May 16, 2022 Weekly Update

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 May 16, 2022 

This Weeks Podcast –Tax Planning Versus Tax Preparation-

Did you know that you can legally and ethically avoid paying unnecessary taxes by working with the tax code? With tax planning, you can avoid tax risk.

Tax preparation is about being reactive while tax planning is about being proactive all year round every single year.

 

This Weeks Blog –Tax Planning Versus Tax Preparation

One thing that most people are concerned about is their taxes. People work hard for their money and want to keep as much of it in their pockets as possible. However, taxes come along and take a major chunk of your earnings.

Tax Planning Versus Tax Preparation

One thing that most people are concerned about is their taxes. People work hard for their money and want to keep as much of it in their pockets as possible. However, taxes come along and take a major chunk of your earnings.

Today, we’re going to discuss tax planning versus tax preparation.

Why?

They’re often lumped into the same definition, although they’re two completely different things. Tax preparation is when you put all of your numbers on a tax form or add it into TurboTax or something similar, and you pay the amount you owe to the IRS.

However, if you’re in retirement and on a strict budget, tax planning works to save you money on the taxes you need to pay.

We recommend tax planning for everyone because it saves you a lot of money.

Tax Preparation Basics

When you have your taxes prepared, it goes something like this:

  • You file your own taxes, use software or hire a CPA
  • Based on the calculations, you pay the taxes for the previous year

In 2022, you’re paying your 2021 taxes. All of the preparation happens the following year after the money is earned, and there’s no real planning involved.

This is where tax planning could have helped.

How Tax Planning Differs

Tax planning happens for the tax year. For example, if you want to save money on your taxes when you file in 2022, planning needs to occur in 2022, not 2023. Tax planning is a proactive approach taken during the year to reduce taxes.

Otherwise, there are only so many ways to reduce your tax burden in April if you didn’t plan for it throughout the year.

For example, let’s assume that you made a ton of money in 2022, received a great bonus and will need to pay a lot of money in taxes. If you engage in tax planning, you may be able to reduce your taxes when you file in 2023 by:

  • Using charitable contributions
  • Roth conversions
  • Etc.

And if done correctly, tax planning can be done over the course of years to reduce your taxes drastically.

Tax Planning Strategies to Save You Money

Reduce Taxes on Social Security

Many people entering retirement don’t understand that they have to pay taxes on their Social Security income. While there are some exceptions to this rule, many of you reading this will still need to pay money to the IRS based on the benefits you receive.

If you make an income in retirement, somewhere around $40,000 for a married couple filing jointly, you will have to pay taxes on up to 85% of your Social Security benefits.

Tax planning can help you reduce your tax burden.

Let’s step back for a moment and consider how people plan for retirement. Many people save for retirement using:

  • 401(k)
  • Traditional IRA

Using these accounts, people plan to supplement their Social Security benefits. However, when you paid into these accounts, you didn’t pay any taxes. You’ll now need to pay taxes when you withdraw from these accounts.

Let’s assume that you take $30,000 out of the IRA per year to supplement your income.

Now, you have $30,000 of income that is taxable and $40,000 in Social Security benefits. Since you “earned” an income from these retirement accounts, you’ll need to pay higher taxes. Utilizing the right strategy, you can move money out of these tax-deferred accounts into accounts where you pay taxes first, but when you make withdrawals in the future, you don’t have to claim the income.

If all you have in income is your Social Security, you’ll:

  • Pay less in taxes
  • Pay less in Medicare premiums

However, tax planning in this scenario needs to take place 5 or 6 years before you plan to retire.

Roth Conversions to Reduce Taxes

Roth conversions are one of the best ways to get your tax-deferred money out of your 401(k) and Traditional IRA and into an account that allows you to have income in retirement but not pay taxes on it.

In fact, using this strategy, most of our clients earn the same or even a higher income in retirement than when working.

But here’s the problem.

  • Tax-deferred accounts mean you pay less taxes now and more taxes when you make withdrawals
  • People assume that when they’re in retirement, their income will be lower, so they’ll pay less taxes
  • Based on this assumption, people think a tax-deferred account is the best option to pay less taxes

The problem is we’re seeing people earn more in retirement than when they’re working, causing them to pay higher taxes because they’re in a higher tax bracket.

And you have to start taking a required minimum distribution (RMD) at 72 and a half due to tax laws. 

Instead, a Roth conversion works like this:

  • Roll pre-taxed money into a taxed account
  • Convert money into a tax-free bucket
  • Reduce your long-term taxes

Let’s assume that you have $1 million in a tax-deferred account. When you convert to a Roth account, you’ll pay taxes on the $1 million. However, the money can now grow tax-free, meaning as the account grows, you don’t have to worry about taxes.

We know that if tax laws do not change, everyone is going to pay higher taxes in 2026.

If you convert to a Roth account, you’ll pay taxes today and avoid the higher taxes that are coming in just a few years.

Tax planning helps you account for all of these factors, save money when you’re in retirement, and have a lot less to worry about as a result. Tax-free buckets are ideal for everyone planning to retire because your money can grow tax-free.

And we have one last tax planning strategy that we must discuss: planning for your surviving spouse.

Planning for Your Surviving Spouse

In 99.99% of marriages, someone is going to outlive their spouse. Of course, there are the rare occasions when spouses pass on the same day, but this often involves a very tragic occurrence. Tax planning for your surviving spouse is not something many people want to think about, but it’s a way to ensure your spouse is financially stable when you’re no longer here.

When you pass, your spouse needs to file as a single person, and this does a few things:

  • Increases tax burden
  • Reduces standard deductions

Setting up a tax-friendly account for your spouse is the best option if you don’t want to transfer money to the IRS. Planning ahead allows you to save your spouse money on taxes and ensure that they have the income necessary to live comfortably after you’re gone.

Work with a CPA or us (click here to book a conversation) to start working through in-depth tax planning to save you and your spouse money on their taxes.

One last thing before you go:

Click here to subscribe to our Secure Your Retirement podcast for more great information on retirement and tax planning.

May 9, 2022 Weekly Update

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 May 9, 2022 

This Weeks Podcast –The Retirement Bucket Strategy-

Have you given thought to how you’d like to structure your retirement plan? How about a strategy that ensures you have both income and growth in retirement?

The bucket strategy is a simple strategy that will give you peace of mind through your retirement. The goal for your retirement should be to have access to money, an income stream, and growth on your money.

  

 

This Weeks Blog –The Retirement Bucket Strategy

Structuring your retirement plan is key if you want to secure your retirement. If you’re younger and still earning a healthy income, your goal is likely to have more risk. However, if you’ve been retirement planning and are just a few years away from finally reaching your milestone, your plan’s structure will be different.

The Retirement Bucket Strategy

Structuring your retirement plan is key if you want to secure your retirement. If you’re younger and still earning a healthy income, your goal is likely to have more risk. However, if you’ve been retirement planning and are just a few years away from finally reaching your milestone, your plan’s structure will be different.

One thing we talk about a lot on our podcast is buckets, and today, we really want to go more in-depth on the retirement bucket strategy and how it works.

