Tag Archives: fiduciary

Where’s the Adult Merit Badge for Super Savers?

Super Savers are a special breed.

They are not concerned about keeping up impressions; they exist outside the mainstream of seductive consumerism.

Call it a mindset, call it walking a different path; perhaps it’s an offbeat childhood money script. Whatever it is, those who fall into this category or save 20% or more of their income on a consistent basis are members of an elite group who strive for early financial independence.

Speaking of independence: At RIA we believe households should maintain 3-6 months of living expenses in a savings account for emergencies like car and house repairs.  They should also maintain an additional 6 months of living expenses as a “Financial Vulnerability Cushion,”  whereby cash is set aside for the big, life-changing stuff like extended job loss especially as we believe the economy is in a late-stage expansionary cycle. Job security isn’t what it used to be; best to think ahead.

In 2018, TD Ameritrade in conjunction with Harris Poll, completed a survey among 1,503 U.S. adults 45 and older to understand the habits that set Super Savers apart from the pack. The results are not surprising. However, they do validate habits all of us should adopt regardless of age.

Like a physical exercise regimen, shifting into Super Saver mode takes small, consistent efforts that build on each other.

So, what lessons can be learned from this elite breed?

First, on average, Super Savers sock away 29% of their income compared to non-super savers. 

Super Savers place saving and investing over housing and household expenses.

Keep in mind, the Personal Saving Rate as of December 2019 according to the Federal Reserve Bank of St. Louis was a paltry 7.6%.  How does this group manage to accomplish such an arduous task? They abhor the thought of being house poor. They focus attention on the reduction of spending on the big stuff, or the fixed costs that make a huge impact to cash flow. Candidly, they’re not concerned about cutting out lattes as a viable strategy to save money. Super Savers spend 14% on housing, 16% on essential household expenses compared to non-supers who spend 23% and 21%, respectively. Any way you cut it, that’s impressive!

Perhaps it’s because Super Savers think backwards, always with a financially beneficial endgame in mind. There is great importance placed on financial security, peace of mind and freedom to do what they want at a younger age. They consider the cumulative impact of monthly payments on their bottom line, which is not common nature for the masses.  They internalize the opportunity cost of every large or recurring expenditure.

Super Savers weigh the outcome of every significant purchase, especially discretionary items, which invariably increases their hesitancy to spend. This manner of thought provides breathing room to deliberate less expensive alternatives and thoroughly investigate the pros and cons of their decisions.

Tip for the Super Saver in training: Sever the mental connection between monthly payments and affordability. How? First, calculate the interest cost of a purchase. For example, let’s say you’re looking to purchase an automobile. First, never go further than 36 months if you must make payments. Why? Because longer loan terms like 48 to 72 months is a payment mentality that will undoubtedly increase interest costs.

For example, let’s say an auto purchase is financed for $23,000. At 3.49% for 36 months, the payment is roughly $674 with total loan interest of $1,258. For 72 months, naturally there’s a lower monthly obligation – $354. However, total loan interest amounts to $2,525.

A Super Saver’s consideration would be on the interest incurred over the life of a loan, not the affordability of monthly payments. An important difference between this manner of thinking and most, is to meet a lifestyle, it’s common for households to go for the lowest monthly payment with little regard to overall interest paid. Super savers will either consider a less expensive option or adjust household budgets to meet higher payments just to pay less interest in the long run.

Second, Super Savers live enriching lives; they don’t deprive themselves.

Members of the super crowd don’t live small lives -a big misnomer. I think people are quick to spread this narrative to ease personal guilt or envy. Certainly, a fiscal discomfort mindset is part of who they are when they believe personal financial boundaries are breached. However, the TD Ameritrade survey shows that both super and non-super savers spend the same 7% of their income on vacations!

Third, starting early is key for Super Savers.

Per the study, more than half of Super Savers started investing by age 30 (54%).  I’m not a fan of personal finance dogma. Many of the stale tenets preached by the brokerage industry are part of a self-serving agenda to direct retail investor cash into cookie-cutter asset allocation portfolios; all to appease shareholders.

However, one rule I’m happily a complete sucker for is Pay Yourself First. It’s not just a good one. It’s the core, the very foundation, of every strong financial discipline. Why? Paying yourself first, whereby dollars are directed to savings or investments before anything else, reflects a commitment to delayed gratification. An honorable trait that allows the mental breathing room to avoid impulse buys, raise the bar on savings rates and minimize the addition of debt.

Per Ilene Strauss Cohen, Ph.D. for Psychology Today, people who learn how to manage their need to be satisfied in the moment thrive more in their careers, relationships, health and finances when compared to those who immediately give in to gratification. Again, the root of Pay Yourself First is delayed gratification; the concept goes back further than some of the concepts the financial industry has distorted just to part you from your money.

Fourth, Super Savers embrace the simple stuff.

