we have a well-curated system from the first meeting we have with a potential client to the actual job of managing their financial retirement plan. 

CLICK HERE TO LISTEN TO THE PODCAST

 

CLICK HERE TO WATCH ON YOUTUBE

This Weeks Blog –Peace Of Mind Wealth Management Retirement Process-

If you decide that you want our help when you’re trying to secure your retirement, these are the very steps that we’ll go through to help you meet your retirement planning goals.

CLICK HERE TO READ THE BLOG

Peace of Mind Wealth Management Process

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Our Peace of Mind retirement process can be a little overwhelming for some, so we decided to make the process a little less intimidating for you. We’re going to walk you through the Peace of Mind wealth management process step-by-step:

  1. Personalized Introduction Meeting
  2. Personalized Planning Meeting
  3. Personalized Options Review
  4. Personalized Monitoring

If you decide that you want our help when you’re trying to secure your retirement, these are the very steps that we’ll go through to help you meet your retirement planning goals.

Personalized Introduction Meeting

An introduction meeting is the first step to working with us. This meeting is very important, and in our process, it’s a no-obligation meeting. We sort of view this as your “second opinion” because you’re coming to us with an idea for your retirement plan that you want to be validated.

You’ll come into the meeting with what you’ve prepared prior or with documents so that we can create a financial snapshot for you.

The snapshot will help us understand where your financials are today.

We’ll use this meeting to determine:

  • Are we a good fit for you?
  • Are you a good fit for us?

If we’re a good fit for you and you’re a good fit for us, we can then move forward. 

The financial snapshot of today allows us to judge where you are today and how we can help you reach your goal of a peace-of-mind retirement. In total, the meeting is 30 – 45 minutes, and we’ll get to know each other, your goals and how you view things.

For us, there are two reasons that we may tell you that you’re not a good fit for us:

  1. You’re spending far too much money for any plan to be sustainable. We can determine this pretty quickly.
  2. You want us to buy risky investments for you that we don’t agree with, such as options or futures, which we believe hold too much risk to be viable.

If we both believe that we’re a good fit for each other, we’ll schedule a planned meeting. Even if we’re not a good fit, you’ll walk out of the meeting with some form of validation for your financial future.

Personalized Planning Meeting

After the first visit, we have your financial snapshot, which includes:

  • Assets
  • Spending
  • Income
  • Retirement goals
  • Inheritances
  • Estate plan
  • Etc.

Before the second visit, we’ll start working on your plan, plugging it into our software and coming up with a general plan for you. We’ll be able to calculate things such as Social Security and retirement income.

We’ll also go through a risk assessment, such as calculating where your investments are and what their potential may be in the future. Our team will score all of your investments so that we can determine the true risk of your financial plan.

We’re able to run what-if scenarios during this meeting, such as:

  • What happens if I retire today? 5 years from now? Etc.
  • What happens if a spouse dies?
  • What happens if you live to 80, 90 or 100?

Everything is visualized so that you can see what major events may impact your retirement.

Finally, we have a major risk conversation with you. We’ll run a simulation of your risks using your portfolio information so that we can address your risk properly. The personalized planning meeting is a truly eye-opening experience and one that often leads to many people realizing 15% to 20% of their retirement is high-risk, meaning it can disappear quickly.

At the end of the meeting, you’ll receive a full printout.

This meeting will last about an hour for most clients.

Personalized Options Review

If you’re on board and want to come back for a third meeting, The Options Review is the next step, and it’s a commitment. In the second visit, we provide a ton of value for free, and the option review is where you come in and are serious about working with us.

You’ll come in with questions, such as:

  • How would our relationship with you work?
  • How do I allow you to manage my 401(k)?
  • Etc.

We go through any questions that you have and discuss your options with you. Once all of this is done, we can then really work with you.

Personalized Monitoring

Personalized monitoring is us implementing the plan we laid out for you. We execute the plan that we discussed, and we monitor your accounts daily. We’ll make adjustments as necessary to help your money grow and push you closer to your retirement goal.

We’ll also need to monitor your finances and life changes.

And we do this monitoring through meetings. We will certainly have an annual meeting with you, but we also have many clients that we meet with more frequently. Meetings will depend on your needs, and we’re flexible here.

For example, you may want to meet more when you:

  • Are close to retiring
  • Lived in retirement for 5 years and want to sell your house and travel
  • Etc.

We also provide a market update to our clients every Monday, so you’re always in the loop and can be confident in your retirement plan. The process is very detailed, and we also offer tax planning, tax strategy, estate planning and other key elements to help you manage your money in the best way possible.

If you would like to schedule a personalized introduction meeting with us, click here.