Here is the strategy we use to:

  • Build wealth
  • Generate income

And the retirement bucket strategy is simple. In the next few minutes, you can learn how to use the same strategy we use to be comfortable in retirement.

How Do I Structure Everything I Have in Retirement?

If you’ve been putting money aside for retirement and making your money work for you, you will come to a point where you need to structure your accounts differently. Structure provides security, emergency money, income, and growth.

When people are working, they generate income and it’s easier to put money away.

However, when you retire, you flip a switch and then must use the money you saved to generate an income. Stopping work is a major shock for most people, and the vast majority are often concerned about whether they have enough.

Whether clients have $1 million or $10 million in their retirement accounts, they’re always concerned that they’ll run out of money. Many people rely on the growth of 7% to 10% in the market, and then when you have the Ukraine / Russia war and pandemic, anxiety sets in due to market volatility.

The retirement bucket strategy helps you structure your retirement in such a way that you don’t have to rely 100% on volatile markets.

Introducing the Retirement Bucket Strategy

Our bucket strategy has three main buckets, each with its own roles and purposes.

Bucket 1: Liquid Cash

You can view liquid cash as sort of an emergency fund or a feel-good fund. Many clients have this cash tucked away, often in an FDIC-protected bank account, for when any of life’s unexpected events that pop up.

Bucket 2: Income

You rely on the income bucket to generate income now that you’re no longer part of the workforce. Many people have the following in this bucket:

Income buckets often do not generate enough income for all your needs and wants if they only include Social Security and pension. However, when appropriately structured, these buckets do generate nice income streams that allow you to pay your bills.

Income Buckets Disconnect from Markets

Your income bucket is crucial to your survival. If you’ve been looking into retirement for a long time, you may have heard of the 4% rule. The rule states that you can take 4% out of your retirement each year because it will be made back up with market gains.

However, let’s assume the following:

  • $1 million in retirement funds
  • 4%, or $40,000, taken out of these accounts to live each year
  • Market slump cuts retirement down to $600,000

In the above scenario, when the market fluctuates and you’re using the 4% rule, you’ll either must live on $24,000 a year or take out 7% that year to live.

These risks are far too great when you’re not in the workforce or generating income. Instead, we recommend all the accounts in your income bucket be 100% detached from the markets so that you can be confident that you have the money each month to pay for your necessities.

Bucket 3: Growth

A growth bucket is designed to help you grow your retirement over time. These buckets have risk and volatility. In many cases, the growth bucket is a long-term bucket that often includes investing in the market.

Retirement Bucket Strategy in Practice

After structuring these buckets, let’s assume that you have:

  • $1 million in retirement accounts
  • Social Security/pension
  • Need an additional $2,500 a month in income

In this case, we may recommend the following retirement bucket strategy:

  • Put $50,000 in your liquid cash bucket that’s easily accessible
  • $450,000 goes into your income bucket
  • $500,000 into your growth bucket

With this structure, we can run some modest numbers here and see how all of this works out in the long term. In your income bucket, let’s assume that you want a 3% rate of return on your $450,000, and this would generate $2,500 a month for you for 20 years before the money in this account runs out.

At the end of 20 years, the bucket is eliminated if the rate of return is just 3% per year.

Now, during this 20-year period, you’ve had your $500,000 growing at a very conservative rate of 6%. The growth bucket would have $1.7 million in it if you didn’t touch it at all.

If you retired at 65 (you’re now aged 85), you would have $1.7 million left in your growth bucket to do a few things. Ideally, you’ll place some of this money into your income bucket to help fund your lifestyle for the next 10 – 15 years – easily.

The retirement bucket strategy makes it simple and easy to retire with peace of mind.

If you want peace of mind, this simple strategy can provide it. Of course, we are always here to help you with an individualized retirement plan that better fits your needs.

Click here to start our 3 Keys to Secure Your Retirement Master Class.

May 2, 2022 Weekly Update

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 May 2, 2022 

This Weeks Podcast –Lynne Bowman – Brownies for Breakfast-

How conscious are you about what you eat? Your health is indeed your wealth; staying healthy is one of the best financial strategies you can have.

Eating for health and wealth means eliminating sugar and bad ingredients from your diet and choosing to eat whole plant-based foods.  

 

This Weeks Blog –Enjoying a Healthy Retirement-

After all, once you secure your retirement, you want to live as long as you can in optimal health. If you want to change your health drastically, one of the things that you can begin doing right now is to stop………..

Enjoying a Healthy Retirement

We were very excited to speak to Lynne Bowman, author of Brownies for Breakfast: A Cookbook for Diabetics and the People Who Love Them, on our latest podcast. And today’s article and podcast are all about how to have a healthy retirement and life as healthy of a lifestyle as you can.

After all, once you secure your retirement, you want to live as long as you can in optimal health.

Who is Lynne Bowman and What is Her Mission?

Lynne Bowman is the glam grandma who knows how to get you to eat your veggies. Many people don’t understand the connection between health and wealth, and Lynne’s mission is to get you to eat your veggies.

As a Type II diabetic, she has been trying to stay on her feet and stay healthy since the 80s.

Lynne is a young 76, and she loves bringing the security of good health and money to people. After all, over 70% of people go bankrupt because of medical bills. 

Lynne wants to keep people on their feet:

  • Longer
  • Better
  • Stronger

Today, she shares her insights on what really works when you incorporate good habits into your life. Her new book, Brownies for Breakfast, sheds light on the emotional relationship with food and how to break free from bad habits and stay healthy.

Of course, there’s also a community that brings a healthier, happier life, too.

Who are you eating with? Are you eating in your car? Are you rushing from restaurant to restaurant? All your answers here have a direct impact on your health.

Lynne is going to share some advice that she’s learned firsthand through her own experiences with you today.

Lynne’s Most Surprising Advice for Our Audience

This tip, as Lynne warns us, is starting to become more mainstream, but it’s still a shock to a lot of people. One of the most important things that you can do for your health is not to eat so often.

If you want to change your health drastically, one of the things that you can begin doing right now is to stop eating all the time.

Eating in shorter-hour windows, ideally in the middle of the day and stopping eating at night, is an excellent way to start. And this isn’t just some new fad. Autophagy, or the way that your body cleans damaged cells and regenerates new ones, has shown that this way of eating can be very beneficial.

If you’re continually eating, it doesn’t allow the body to clear out these bad cells.

And since your body does most of the cleansing process when you sleep, eating late at night never allows your body to get rid of the bad cells that lead to health issues. A few things to keep in mind are:

  • Sleep is crucial to great health
  • Most of the body’s cleansing occurs when you sleep
  • You can’t fall into a deep sleep with a full stomach

Even if you fall asleep immediately after a big meal and feel great when you wake up, your body devotes more energy to digestion and less to cleansing, cell regeneration and repair. There’s also a major role of sleep in cognitive function, which everyone should worry about as they age.

Lynne recommends that you experiment with the way you eat because you’re the only one that will 100% cooperate with your plan.

What’s the Overwhelming Premise of What to Do and What to Avoid?

Lynne has a lot to share with us, and we asked her to tell us:

  • What are the things you should be doing?
  • What should you avoid to maximize your health? 