When it comes to financial decisions, basics work. For example, Super Savers avoid high-interest debt (65% vs. 56% for non-super savers),  stick to a budget (60% vs. 49%), invest in the market (58% vs. 34%) and max out retirement savings (55% vs. 30%).

Listen, these steps aren’t rocket science; they’re basic financial literacy.

For example, I’ve been ‘pencil & paper’ budgeting since I began my Daily News Brooklyn paper route at age 11. Budgeting over time fosters an awareness of household cash flow.  Try micro-budgeting for a few months. It will help you intimately engage with  personal spending trends.

Micro-budgets are designed to increase awareness through simplicity.

Yes, they’re a bit time-consuming, occasionally monotonous; however the goal is worth it – to uncover weaknesses and strengths in your strategy and build a sensitivity to household cash-flow activities. My favorite old-school book for budgeting comes from the Dome companies. For a modest investment of $6.50, a Dome Budget Book is one of the best deals on the market.

Last, Super Savers believe in diversified streams of income and accounts!

44% of Super Savers prefer to bolster already impressive savings rates by funding diversified sources of income, compared to only 36% of their non-super brethren. In addition, Super Savers are especially inclined to lean into Roth IRAs compared to non-super savers. It is rewarding to discover how the best of savers seek various income streams to build their top-line.  They are also tremendous believers in Roth IRAs. The reason I’m glad is this information further validates why our advisors and financial planning team members have passionately communicated the importance of the diversification of accounts for several years.

Super Savers build the following income streams outside of employment income – Dividends, investment real estate, annuities (yes, annuities – 21% vs. 14% for non-super savers), and business ownership (14% compared to 8%).

Their retirement accounts are diversified; over 53% of Super Savers embrace Roth options (53% compared to 29%). A great number of Super Savers fund Health Savings Accounts and strive to defer distributions until retirement when healthcare costs are expected to increase.

Why diversification of accounts?

Imagine never being able to switch lanes as you head closer to the destination called retirement. Consider how suffocating it would be to never be able to navigate away from a single-lane road where all distributions are taxed as ordinary income. There lies the dysfunctional concept that Super Savers are onto – They do not believe every investment dollar should be directed to pre-tax retirement accounts.

Congratulations -With the full support of the financial services industry you’ve created a personal tax time bomb!

As you assess the terrain for future distributions, tax diversification should be a priority.  Envision a retirement paycheck that’s a blend of ordinary, tax-free and capital gain income (generally taxed at lower rates than ordinary income). The goal is to gain the ability to customize your withdrawal strategy to minimize tax drag on distributions throughout retirement. Super Savers have figured this out. Regardless of your savings habits, you should too.

Many studies show that super savers are independent thinkers. Working to create and maintain a lifestyle that rivals their neighbors is anathema to them.

Now, as a majority of Americans are utilizing debt to maintain living standards, Super Savers set themselves apart as a badge of courage. No doubt this group is unique and are way ahead at crafting a secure, enjoyable retirement. and financial flexibility. Whatever steps taken to join their ranks will serve and empower you with choices that those with overwhelming debt cannot consider.

And speaking of badges: Did you know Amazon sells Merit badges for adulting? It’s true. I believe they need to add a “I’M A SUPER SAVER” badge to the collection.

If you’d like to read the complete T.D. Ameritrade survey, click here.

Bonds Are Dead…Again?

Not trying to be a wet blanket here, but c’mon. Again? 

Maybe the line I’m walkin’ needs to be crossed. Too early to say. The pros in this business who believe the 10-year Treasury yield must breach 4% are piling on to one side of the boat.

The contrarian in me along with several data points compel me to maintain a preference to remain on the lonely side of the ship.

Most likely what you’re witnessing is a peak in intermediate and long-term interest rates, not the start of something big.

I share several reasons for my logic.

Most important, do not, I mean do not, get swayed by talking financial heads who warn that stocks will be the big winner when rates rise and bonds the loser. Simply, if rates rise too rapidly anywhere along the yield curve, stock prices will fall off a cliff while bond prices will slowly roll down a hill.

Why have rates possibly hit their zenith?

Consider the over-indebtedness of governments, corporations (corporate debt now stands at 45% of GDP), households, inflation as measured by the Dallas Fed’s Trimmed Mean PCE right at 2% – in union with the Fed’s nebulous target, and the ominous danger signs coming from housing – a leader of economic activity & forefront in a consumer’s “feel good” sensors of the psyche. Quite frankly, the economy just cannot handle rates much higher from here.

Recently, growth in the Economic Cycle Research Institute’s U.S. Leading Home Price Index turned in its worst reading since 2009. ECRI’s Index was spot on nailing the early stirs of the housing crisis in 2006.

According to ECRI’s head honcho Lakshman Achuthan, home price growth is set to fall in a sustained cyclical downturn.

Let’s not forget demographics. The U.S. population is aging which puts a lid on how high inflation-adjusted interest rates can go. If anything, there’s a point where older investors will seek to trim their stocks to capture juicer income yields from bonds.