What Lynne Recommends Doing

  • Eat whole foods
  • Go plant-based

She recommends eating plant-based foods and avoiding processed foods. If you’re going to eat meat, avoid factory farming. You want high-quality meat from animals that are happy and healthy.

Of course, many people can’t imagine not eating meat, and if you fall into this category, just be smart with the meat choices you make.

What Lynne Recommends Against

Sugar. If you just cut sugar out of your diet, you’re going to eliminate so many bad food items. Reading labels is crucial to avoiding sugar, and then you’ll realize that almost everything you find in the food store in a box has sugar added.

And sugar is addicting. In fact, it’s more addicting than heroin and other opioids. You’ll also experience withdrawal and depression when you stop eating it.

Now, maybe you’re thinking: well, I’ll just cut back on sugar. Would you recommend someone just cut back on hard narcotics? No. It doesn’t work.

If you cut all sugar for two to three weeks, you’ll start noticing just how good you feel.

Brownies for Breakfast covers excellent recipes that don’t include sugar. You can still enjoy great-tasting foods without even realizing that there’s no sugar included in the recipe.

Best Exercises to Complement a Better Diet for People 55 and Older

Lynne recommends walking – often. She recommends walking anywhere you can and as often as you can. Humans are meant to walk, and this helps with:

  • Circulation
  • Weight management
  • Strength
  • Endurance

Additionally, she works out three times a week with a few gals around her age. She does TRX and Pilates, but she also does a lot of stretching. You benefit from seeing your friends and socializing, which is huge for your health.

People who are completely alone often aren’t in optimal health.

You can also join walking and hiking groups.

However, the truth is that you need to get moving. You can join dancing classes, go to a gym if you like, walk your dog a lot or engage in other activities that get you moving.

Starting Grandkids Off on Eating Their Veggies When They’re Young

Kids learn very young, and if you can do these two things, kids will eat veggies:

  • Get your kids cooking because they’ll eat what they cook
  • Get your kids in the garden growing food because they’ll eat it

If you make eating fun and get your kids involved in the cooking process, you’ll find that kids will eat their veggies.

Also, when they’re old enough, get your grandkids reading labels when they go to the store. Kids love sweets, but when you explain the dangers of sugar and processed foods and then back this up with growing and eating whole, natural foods, they’ll learn to eat better at a much younger age.

Anyone wanting to learn more about Lynne can visit her website at LynneBowman.com.

If you’re in the midst of retirement planning and need a little help, sign up for our free course: 4 Steps to Secure Your Retirement Video Course.

Social Security Questions Answered

Social Security is such a key part of retirement planning, but people have a lot of questions that they never ask about. If you’re relying on Social Security to secure your retirement, you must know the answers to some key questions.

Don’t know what questions to ask?

We have you covered. We’ll be discussing the most important questions you should be asking about Social Security.

Top Social Security Questions and Answers

How Do I Find Out How Much My Social Security Benefits Will Be?

Determining your Social Security benefits was, at one time, much easier. Many people probably remember the time when paper statements were sent to you in the mail explaining just how much your benefits would be if you retired now or in the future.

However, the Social Security Administration wants to save money and encourage people to use its website. As a result, you won’t receive these paper statements in the mail anymore.

Instead, you’ll want to go to:

We can run estimates to determine your benefits, but the only 100% accurate solution to find out about your Social Security benefits is to go straight to the Social Security Administration.

You can view how much you’ll have in benefits if you retire now or in the future. Additionally, you can apply for benefits right on the platform if you like. You should sign up about three months before you plan to take your benefits just to be on the safe side.

Bonus Question: What about spousal benefits and Social Security?

Individuals have two options for Social Security:

  1. Their own benefit
  2. Their spouse’s benefit

Why would you want to take your spousal benefits? Typically, one spouse works more than the other spouse or earns more than their spouse and can take higher benefits. Ultimately, most people want to maximize their benefits, so they’ll only take their benefit if it’s the higher of the two amounts.

Let’s see a few examples of this:

  • One spouse goes to work, and the other raises the kids. If you’re married for 10 or more years, your spouse can take your spousal benefits.
  • Both spouses are the same age (just to make this easy), and they’re 67 years old.
  • The working spouse has $3,000 a month in Social Security benefits.
  • The non-working spouse, who didn’t get to work and earn credits, may have a $1,000 benefit.
  • You can take your $1,000 benefits, or you can take half of your spouse’s benefit.
  • So, based on this, the non-working spouse will want to take spousal benefits because they’re $1,500 a month versus their own $1,000 a month.
  • In total, the couple would have $4,500 a month in Social Security benefits.

However, if the working spouse is 67 and the non-working spouse is 65, the math is a little different. If the spouse who didn’t go to work applies at 65, they’re applying early and will have the benefit cut down to $1,350 or a figure around this amount.

What is the Youngest That You Can Take Social Security?

Barring any disability or any other issues, you can retire at 62. However, the earlier that you take your benefit, the lower your benefits will be. Benefit increases will end at 70, so there’s no reason to wait longer to take your benefits.

If you take in around $20,000 or more a year, you are penalized for taking your benefits before full retirement.

If you don’t understand your benefits or want advice on the best way to maximize your benefits, schedule a call with us today.

How is Social Security Taxed?

Many people get upset that they have to pay taxes on their Social Security. For many of our clients, it’s a sore spot and a major topic of discussion. However, under current law, you may have to pay taxes on your benefits.

Married and Filing Jointly

Unless you have less than $32,000 in income, you’ll have to pay taxes on your benefits. 

$32,000 and $44,000 in Income

If your adjusted gross income falls into this range, you’ll pay taxes on up to 50% of your Social Security. For example, if your benefits are $3,000 a month, you’ll pay taxes on $1,500.

$44,001 and Higher

If you earn over $44,000 in adjusted gross income, you’ll pay taxes on 85% of your benefits. 

Single Filers

If you’re single, you’ll pay taxes on 50% of your benefits if you earn $25,000 or more. And if you earn over $34,000, 85% of your benefits are taxable.

Unfortunately, you’ll be taxed on Social Security in most cases. We recommend working with a financial planner to help you determine when to take your benefits and how to minimize your tax burden through strategic tax planning.

When Should I Take Social Security?

If you go to Google, you’ll find most people saying to take Social Security at 70. You’ll maximize your benefits by waiting, yet every family and situation is different. When we work through a person’s retirement plan, we evaluate:

  • Income
  • Assets
  • Health
  • Expected lifespan

When income is not coming from Social Security, it often comes from assets or retirement accounts. The impact on your retirement may not be much, but if you want to leave as many assets as possible to the next generation, your choice may be different than someone who doesn’t mind leaving a little less to your estate.

There are so many factors to consider aside from maximizing your Social Security by waiting until 70 to start taking it.

For example, if you have more than enough assets or you may only live to 75, taking Social Security earlier may be in your best interest. You need to consider your choice carefully to make the right financial decision for you and your family.

Do you want to skip the reading and listen to us talk about great topics, such as Social Security, financial planning, ways to secure your retirement and more?

Sign up for our podcast today, where we have great weekly discussions on the topics above and more.

5 Medicare Mistakes to Avoid

Medicare is crucial when trying to secure your retirement because private health insurance is very expensive. And if you’re in retirement without any form of insurance, you’re one medical emergency away from depleting your funds.

We had the pleasure of speaking to Roderick Spann of Senior Advisors and discussed five Medicare mistakes to avoid so that you can enjoy a worry-free retirement.

5 Most Common Medicare Mistakes to Avoid

1. Not Enrolling in Part B Under the Right Circumstances

Medicare has what is considered an “initial” enrollment period. This enrollment period revolves around a person’s 65th birthday. The period is valid during the following time periods:

  • Three months before turning 65
  • The month of turning 65
  • Three months after turning 65

Generally, a person will enroll in the three months before they turn 65 so that Medicare begins on the first of the month that they turn 65.

If you have an employer with over 20 employees, you can remain on their group plan and not go on Medicare Part B. However, if your employer has fewer than 20 employees or you’re no longer employed, you need to enroll in Part B.

It’s crucial to enroll in Part B because it is the medical insurance portion of Medicare. Essentially, Part B covers any medical care outside of the hospital. Part A only covers your in-hospital care.

Part B covers your:

  • Outpatient surgery
  • Doctors
  • X-rays
  • CAT scans
  • Etc.

Ideally, if you need to enroll in Medicare, do it at the beginning of the initial three-month period. Delays can lead to penalties, and you never know what may go wrong during the initial enrollment that must be rectified.

2. Ignoring Medicare Part D

Medicare has a lot of parts. For example, let’s say that you get sick, visit the doctor and are prescribed medication. Parts A and B of Medicare will not cover prescriptions. Instead, you’ll need to have Part D, which offers you drug coverage.

Part D prescription plans are all very different, and there are 25 – 30 of these plans available. Many people choose a plan recommended by a friend or coworker, but this is a bad idea because you may need specific coverage not offered in the plan.

Plans have different:

  • Co-pays
  • Premiums
  • Etc.

If you’re not analyzing your prescription drug coverage when choosing a plan, you can spend thousands of dollars more than necessary. For example, plans have preferred pharmacies that offer the best prices and coverage. If you don’t go to this pharmacy because it’s too far away, you may spend thousands of dollars more per year than you would on a different plan.

Analyzing your prescription drug coverage is crucial when opting into Part D.

3. Not Understanding Medicare Advantage vs. Medigap Coverage

Unfortunately, navigating Medicare is complex. Just when you think you have all the coverage you’ll possibly need, you’re presented with options for Medicare Advantage or Medigap coverage.

And these plans are worth considering because they offer additional coverage.

Before going into these coverages, let’s backtrack and discuss original Medicare.

Original Medicare

Original Medicare is your Part A and B coverage. Under these plans, just 80% of medically necessary services are covered. You’re responsible for an unlimited 20% of coverage.

So, what can you do?

Enroll in a Medicare Supplement or Medigap plan. These two plans do exactly what they sound like: fill the gap in original Medicare. However, Medicare Advantage is Different.

Understanding Medicare Advantage

Medicare Advantage works differently from Medigap and Medicare Supplement plans. You’ll move from original Medicare to private insurance under Medicare Advantage. The main difference here is:

  • Plan costs
  • Choice of doctors

Original Medicare allows you to go to 99% of hospitals and 90% of providers. Advantage plans are like HMOs, where you must go to specific doctors and hospitals. These plans are regional based.

4. You Have Retiree Coverage or Employer Plans and Don’t Think You Need Medicare

Retiree coverage may not be the most cost-effective or robust as you need. Some plans have $0 premiums, and that’s something you’ll want to stay on. However, we’re seeing many retiree plans that have monthly premiums, making them less effective than Medicare Advantage or even an Original Medicare plan.

You must sit down and analyze:

  • What your plan covers
  • Coverage and cost versus Medicare

Again, you need to analyze every portion of your current coverage to determine whether Medicare is a good option for you.

5. Selecting a Plan Based on a Friend or Family Member’s Advice

Friends and family may not have the best insight into the right plan for you. A plan may be optimal for you and horrible for your neighbor. Unfortunately, Medicare is not a one-size-fits-all solution.

You should speak to someone in the area who is a specialist and can help you sift through the plans and options that you have available through Medicare.

It’s important to have a thorough understanding of your:

  • Medical needs
  • Medicare options

This way, you can then weigh the pros and cons of supplement or Medigap plans or even the different parts of Medicare.

If you’re 64 and turning 65 soon, planning for Medicare with an expert would take an hour of your time and can be extremely beneficial for your healthcare needs. A few of the questions that are asked are:

  • Are you employed?
  • Do you plan to retire at 65?
  • Does your current insurance cover just you or others?

Once you answer all the questions, you’re presented with plans and options that will best fit your unique needs. Experts can even help and assist you with the actual enrollment process, so you know how to navigate Medicare from start to finish.

Did you spot the recurring theme with all these plans? You need to know the coverage you really need and to understand what’s available through Medicare that can help you maximize your coverage.

Roderick is a professional Medicare Agent, so if you need help with Medicare or have questions, reach out to him at (908) 481-5678 or send him an email.

If you need help with securing your retirement, schedule an introduction call with us today.

Bonds Versus Bond Alternatives

If you’ve been learning or actively engaged in trying to secure your retirement, you know that investments are a wise choice. And a portfolio of 60/40 is what most people learn about. Today, we’re going to be discussing the 60/40 portfolio, what it means and a lot about bonds and bond alternatives.

What is a 60/40 Portfolio?

The 60/40 portfolio is one that many people hear about when starting their retirement planning. What does it mean?

  • 60% of your investments in equities
  • 40% of your investments in bonds

Bonds carry very little risk in traditional markets. You can take on the risk of stocks and still have 40% of your money in bonds that offer low returns.

And from the outside, the breakdown is good for investors because bonds have low risks.

However, due to the current economic state we’re in, bonds are riskier. Bond alternatives are available, which can help you further diversify your portfolio and possibly eliminate your traditional bond holdings.

Example of a 60/40 Portfolio

A 60/40 portfolio is easy to visualize if you have $1 million in investments.

  • $600,000 in stocks, mutual funds, etc.
  • $400,000 in bonds

If you have a portfolio like this, market volatility can’t wipe out your entire portfolio. However, we’re estimating that for the next decade, bonds will be volatile due to the low interest rates we’ve had since 2008.

Bonds and the Index to Examine

When you talk about the stock market, you think of the S&P 500, Dow Jones or NASDAQ as a gauge for how well the market has done or is doing. With bonds, you can’t look at the same indexes. Instead, you’ll want to judge the performance of bonds based on:

  • Aggregate bond index (AGG)

The AGG index has a very diverse building of bonds, and when you take snapshots of the index year-to-date (January – April 2022), it’s down 6% to 6.5%. If you’ve been told that bonds are a safe bet and then you see that the AGG index is down dramatically in the first four months of the year, it’s evident that there’s an issue going on.