Per research by the Federal Reserve Bank Of San Francisco:

  •  Changing demographics can affect the natural real rate of interest, r-star; the inflation-adjusted interest rate that is consistent with steady inflation at the Fed’s target and the economy growing at its potential. Demographic trends affect the equilibrium rate by changing incentives to save and consume. Lengthier retirement periods may raise some households’ desire to save rather than consume, lowering r-star. At the same time, declining population growth increases the share of older households in the economy, who generally have higher marginal propensities to consume, raising consumption and r-star.
  • As population growth declines, it could also reduce real GDP growth and productivity, thereby putting downward pressure on r-star.

Investors lament – “My bonds are losing money!” Wait: Are they? Not so simple.

First, bonds may have lost their mojo as far as price appreciation. I’ll concede that point. However, they’re far from dead. Generally, the income and diversification from high-quality and Treasury bonds act as buffers to portfolio volatility, especially through periods of significant corrections or bear markets in stocks.

Second, dig deeper into what appear to be capital losses on bonds. If you own almost any type of fixed income investment whether a mutual fund or individual bond, you’re witnessing negative numbers (losses in brackets), or online – a sea of red. Don’t panic. Don’t assume you’re losing money. Dig deeper.

If you own a bond and seeking to hold to maturity, ignore the paper losses. Unless planning to sell before maturity, a return of principal is in your future. Consider the return on the bond the yield or income being paid on the investment.

Last, if you own a bond mutual fund like most of us do in our company retirement plans, you’re going to need to play Columbo, or detective when it comes to isolating investing reality from observed losses. Recently, a friend of mine reached out. He was stressed that he “lost” $3,000 on his bond fund so far this year according to the information retrieved from his company’s retirement plan portal.

I helped him break it down.

Yes, he indeed was down $3,000. His investment of roughly $53,000 in the bond fund began the year at approximately $56,000.

When digging in and isolating his original investments vs. monthly income generated (and reinvested back into the fund), we discovered $41,000 was the sum of hard-earned money he placed in the fund, $13,000 was income and appreciation. So, on the surface, was $3,000 a reduction in the overall balance in the fund? Yes. Was he losing principal at this juncture? No.

Also, keep in mind, as bond mutual fund prices fall, yields should increase. As bonds mature, a portfolio manager should be investing new dollars in higher-yielding bonds or swapping into bonds with more attractive yields.

As my buddy is convinced rates “must go higher because the news tells him so,” I had him exchange into a fund with less interest rate sensitivity.

For investors like him who remain concerned about an increase in rates, a chance to control interest risk by shortening duration (think ultra-short or short-term bond funds), is at hand. If yields retrace and bond prices commensurately increase, it should provide a window of opportunity to swap longer duration positions with shorter duration alternatives.

Or, ask your broker for the latest rates on certificates of deposit. It’s like a candy store for conservative investors or savers out there. Yes, your broker should have access to CDs from major financial institutions, so no need to spend lots of time shopping around. For example, I discovered one-year CDs paying 2.3%, 2.8% for two years. At the end of the terms, principal is returned. These vehicles are FDIC-insured and pay interest monthly, semi-annually, or at maturity.

Bonds aren’t dead. Bonds are an important part of your portfolio. At 34X earnings for stocks, the last action a rational investor should take here is to dramatically reduce bond exposure to purchase stocks.

If you’re an investor with a primal brain who gets frustrated by investment account balances from month to month, doesn’t see progress, believes you’re missing out on the stock party and makes changes without regard to risk attitude, the current breakdown in housing and other cyclical stocks and current valuations, then frankly, you deserve what’s coming to you.

And it’s not going to be pretty.

3-Steps To A Successful Open Enrollment – Part 2

In Part 1,  I sought to help RIA readers understand the importance of selecting and rethinking a healthcare employer benefits option that should serve more as a “healthcare-in-retirement” account.

A Health Savings Account provides triple tax-free benefits; a unique feature that makes maximum annual funding to subsidize rising health-care costs in retirement, a no-brainer. Non-catastrophic current healthcare expenditures should be accounted for in a household budget, thus allowing the HSA to accumulate over time.

I reviewed the importance of taking advantage of employer-based long-term disability coverage; there’s a greater chance of becoming disabled than dying. To ignore this option is clearly reckless financial behavior.

Flexible Spending Accounts may be available for dependents and are ‘use it or lose it’ in nature.

Part 2 covers additional benefits. The following choices are not perfect. For most households, additional coverage will be required.

Life insurance:

It’s customary for employers to offer one-time annual salary life insurance as a freebie. AD&D or accidental death & dismemberment coverage as an add-on to traditional life insurance coverage may also be paid 100% by an employer. AD&D may cover death or the loss of a limb, eyesight, speech or hearing due to an accident.

I’m shocked by how many workers, especially those with dependents, who take the bare minimum when it comes to life insurance. Employers generally offer supplemental life insurance up to four times annual salary inexpensively with evidence of insurability. To determine how much life insurance is required for your personal circumstances utilize the life insurance calculator available at www.lifehappens.org. Better yet, establish a meeting with your financial partner to determine what your family requires.

Life insurance decisions must not be made in a vacuum. For example, I find that employees who do a commendable job purchasing life insurance for themselves, fail to consider the financial impact to a household at the loss of dependent spouses. Some policies offer dependent life insurance however, it’s generally inadequate to cover dependent spouses who remain home with children; it may be considered partial coverage at best.

According to Salary.com in their 19th annual Mom Salary Survey, a stay-at-home mother commands annual compensation of $162,581, up nearly $5,000 from 2017. For couples with young children who do not have the financial resources to hire a live-in caregiver, additional life insurance coverage will be mandatory to mitigate the risk of losing a dependent spouse for as long as children require assistance.

The greatest disadvantage of employer-provided life insurance and long-term disability options is lack of portability. In other words, lose your job, lose your coverage. Do not be lulled into complacency because life insurance is offered by your employer unless you’re in a rare career situation where job security exists. At Clarity, we assist workers to assess their insurance needs through holistic financial planning and suggest additional life insurance to compliment benefits offered by employers.

Retirement plan review time:

It’s possible your company retirement plan falls short – no match, limited choices, but it is what it is.

Open enrollment doesn’t necessarily include deadline decisions about an employer-provided retirement plan. However, take 30-40 additional minutes to review your investment mix, fund selections and current contribution rate.

Side note: According to MetLife’s 2018 Employee Benefit Trends Study, 70% of employees would be interested in converting sum or all of their retirement savings into lifetime income. Most employers offer defined contribution plans such as 401k plans.

In the good old days, in the ancient times of pensions (first time I heard the word ‘pension’ was during a rerun of an episode of The Little Rascals from the mid-1930s), the employer solely bore the risk of saving and investing for a worker’s retirement. In other words, you were provided an income for life in retirement as an employee of the organization for a specific period of time.

Bluntly, as shareholder greed and technology made workers less of an asset and more of a liability, the responsibility of saving for retirement was placed one-hundred percent on the shoulders of the employee.

In a 401(k) you, the employee, takes on high fees, limited investment selections and the risk of possible devastating stock losses, especially if over-allocated to company stock. A common pitfall is to ignore asset allocation and allow the stock portion of a portfolio to deviate dramatically from the emotional capacity to stomach volatility.

Tread carefully with target date mutual funds.  

In 2007, the Department of Labor placed a stamp of approval on target-date fund choices in 401(k) plans so plan providers have been quick to embrace them.

A target date fund is a mix of asset classes – large, small, international company stocks and fixed income that is adjusted over time or allocated conservatively the closer an employee is to the ‘target date’ identified.

For example, the Vanguard Target Retirement 2020 Fund is designed to increase its exposure to bonds the closer it gets to 2020. Let’s be clear – this is NOT a maturity date, which is part of the confusion of a target-date fund. The target never gets reached. The fund doesn’t go away. It’s always out there.

Also, as a rational human, in 2020, the so-called retirement or target year, wouldn’t you intuitively think this fund should be a conservative allocation? Perhaps 30% equities and 70% fixed income? Well, it all depends on a target date fund’s ‘glide path,’ or method of how the allocation is reshuffled the closer the time to the target date. Every fund group differs in philosophy, so you must read the fine print.

For example, the Vanguard Fund takes seven years AFTER 2020 to shift from a 60/40 stock & bond allocation to a 30/70 bond & stock mix. In reality, this is a 2027 fund.

Target date funds are not the best, but suitable choices as most 401(k) participants treat their plans like pensions. In other words, they deposit money into them, ignore allocations and wish for the best. Once money is placed into 401(k) plans it seems to fall into a psychological dark hole and rarely monitored or rebalanced. At least target date funds allocate and rebalance on autopilot (employees don’t need to do anything).

A growing, positive trend – Workplace wellness plans:

According to the Kaiser Family Foundation’s Employer Health Benefits Survey for 2017, 58% of small businesses and 85% of large companies offer health and wellness promotion plans which include smoking cessation, weight management, behavioral and lifestyle coaching. It would be shortsighted to ignore enrollment in these programs. Why?

Per Kaiser:

“Fifty-two percent of large firms with a health risk assessment program offer an incentive to encourage workers to complete the assessment. Among large firms with an incentive, the incentives include: gift cards, merchandise or similar incentives (50% of firms); requiring a completed health risk assessment to be eligible for other wellness incentives (46% of firms); lower premium contributions or cost sharing (46% of firms); and financial rewards such as cash, contributions to health-related savings accounts, or avoiding a payroll fee (40% of firms).”

Keep in mind, most wellness programs are offered throughout the year. However, many employees seem to focus on them on a limited basis or during open enrollment in November.

As I mention often, an employer’s benefits program is the first line of defense against financial vulnerability.

If you require an objective assessment of your employer’s benefits package and how to maximize options, do not hesitate to reach out to us here.