Normally, bonds perform better when the market is performing poorly, but in this case, the markets are down just 3% this year.

For 10 years, interest rates were low, and now with the Fed raising interest rates to control inflation, the bond market is going to struggle for quite a while.

What are Bond Alternatives in 2022?

Bonds are having issues, and if you have them as a strategy to secure your retirement, it’s time to consider bond alternatives. A bond alternative needs to do a few things:

  • Offer a safe investment versus the market
  • Provide you with an income

Over the past few years, annuities have shown their strength and ability to offer a safe alternative to bonds.

Why?

First, a fixed annuity cannot lose in a year. In the worst case, you earn nothing in the year. You can never lose money, so from the risk perspective, annuities offer a low-risk alternative to stocks.

In our own experience, we’ve seen that annuities earn in the 3% to 6% range each year over the last decade.

While an annuity may not earn you 3% to 6% every year, it also won’t lose money. You can depend on the income of the annuity since it will never lose money.

Structuring an Annuity into Your Portfolio

You can choose a 60/40 portfolio if you like, but you also must understand that every family is different. There’s no right or wrong structure for your portfolio, and that’s the beauty of annuities.

We always start off with a retirement financial plan to:

  • View where you are today
  • View where you’ll be when it’s time for retirement

A retirement financial plan considers everything:

  • All income sources
  • Expenses

Annuities provide a safe, reliable, and non-reliable source of income. Plus, if you’re like most investors, you still have a growth bucket with your money tied up in the markets. If you’re not touching the investments, they’ll grow untouched for a long time while you rely on annuities to generate income.

Bonds aren’t a horrible choice for investors.

You can and should buy bonds when they’re stable, but with the Fed stating that they’re going to be raising rates multiple times in 2022 and 2023, it’s time to look at your portfolio as a bond holder.

The rising rates will have a negative impact on bonds.

In the meantime, we recommend a fixed annuity as a bond alternative because they offer a decent rate of return, cannot lose money, and provide a source of income that you can tap into at any time.

If you liked this article and would love to hear more from us, please sign up for our podcast.

And if you want to learn more about bond alternatives and fixed annuities or simply want us to run a retirement financial plan for you, schedule an introduction call today.

Overseas Real Estate Investing: What You Need to Know

Overseas real estate investing is one of the methods of retirement planning that people worldwide are starting to follow. Today, we sat down with Evie Brooks, a professional who specializes in real estate in Panama.

Evie is a real estate investment educator and trainer.

In fact, she was an advanced trainer for “Rich Dad Poor Dad” before transitioning into a Panama real estate expert on properties for:

  • Vacation homes
  • Organic agriculture

And all her investments are 100% hands-off, so you can secure your retirement with your money instead of working even harder.

Why Panama is Such a Great Place to Invest

Before we went any further, we wanted to ask Evie one question that was on our minds – and is probably on your mind right now. Why is Panama a good place to invest?

After researching many different countries, Panama was Evie’s main choice because:

  • Since 2008, the GDP growth averaged over 6% and rose to over 11%.
  • The Panama Canal is crucial to worldwide trade, and these trade routes will continue helping the country spur growth.
  • Copper mines were discovered, and they started being mined before COVID. It’s expected that in the next 40 years, these mines will generate more revenue than the Panama Canal.

Panama has a booming opportunity, and with this growth, more people are going to be buying automobiles, homes, and other goods.

Healthcare in Panama

Panama is working on medical tourism, too. The country’s robust healthcare and dental care sector offers top-tier care at prices far more affordable than in the United States. There are two John Hopkin’s affiliated hospitals in Panama, so you know the healthcare is good.

For the same services, you pay 20% to 25% of what you would in the US in Panama.

You can also pay for international health insurance plans if you do travel a lot and want to go to Panama and other countries.

So, healthcare is just another reason that people are investing in Panama. Soaring prices around the world are helping drive this new form of tourism in Panama, making it an excellent choice for investors who want to get in on the “boom.”

How to Begin Investing in Panama

Panama offers an abundance of investment opportunities, including:

  • Long-term rental properties
  • Short-term rental properties
  • Pre-construction opportunities
  • Government-subsidized programs

When speaking about government-subsidized programs, many people don’t know what this means. Here’s an example: Panama’s government is building 150,000 small homes for locals. Up-and-coming residents can enter these homes with rates of 2% or less and just $500 down. 

The government is subsidizing developers to build these properties to help younger generations get into their homes.

Evie tells us that for $50,000 to $65,000, you can invest in these government programs and get an 11% return on your investment. And the investment is only held for two years. You receive payments twice a year on these properties.

Additionally, there are other projects with 20% to 30% returns.

Evie helps investors learn how to invest in Panama in as easy of a way as possible. Her company can even help you get your visa to enter the country.

How Do You Know If Investing in Panama is for You?

We know that investing in real estate takes a certain level of trust. There’s a good chance that you don’t know much about Panama’s market unless you live there. However, that doesn’t mean that you should miss out on the potential opportunities that investors have in the country. 

A few ways to get comfortable with investing in Panama are:

  • Work with a company like Evie’s, which offers private tours
  • Go to the country yourself

Most of Evie’s clients are expats, people considering moving to Panama, or clients who want to diversify their portfolios.

Since COVID, many people are starting to diversify their portfolios, and investing in Panama is one option that many people are adding to their investment portfolios. Figuring out how to invest in Panama is complex.

Evie’s company has deals with developers through her program, which means that anyone who works through her company gets outrageous investment deals. 

Panama also has the US dollar, so that’s also comforting for a lot of investors to know.

Relocating to Panama as Part of Your Strategy to Secure Your Retirement

Retirement planning can take many turns, and one of those turns is relocation. The United States is expensive, and as we’ve seen with just healthcare, relocating to a place like Panama may be in your best interest.

Evie states that most residents of Panama can live on a shoestring budget, and you can do this, too.

From homes for $175,000 to beach homes worth millions of dollars, Panama offers everything. Many people live very nicely on $2,000 to $2,500 per month. When comparing prices to the US and Canada, you’ll pay three to five times less in most cases.

And as part of your retirement planning, you can invest in many of the properties that others are buying when they move to the country.

If you want to learn more about Evie Brooks and her business, we encourage you to visit her official website or My Panama Vacation Realty.

Final Thoughts

Investing in Panama, or any foreign real estate, may be a good option for your investment portfolio. Accumulating assets, especially if they’re income-generating rentals, will allow you to diversify your investment portfolio and benefit from Panama’s high GDP growth rate.

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3 Questions for Investing Retirement Money in 2022

Investing in 2022 is scary because of one word that we’re all hearing: inflation. Today, we’ve had the pleasure of discussing how to secure your retirement through smart investments. One topic that we’ve seen come up a lot is investing retirement money.

But we want to go a bit deeper than just one question to help you better understand retirement and investing.

3 Questions for Investing Retirement Money in 2022

1. How Will Inflation Affect My Retirement?

In 2021 and 2022, we’ve seen some very high inflation years. We’re seeing 7% and 8% inflation, and when stimulus packages from the coronavirus hit, it led to the printing of a lot of money. When more money enters the economy, inflation spikes.