3-Steps To A Successful Open Enrollment – Part 1

It’s almost that time again.

Another year, another window of opportunity to select employer benefits options for the upcoming new year.

How do American workers feel about open enrollment season?

According to the latest Aflac Workforces Report, 67% of the 5,000 employees who participated in the study described benefit enrollment as complicated, long or stressful.

Amazingly, 83% of respondents spend less than hour researching available options; 20% do no research at all. An overwhelming 92% are on enrollment auto-pilot, simply choosing the same benefits year after year.

Employees tend to minimize the importance of employer-provided benefits; they rush through the process to ‘get it over with,’ instead of taking time to seek professional advice, whether from a financial planning partner or in-house human resource staff. Thankfully, over the years I’ve been able to assist workers with making the most of their benefits options.

The goal is to perceive open enrollment period as an annual window of opportunity to save money (Aflac found that 55% of workers waste up to $750 by making mistakes during open enrollment), minimize the financial impact of potential catastrophic risk and explore new options especially as employers increasingly shift the burden of rising healthcare insurance costs to employees.

Remember: Your first line of defense against financial fragility is the benefits offered to you by your employer.

November is customarily enrollment month. Before you submit your selections for 2019, take into consideration the following three money-savvy steps:

Embrace a high-deductible health insurance option.

Most likely, your employer has or will offer a high-deductible plan coupled with a Health Savings Account. A high-deductible healthcare plan is defined by the IRS as one with a deductible of at least $1,350 for an individual, $2,700 for a family. A HDHP limits total annual out-of-pocket expenses to $6,650 for an individual and $13,300 for families.

Based on data from the National Health Interview Survey which is conducted by the National Center for Health Statistics, enrollment in high-deductible health plans along with Health Savings Accounts increases with education and income level. Highly educated and affluent adults are more likely to enroll in high-deductible plans with an HSA and less likely to enroll in traditional healthcare plans. Per the long-term financial benefits of HSAs, this statistic makes perfect sense to me.

Unfortunately, future costs of healthcare including that of employer-provided coverage will continue to increase as a result of health insurer losses due to the Affordable Care Act. A growing number of companies are adding high-deductible plans along with health savings account options that need to be considered this enrollment season. This isn’t a trend that’s going away; it’s inevitable, you’ll have a high-deductible plan option if not now, then in the future.

A Health Savings Accounts is a powerful savings vehicle that allows triple tax benefits. Contributions are tax deductible, and if an employee, they’re funded pre-tax from payroll contributions. Growth or income is tax-free (yes, you should have mutual fund investment selections like in a company retirement plan.) Finally – distributions for qualified medical expenses are tax free.

HSA contribution limits (employer and employee total), for 2019 are $3,500 for a single filer, $7,000 for a family. Those over 55 may contribute an additional $1,000 as a ‘catch-up’ contribution.

If you only see a doctor once or twice a year, it may be beneficial to switch to your employer’s high-deductible plan offer with employer match (hopefully available) and save as much as possible in a Health Savings Account.

If you don’t have a high-deductible with HSA option yet, it’s coming. Over time, your employer is going to shift the burden of healthcare premium costs to you, the employee.

Think of a HSA as healthcare retirement plan. It’s not a ‘use or lose it’ account, either like a Flexible Spending Account. In other words, in a HSA, you can stockpile money, allocate across investments, usually mutual funds, allow the money to grow tax-deferred, then withdraw at retirement to subsidize rising healthcare costs or even pay Medicare premiums.

For a couple retiring in 2019, lifetime healthcare costs are estimated to be $280,000 based on Fidelity’s latest report. A third of the expenditures will be Medicare Part B premiums. In my opinion, healthcare costs are difficult to assess but one thing is certain – the healthcare cost burden is rising.

A study published in the Journal of The American Heart Association outlines that making time for exercise pays off. Literally. Researchers discovered how walking 30 minutes five days a week can save people $2,500 a year. A positive, monetary outcome of reduced medical expenditures.

There are documented benefits of fully funding a HSA as a priority. Even over a company retirement account as HSA benefits may be pre-tax, grow tax-deferred, and withdrawn tax free. A strong combination that does not exist in other savings and investment vehicles.

At Clarity, we advise workers to prioritize HSA contributions over retirement plan contributions, especially when employer 401k matches aren’t provided. According to healthcare account investment expert Devenir, an increasing number of employers are contributing to their workers’ HSAs. Per the Devenir Midyear HSA Research Report, nearly 32% of all HSA dollars contributed to an account came from an employer with the average contribution at $658.

This is going to sound counterintuitive, however, consider paying out-of-pocket health insurance deductibles and as many medical expenses as possible with after-tax dollars thus leaving savings in an HSA to accumulate long-term for medical, dental (Medicare doesn’t cover dental FYI), and vision treatments in retirement. Health Savings Account dollars may be allocated across mutual funds; accounts can’t be lost in the case of job loss and transportable to another HSA custodian or rolled over to a new HSA provider every 12 months.