What we’re experiencing right now is a result of this additional money flooding the market.

When you’re dealing with retirement planning, you’re thinking long-term – often 30 years. Of course, planning out your retirement should account for inflation, but we can’t assume that inflation levels will stay at 8% because it’s far too high.

In fact, any plan that you run is unlikely to withstand 30 years of compounded inflation at 8%, meaning you wouldn’t have any money left. Honestly, inflation doesn’t bother me as much as it does other people right now because:

  • Over the last 10 – 12 years, inflation has been very low at 1% to 1.5%
  • Looking at historical data over the last 100 years, inflation is 3.2%

So, when you look at everything, we see that inflation was:

  • 11.3% in 1979
  • 13.5% in 1980
  • 10.3% in 1981

In between many periods, we see 5%, 8% and 9% inflation. However, in 2009, we hit a period of deflation where we had –4% inflation. While living in the moment of higher inflation, it’s very difficult to understand averages because we’re seeing sticker shock everywhere we go.

But based on the law of averages and what we’ve seen in the past, inflation should come back down.

A retirement financial plan that is actively managed will account for inflation and take steps to help combat it if it’s a long-term problem. However, while inflation may remain for the next few years, it will eventually fall back down.

2. Should I Be Investing When the Market is Uncertain?

People are concerned with investing right now. As financial advisors, we know that there are times, like when the pandemic hit, that we should be invested. However, the answer to this question isn’t easy.

Things can change from one week to the next, where investing in the market is good or bad.

Starting in 2022, we saw a lot of volatility. Fast-forward to recent weeks, and we’re amid Ukraine and Russia at war. That has thrown a bit of turbulence into the market.

Market volatility is good and bad.

If the market falls, it may be a great time to invest heavily. Right now, we’re about 70% cash because we needed to take a step out of the market. We still have 30% of funds in the market. If there is no demand or too much supply, you should consider exiting the market.

A few key points:

  • If you’re like us, you believe there are times to be invested and times to be on the sidelines
  • If you don’t care whether your account drops 30% to 40%, stay in the market

You should be invested in market volatility, but you need to be ready to pull money out and sit on cash, too.

3. Are Bonds a Good Investment Right Now?

Bonds are in a rough spot right now. If you read the news headlines on bonds, we’re in a bear market where bonds have struggled for a few years. How do we handle this? In traditional markets, you invest in:

  • Bonds
  • Stocks

Interest rates are going up, and bonds also take a hit when this happens. Between February 2021 to 2022, the benchmark index for bonds fell 5% to 5.5%.

Are bonds a good investment right now?

There’s a small place for them, but we don’t want to get locked into a bond for a long period of time because conditions for bonds simply aren’t favorable at this time. You may find a few short-term options to fill the gap, though.

In fact, we do suggest some bond alternatives to our clients.

But we want you to realize that in the investment world, there are:

  1. Risks
  2. Liquidity
  3. Safety

Unfortunately, you cannot have all three. There are no investments that are risk-free and 100% safe. Instead, the best we can do is to limit risks, increase safety and have some form of liquidity.

Often, alternatives offer some form of safety and low risk, but you’ll give up some liquidity.

In fact, in one of our upcoming podcasts, we’re going to go deep into bond alternatives. The topic is vast, and it’s one that we want to cover in detail for you.

Click here to access our complimentary video titled: 4 Steps to Secure Your Retirement.

What’s The Difference Between a Mutual Fund and an ETF?

When you look at your investment portfolio, you may find a few things: mutual funds, exchange traded fund (ETFs) and quite a few others. If you’re deeply involved in retirement planning, you probably know the difference between a mutual fund vs. an ETF.

However, many people don’t know the key differences between these two, nor do they worry about it – especially if these accounts make good returns.

We’re going to walk you through the concept of a mutual fund and an ETF, how they differ and when each is beneficial.

ETF vs. Mutual Fund: Understanding the Basics

ETFs and mutual funds are different, and they each have different structures. Before we go into the main differences, it’s crucial to define mutual fund and ETF.

What is a Mutual Fund?

A mutual fund is a way to diversify an investment portfolio. For example, there was a time when people trying to secure their retirement would invest in IBM, Google, energy stocks and so on, but they were required to purchase each stock separately.

Mutual funds have a purpose, such as mimicking the S&P 500, specific sectors and so on.

The purpose is what makes up the entire fund. As an investor, if you want to mimic the S&P 500 and invest in a mutual fund to do this, you can be confident that the fund will include a mix of all stocks in the index. Additionally, you don’t have to manage each stock individually.

One mutual fund can include 50 to 1,000 individual stocks to make investing more efficient because the diversification is already done for you.

Think of a mutual fund as a company that has a stockbroker who works behind the scenes to manage diversification.

When you own mutual funds, the one thing to know is that when you sell a share in a mutual fund, it’s not done until the end of the day. So, you may put in a sell order at 9 am, but the sale doesn’t happen until 4 pm when the markets close.

If the market goes or up or down during this time, you’ll be impacted as a result.

What is an ETF?

An ETF is similar in nature to a mutual fund, and while they’re vastly popular, they only came about in 1992. Due to their efficiency, ETFs are an excellent option. When selling an ETF, the structure allows you to sell in the same way as an individual stock.

You can sell an ETF at any time of the day.

So, if you’re invested in a technology ETF, you benefit from the entire industry without the risk exposure of investing in just one stock. The price movement of the ETF is live, so you can sell at any time to recognize the real-time price.

Buying and Selling Mutual Funds vs. ETFs

We looked at the buying and selling of mutual funds and ETFs, but let’s look at a clear example of the two because it can be quite confusing. Let’s run through a scenario of buying and selling a mutual fund first:

  • It’s 10 am in the morning and the mutual fund is $100
  • You put in a buy or sell for the mutual fund
  • The buy or sale doesn’t go through until the market closes at 4 pm
  • At 4 pm, the mutual fund is valued at $80 a share

If you were buying in the above scenario, you would benefit from the lower share price at the close of the market. Sellers would see share value fall by 20%, losing out on significant profits.

ETFs offer the benefit of immediate sales. Here’s an example:

  • It’s 12:30 pm and shares are up 25% on the day.
  • You put in a sell order.
  • The sale is immediate, and you sell at the high of the day.

Since ETFs are sold just like a stock, you can react to current market conditions, which is beneficial. You can also purchase ETFs in the same way.

Over time, there has been the evolution of ETFs turning into actively managed funds.

What is Active Management?

If we go back to our section on mutual funds, you’ll remember that mutual funds have a manager that works to keep a portfolio diverse. For example, let’s assume that the company’s technology mutual fund includes Apple because it’s one of the leading tech companies in the world.

If Apple stock started falling drastically on poor financials and key leadership leaving the company, active managers would sell the shares in Apple and adjust to market conditions.

Through active management, stocks enter and exit the fund to pad investors against losses and keep the fund profitable.

Actively managed ETFs work in this same way, yet you can sell the ETF immediately, too. The trading and efficiency of the ETF allow you to sell off the share while benefitting from active management.

Fees and Costs

Mutual funds are set up as a company, so you’ll find that they have fees and costs that are often more expensive than an ETF counterpart. You’re paying for the company’s financial experts to manage the fund in the best way possible to maximize returns.

However, fees and costs are often higher for the mutual fund because the company has a lot of overhead.

ETFs are more efficient, so the cost of maintenance is typically a little lower than a mutual fund. Brokerage fees are often not an issue if you invest in ETFs, but they can become expensive if you regularly invest small amounts of capital. Making larger investments less frequently may be the better option in this case.

However, the total fees for an ETF are often significantly less than a mutual fund.

Wrapping Up

We’re not saying that ETFs or mutual funds are better, but we use ETFs almost exclusively because they cost less and give you more control over your investments. We’re not saying that there aren’t great mutual funds out there, but they’re just not our preferred option.

ETFs offer the flexibility to sell or buy at any time while the market is open, and this is a freedom that mutual funds simply don’t offer.

Click here to access our 3 Keys to Secure Your Retirement class.

5 Retirement Planning Questions

Even when you’re a week away from retirement, there’s a good chance that you’ll have a lot of questions left. Retirement planning is evolving, and if you want to secure your retirement and sleep well at night, you need to have answers to a few crucial questions.

We’re going to outline retirement planning questions that we receive most often from our clients.

In fact, we’ve compiled a list of five questions that everyone hoping to retire can answer.

5 Retirement Planning Questions and Answers to Secure Your Retirement

1. How Much Should I Have Saved?

How much money is enough for your retirement? This is a difficult question to answer because every family and lifestyle is different. We’ve seen families have millions of dollars in their retirement accounts and struggle through retirement.

Adversely, we’ve seen families with just a few hundred thousand in their retirement accounts have a fantastic retirement.

The total retirement portfolio amount is relative to a family’s lifestyle.

There is also a school of thought that for retirement, you should:

  • Save 25 times your highest-paid salary

Instead, we like working through the numbers for ourselves. If a person has a pension, rental income or other debts or income that factor into the equation, they may need significantly less or more than this figure.

The question of saving enough is understanding how much you plan to spend in retirement. If you want to go on lavish vacations, you’ll need to have more in retirement than the person that’s paid off their home and wants to live a quiet life.

2. When is the Best Time to Take Social Security?

Our number one YouTube video with over 100,000 views focuses on whether a person should take Social Security at 62 or 65. In fact, you can watch this video right on YouTube here.  

Many people are taught to retire at 70 because that’s when you’ll receive the most money from Social Security.

And that’s true.

If you live until you’re 90 or 95, take Social Security at 70. However, what if you lived to 72? You would have been if you had taken Social Security at 62, right?

The answer comes down to this:

  • If you retire early, do you need to take money out of your retirement account to cover Social Security if you don’t take it? For example, do you need to take out an extra $2,000 from your accounts per month to hold off on taking Social Security? If so, you’ll likely benefit from taking Social Security early.
  • If you don’t need the money from Social Security right now, wait until you’re 70 because it will maximize your benefits.

Unfortunately, there’s no one-size-fits-all answer here. 

3. Should I Rethink My Risk Exposure in My Retirement Accounts?

When we have troubling times in the market, many people question their risk exposure. If the market fluctuates, you need to think about your risk exposure. In fact, you should always think about risk exposure to safeguard your retirement.

The way we handle risk is by:

  • Taking your retirement total
  • Understand risks
  • Learning when you get uncomfortable when there are losses
  • Creating a portfolio around being uncomfortable

If you have $1 million, it is crucial to know that if you lose 20%, you’re losing $200,000. Many people will feel uncomfortable at a 10% loss with this retirement amount, but if you have $10 million, you’re likely less scared to lose 10% of your money.

In short, you always need to consider your risk before and during retirement to ensure that you can have a comfortable retirement.

4. Is an Annuity a Good Option for Retirement?

Annuities often have the most questions about when knowing where to put their money. Unfortunately, annuities are very complex, but we do have quite a few articles on annuities that we’ve linked below for you:

Simply put, there are three reasons why you may want to look at an annuity as a good option for your retirement:

  1. You want to build an income that will last a lifetime.
  2. You don’t want to go into bonds and are looking for a safe alternative.
  3. You want to invest in the market and want tax deferral.

For most people, the first two options are the main reasons to have an annuity. Bonds aren’t doing well right now, so an annuity is an excellent option to consider.

5. How Will Taxes Affect My Retirement?

Taxes are always on people’s minds. From a tax perspective, retirement accounts often have their own rules on taxation. For example:

  • 401(k) / IRA are pre-tax
  • Roth accounts are tax-free
  • Brokerage accounts are taxed on gains or losses throughout the year

Each of these retirement buckets has different taxation rules. Then you have Social Security, maybe pension income and so on that may be taxed. People who take Social Security and are still earning an income really need to think about their taxation because they will need to pay taxes on these accounts.

When you’re 72, you’ll need to take the required minimum distributions.

Tax-deferred accounts require you to take required minimum distributions, which will impact your taxes.

Roth conversions are a very powerful option that does apply to some retirees. The idea is to pull money from an IRA and put it in a Roth account, which is tax-free. Since taxes are likely to go up, tax planning is crucial to help you reduce your taxes in the future.

We can even walk you through a retirement-focused financial plan where we answer all these questions and help you fully understand what it means to retire in your situation. If you’re interested in talking to us, we have a 15-minute, complimentary session where we can discuss these details with you.

We have also linked a free course of ours below to help you get started on the right path to retirement.

Click here for our FREE course on how to secure your retirement in 4 easy steps.

Investment Portfolio Strategy

Risk is a major concern for people nearing and in retirement. When you’re younger, you can withstand higher risk, and you have time for the economy to correct itself even after a significant downturn.

For example, when the market crashed in 2008, many people lost money and had their retirement plans upended.

If you were 70 at the time and had most of your investments in stocks, especially riskier stocks, you didn’t have the same luxury of a 30-year-old who is still:

  • Working to bring in income
  • Actively able to wait out the crash

When you secure your retirement, your investment portfolio allotment should change to be less risky. As we have seen after 2008, there is a trajectory where people are very cautious with their investments after a significant loss, but now, people tend to enjoy more risk.

The fear of the market crashing is well behind us, so risks tend to increase in an investment portfolio.

Risks should be adjusted on your own basis. We promote a risk adjustment portfolio because it helps you sleep well at night and secure your retirement the way you want.

What is a Risk-Adjusted Portfolio?

A risk-adjusted portfolio, for most people, will mean that they want an adjustment to their asset allocation. For example, asset allocation may include buying smaller pieces of the market, such as:

  • Small-cap funds
  • Mid-cap funds
  • Large-cap funds
  • Commodities
  • Tech stocks
  • Pharmaceutical stocks
  • Bonds
  • Treasuries
  • Etc.

If you’re 70 years old, you’ll probably mitigate risks by putting more money into bonds because they’re a safer investment option. Many people create a 60/40 portfolio, where 60% is in equities and 40% is in bonds and safer investments.

Unfortunately, this allocation method may still be too risky for some retirees.