Thoroughly understand your Flexible Spending Account options.

For comparison purposes, consider FSAs the ‘smaller sibling’ to the HSA. A Flexible Spending Account or FSA permits the accumulation of pre-tax dollars (although not to the extent allowed in HSAs) and allows tax-free distributions for healthcare, dental or vision expenses.

Unlike an HSA, FSA balances must be used by December 31 every year. Now, an employer may allow a grace period or carry over of $500 for 2 ½ months into a new year, however the general mandate is use it or lose it by the end of the calendar year. October is a good month to assess healthcare spending for the new year as to not overcontribute. Currently, an employee may sock away $2,650 annually that may be used for an individual or family.

Generally, employees are not offered both a HSA and FSA. Employers may compliment a HSA with a limited-purpose FSA, a type of Flexible Spending Account which allows tax-free withdrawals based on specific types of healthcare expenses like dental and vision.

A dependent care FSA is a pre-tax account that may be used to pay or reimburse for services such as child day or dependent adult care services. Employees eligible to claim disabled family members, elderly parents and children for tax purposes, can take advantage of this employer-offered benefit.

The current maximum contribution is $5,000 a year per household. With average national in-center child care costs running $9,589 annually according to Care.com, the ability to cover more than half these expenses tax free is a tremendous advantage.

What about employer long-term disability coverage?

Statistics outline that one out of four workers will become disabled before they retire.

Long-term disability insurance provides a level of income protection during extended periods if sidelined from working, especially at an employee’s own occupation. It’s one of the most inexpensive, comprehensive benefits employers provide yet I find many forgo signing up as they believe a long-term disability will never occur or healthcare insurance takes higher priority in the family budget. I observe this behavior especially with Millennial employees who ironically, haven’t yet built the financial stability necessary to withstand a long-term disability.

Without long-term disability coverage, a household is going to need to prepare to shoulder the financial burden of making up a gap in household cash flow for as long as a long-term disability exists. Or until the wage earner can return to his or her own occupation or at the least, any occupation, depending on how severe the disability may be. In some cases, LTD insurance payouts will last until the insured reaches age 65. On average, a long-term disability lasts two years.

Employer long-term disability generally offers varying levels of coverage, from a minimum of 20% of monthly salary, to the maximum which is closer to 65%. Keep in mind, these benefits if paid with after-tax dollars, would be paid received tax free, so receiving 60% of income isn’t as austere as believed.

At Clarity, we advise every employee to take advantage of maximum coverage. No excuses. Unless you have a decade’s worth of emergency cash for living expenses or invested enough for large expenses like a child’s college education, it isn’t worth passing on coverage.

In Part 2, I’ll review several of the lesser-known employer benefits workers should consider for 2019.

8-Steps To Fiscal Fitness

Autumn is the period of transition from summer to winter; a time of harvest.

Use the season to breathe fresh perspective into your finances and prepare for a prosperous 2019.

Here are the 8-steps to fiscal fitness.

#1: A thorough portfolio review with an objective financial partner is timely.

Most likely your long-term asset allocation or the mix of stocks, bonds and cash you maintain or add to on a regular basis, has been ignored. With most of the major stock indices almost at new highs, it’s possible your personal allocation to stocks has grown disconnected from your tolerance for risk.

Consider complacency the emotional foible du jour. After all, it appears easy to ride out an aggressive allocation at present since every market dip appears to be an opportunity to buy. With volatility in September as measured by the VIX, so far subdued, investors are growing increasingly overconfident in future market gains.

A financial professional, preferably a fiduciary, can help make sense of how the risk profile of your portfolio has changed, provide input on how to rebalance or sell back to targets, and ground your allocation for what could be a different 2019.

#2: Sell your weak links (losers), trim winners.

Tax harvesting where stock losses are realized (you may always purchase the position back in 31 days,) and taking profits taken from winners is the ultimate cool fall-harvest portfolio moves. Going against the grain when the herd is chasing performance takes intestinal fortitude and an investment acumen with a more appetizing scent than pumpkin spice!

Candidly, tax-harvesting isn’t such a benefit if you examine its effects on overall portfolio performance. However, the action of disposing of dead weight is emotionally empowering and if gains from trimming winners can offset them, then even better.

Per financial planning thought-leader Michael Kitces in a thorough analysis, the economic benefit of tax-loss harvesting is best through tax-bracket arbitrage with the most favorable scenario being harvesting a short-term loss and offsetting with a short-term gain (which would usually be taxed at ordinary income rates).

#3: Fire your stodgy brick & mortar bank.

Let’s face it: Brick & mortar banks are financial dinosaurs. Consider how many occasions you’ve seen the interior of a bank branch. Unfortunately, banks are not in a hurry to increase rates on conservative vehicles like certificates of deposit, savings accounts and money market funds even though the Federal Reserve appears anxious to step up their rate-hike agenda.

Virtual banks like www.synchronybank.com, provide FDIC insurance, don’t charge service fees and offer savings rates well above the national average.

Accounts are easy to establish online and electronically link to your existing saving or checking accounts.

#4: Get an insurance checkup.

It’s possible that weakness exists in your insurance coverage and gaps can mean unwelcomed surprises and consequences for you and the financial health of loved ones.

Risk mitigation and transferring risk through insurance is a crucial element to reduce what I call “financial fragility,” where a life-changing event not properly prepared for creates an overall failure of households to survive financially.

As I regularly review comprehensive financial plans, I discover common insurance pitfalls which include not enough life insurance, especially for stay-at-home parents who provide invaluable service raising children, underinsurance of income in the event of long-term disability, overpaying for home and auto coverage and for high-net worth individuals, a lack of or deficient umbrella liability coverage to help protect against major claims and lawsuits. Renter’s insurance appears to be a second thought if it all however, it must be considered to protect possessions.

You can download an insurance checkup document from www.consumer-action.org. It’s a valuable overview and comprehensive education of types of insurance coverage.

Set a meeting this quarter with your insurance professional or a Certified Financial Planner who has extensive knowledge of how insurance fits into your holistic financial situation.

#5: Don’t overlook the value of your employer’s open enrollment period.

Usually in November, you have an opportunity to adjust or add to benefits and insurance coverage provided or subsidized by your employer. The biggest change (shock, surprise), may pertain to future healthcare insurance benefits.

The number of employers moving to high-deductible health care plans for their employees increases every year. In addition, overall, individuals and families are shouldering a greater portion of health care costs, including premiums every year.

According to a survey of 600 U.S. companies by Willis Towers Watsons, a major benefits consultant, nearly half of employers will implement high-deductible health plans coupled with Health Savings Accounts.

Health Savings Accounts allow individuals and families to make (and employers to match) tax-deductible contributions up to $3,500 and $7,000, respectively for 2019. Those 55 and older are allowed an additional $1,000 in “catch-up” contributions.

Money invested in a HSA appreciates tax free and is free of taxation if withdrawn and used for qualified medical expenses. Like a company retirement account, a HSA should have several investment options in the form of mutual funds from stock to bond.

Although Health Savings Accounts provide tax advantages, as an employee you’re now responsible for a larger portion of out-of-pocket costs including meeting much higher insurance deductibles. If you think about it, your comprehensive healthcare benefit has morphed into catastrophic coverage.

No longer can employees afford to visit the doctor for any ailment or it’s going to take a bite out of a household’s cash flow at least until the mountain of a deductible is met.

Want to make smarter choices during open enrollment season? Check out my post next week – “5 Smart Steps to Successful Open Enrollment,” for guidance.

#6: Check beneficiary designations on all retirement accounts and insurance policies.

It’s a common mishap to forget to add or change primary and contingent beneficiaries. It’s an easily avoidable mistake. Several states like Texas have formal Family Codes which prevent former spouses from receiving proceeds of life insurance policies post-divorce (just in case beneficiaries were not changed), with few exceptions.

Proper beneficiary designations allow non-probate assets to easily transfer to intended parties. Not naming a beneficiary or lack of updating may derail an estate plan as wishes outlined in wills and trusts may be superseded by designations.

#7: Shop for a credit card that better suits your needs.

Listen, it’s perfectly acceptable to utilize credit cards to gain travel points or cash back as long as balances are paid in full every month; so why not find the card that best suits your spending habits and lifestyle?

For example, at www.nerdwallet.com, you can check out the best cash-back credit cards.

For those who carry credit card balances and unfortunately, it’s all too common, consider contacting your credit card issue to negotiate a lower, perhaps a balance transfer rate or threaten to take your business (and your balance), elsewhere. Keep in mind, on average an American family maintains more than $8,300 in credit card debt and the national average annual percentage rate is a whopping 19.05%!

8#: Prepare for an increase to your contribution rate to retirement accounts and emergency cash reserves.

Start 2019 on the right financial foot by increasing payroll deferrals to your company retirement accounts and bolstering emergency cash reserves. Consider a formidable step, an overall 5% boost and prepare your 2019 household budget now to handle the increase.

You can’t do it? Think again. As the seasons change so can your habits.

The fall is a time to shed the old and prepare for the new.

When it comes to money, we can all learn from the power, beauty and resiliency of Mother Nature.

Use the season to gain a fresh perspective and improve your financial health.

What Your Financial Wikipedia Says About You

The longer one lives, the mustier the memories. I often ponder the past; it makes me sad how as years go on, personal events regardless of pain or pleasure, dissolve into fine mist and disappear into a black hole of time. I long to remember all the great things I’ve forgotten!

A couple of childhood memories stand out. Before I share, keep in mind, I was a boy. I was also a nerd, an inveterate reader. Books were and remain, a personal passion. Every year the Scholastic book fair made the rounds to my elementary school. Every year, I tested my parents’ patience, especially my father’s as I requested on occasion to purchase two of the same paperback books.