A good example is if you had 60% in the S&P 500 index and 40% in the AGG index (basically a bond index). As you saw in 2020, the S&P fell over 30% and even further in 2008, 60% of your money can lose 50% of its value overnight.

When it comes to returns, there are two things to consider:

  1. Year-to-date returns, which are how much the stock or portfolio netted you in the last year or a specific year.
  2. Max drawdown is where a portfolio goes up, peaks, and goes down. Peak and bottoms aren’t the best ways to look at investing, so we like to look at yearly changes because markets fluctuate, and max drawdown can be very emotional to see.

Since 2001, the max drawdown on a 60/40 portfolio is 36.7%. If you look at this from a retirement standpoint, how would you sleep at night knowing you lost nearly $370,000 or the $1 million you saved for retirement?

Most people would lose sleep over this figure.

Investment planning helps you lower the max drawdown. However, every investor has their own way they want to invest. Traditionally, you’ll find two main trains of thought when investing:

Our approach is slightly different, and it has worked well for our clients.

Risk Adjusted Portfolio by Supply and Demand

The supply-and-demand concept is simple: when things are in demand, let’s be a part of it, and if it’s not in demand, let’s not be involved. What does this mean in the world of investing?

If stocks are doing exceptionally well, we can go all-in on them with 100% of assets.

When risks get higher, we might go all into bonds or move most of a portfolio into bonds. On the other hand, if things get bad, it may mean putting 100% of our money into cash and holding it until other investments start recuperating and going back up.

Supply and demand allow us to make smarter investments, make money and fight back against risks, too.

A recent example of this happened in March of 2020:

  • The pandemic hits, not many people have been through one, and the market falls 34%.
  • A risk-adjusted portfolio helps protect against that.
  • Our risk-adjusted portfolio fell just 9%, while non-risk adjustments led to 34% losses.

The current state of bonds is a prime example of when bonds don’t work. Inflation is leading to the potential of an interest rate increase, which will lead to lower bond returns. Negative bond returns occur when interest rates rise, and the Federal Reserve is planning to raise interest rates to slow inflation.

So, what does someone trying to find an alternative to bonds do if bonds are at a negative return?

Fixed annuities may be an option because they do offer safe growth. These annuities are an insurance option, and when the bond market falls, this is an option. However, returns are more conservative.

These annuities do have liquidity issues to consider.

For example, most annuities only allow you to take out 10% of your investments a year. You’ll have access to this money, but the limit does make it less inviting to invest in annuities.

We like to put some money into annuities while also diversifying into other options, such as the stock market. Diversifying allows you to access 100% of the liquidity of non-annuities while accessing 10% from the annuity per year.

Final Thoughts

Risk adjustment is a major part of smart investing, but there are multiple ways to adjust and tackle your risks. While we’ve covered a few ways in this post, you may have another risk adjustment method that you prefer.

The idea is to know the many options available to you so that you can adjust your risk in a way that makes the most sense to you.

Do you need help with retirement planning or with an investment portfolio strategy? We can help.

A good place to start is by taking out 4 Steps to Secure Your Retirement Video Course.

However, if you want to connect with us to review your investment portfolio and seek one-on-one investment advice, schedule an introduction call today.

What is Legacy Planning?

Retirement planning is at the forefront of many people’s minds when they near retirement. You’ve worked diligently to save for retirement, and the big payoff is finally nearby. However, you may also want to start thinking about legacy planning.

We recently had a chance to sit down with Angelina Carleton to discuss designing your legacy plan.

Who is Angelina?

Angelina was a commercial real estate broker 10 years ago and worked with multimillionaires. She was working at an event where the topic was private prisons. As she looked around the room, she questioned whether these individuals realized that they were profiting off the misery of others.

As she went to her car, she asked herself if it was time to leave the commercial real estate sector and go into coaching.

What if she could convince all the financial representatives at the event to invest in something other than private prisons? Through her research, she couldn’t find a coach to help her create a legacy.

What was the solution?

Fill the gap. Angelina realized through her coaching that once people change, it impacts others around them, too. Angelina has helped others figure out their legacy plan and helped them reach this goal.

What is Legacy Planning for Angelina?

For many people, legacy planning means leaving money to their kids or grandchildren. People think of their homes, money, and other material things, but legacy planning is much more than that.

Angelina’s definition of legacy planning is a bit different than the definition you’ll find in the dictionary.

For Angelina, legacy means integrity and being true to yourself while being here. Of course, you can leave money to friends and family. However, people also want peace of mind in the legacy that they leave behind.

When coaching, she can help people get “unstuck.”

She wants to help people understand why they do what they do during their lifetime. When a person can get to know themselves beyond their careers, they can truly see what their theme is in life.

Unfortunately, many people don’t allow themselves to become who they really are until retirement.

A person may be a leader in the business world, but that doesn’t mean that they want to be in this position. Instead, through coaching, Angelina helps people open to who they really are at a younger age so that they can leave behind their own legacy.

A few questions to ask yourself are:

  • If you didn’t have to impress anyone, who could you be?
  • If you didn’t have to get it right, what could you create?
  • If you had nothing to prove, what would your legacy be?

For many people, they can’t answer these questions immediately. However, in one, two or four weeks, people have the answer because they allow it to marinate.

When you don’t have to fit a certain mold, you can create the true legacy that you leave behind. The legacy that goes beyond assets and talks about the way that you live your life, too.

Leaving Your Legacy Plan Behind

Angelina asks to tape all her sessions with clients, and if they approve, she gives them a big book of all the key points that were discussed during the coaching contract. These books can help you leave the legacy you want behind.

For example, let’s say that you run a family business and want to leave it to a successor.

When the successor goes into the head role, they may or may not be ready for this big role and responsibilities. They may not know the company’s:

  • Vision
  • Mission statement
  • Values
  • Guiding principles
  • Etc.

Aligning these values and principles is important because when these individuals come into an inheritance, whether it be money, a business, or others, it can help them create the legacy they want.

Who Should Be Designing Their Legacy?

Surprisingly, designing a legacy isn’t for everyone. Generally, people who have had coaching of some kind in the past excel in designing their legacies. Coaching is a broad term, but this can be people who have worked with:

  • Sports coaches
  • Business coaches
  • Personal trainers
  • Etc.

There needs to be a high level of trusting the process when working with a coach to really extract the maximum value possible.

Legacies aren’t for the lucky. They are only for those willing to perceive.

Angelina’s approach to legacy planning is a lot different than the normal financial legacy planning that we’re used to in our practice. Instead, this is an approach that looks at your life and what it means to truly be yourself.

Instead of an estate plan or financial legacy, this is the legacy of what it means to be you, including your values, guiding principles and beliefs.

For example, some of the clients Angelina is working with have started to try and save the planet and solve some of the problems in the world. This is the type of legacy planning that Angelina has to offer.

If you need help finding the true legacy you want to leave behind, you can go to Angelina’s website to see what she is all about. 

Click here to go to Angelina’s website.

There are many approaches you can take with legacy planning. If you need help with the financial side of legacy planning, we can help. Simply call us at (919) 787-8866 or click here to schedule an introduction call with us.