A permanent crease to a cover or the bookmark of a page disturbed was unnerving; it was easier to purchase one book for reading, another as backup to remain untouched. I realize it must have been some light form of OCD or other obsessive behavior. Still in my possession is a pristine copy of a book titled Horse Stories, filled with short stories of equine heroics. Thick and glossy baby-blue pages stand out as different from most 70’s paperbacks.

As an adult, my connection with books has dramatically changed. It’s a lot messier. Today, I highlight, underline, bookmark. Even aged books about Wall Street, original editions from the early 1900s aren’t spared my wrath. The more I annotate, the more I absorb. A well-creased book is the aftermath of worthy toil. Lance forbids me to borrow from his collection because he knows what I’ll do. Perhaps he has a touch of OCD, too?

I couldn’t wait for the latest edition of The World Almanac® and Book of Facts to hit the racks of the local convenience store. Yes, in the 70s, most “mom & pop” retail establishments including pharmacies and candy/soda shops, maintained deep inventories of latest paperbacks and magazines.

The anticipation as I walked from the front door to the middle of the store where books and magazines were displayed on long, multi-shelved metal shelves, grew palpable, especially if it were early in the year and the latest Almanac was available. The tome was so thick, two hands were required to grasp it.

I was fascinated by movie and television personalities, especially those from the 30s and 40s; if they were still alive and if gone, where they were interred. The World Almanac was a great source of information about them along with offbeat news stories I missed throughout the prior year. Amazingly, The World Almanac is celebrating its 150th anniversary edition and available for purchase at www.worldalmanac.com.

I was a news and world-facts junkie from age 10 to forever. So much so, an orange Radio Shack AM radio was secured to my lime-green Schwinn’s handlebars, so I’d never miss New York talk radio.

I loved my encyclopedia editions, too. Who remembers them? My personal 20+ volumes of 1974’s World Book Encyclopedia cost my parents a small fortune. Today, we have Wikipedia although I’m reasonably certain inaccuracies abound. Regardless, I find myself checking the world’s online encyclopedia. My investigations are disparate and at times, unusual. From less publicized Civil War battles to the backgrounds of 70s television detectives, I find that Wikipedia is a go-to source.

Recently, I checked out the career of actor & producer William Conrad. I was surprisingly amazed by his accomplishments. For those too young to remember, William Conrad, a rather rotund fellow with a deep baritone voice and face that resembled a pug, was a diversified talent. From voiceover work to production of iconic television series, Mr. Conrad was an inveterate Hollywood power player. Who knew? All I remember as a private detective in the 70’s detective television series “Cannon,” Bill Conrad possessed the uncanny ability to nab a fleeing criminal half his size and age and catch up with him on foot even though the perpetrator had at least a two city-block head start.

Wikipedia has a penchant to shine light on interesting, and occasionally unpopular information about a subject. So, when it comes to personal finances, what would Wikipedia contributors mention about you?  What are the habits or accomplishments you’d be proud for the world to read? What financial episodes would make you cringe to have divulged to the masses?

Here are a few initiatives that would deem you a financial Wikipedia superstar:

He maximized lifetime income options and ignored the temptation to take Social Security at 62.

Do not underestimate the lifetime income that Social Security can provide. After generating hundreds of Social Security benefits payout scenarios it’s rare I recommend future recipients claim benefits before age 70 especially if I must consider survivor benefits for a younger, lower-earning spouse

According to a The Nationwide Retirement Institute® Consumer Social Security PR Study conducted by Harris Poll, it’s not surprising to discover than ½ of a retiree’s fixed expenses are covered by Social Security benefits.

Per the study, surprisingly few retirees have a financial advisor who provides advice on Social Security strategies. The total incidence of having a financial advisor who provided Social Security advice was a dismal 11%.

A 2015 study by the Consumer Financial Protection Bureau indicates that more than 2 million consumers choose when to begin collecting Social Security retirement benefits. Many make the decision based on limited or incorrect information.

Of those given Social Security advice by their advisors, roughly half or more had to initiate the discussion themselves.

Now with pensions all but gone, Social Security is the only guaranteed monthly income for roughly 69% of older Americans.

Unfortunately, in 2013, 75% of retirees chose to start collecting before full retirement age which results in a permanent reduction in lifetime benefits. This may be a very shortsighted decision.

As Wade Pfau, Ph.D., CFA and professor at the American College outlines in the 2nd edition of his Retirement Researcher’s Guide to Reverse Mortgages:

“Delaying Social Security is a form of insurance that helps to support the increasing costs associated with living a long life. It provides inflation-adjusted lifetime benefits for a retiree and surviving spouse, and those lifetime benefits will be 76 percent larger in inflation-adjusted terms for those who claim at seventy instead of sixty-two.”

According to Social Security expert Elaine Floyd, ignorance is the primary reason. The CFPB report outlines studies that represent how much people don’t know about claiming. One study for example outlined that only 12% of pre-retirees knew how benefits differed if benefits were claimed before, at, or after full retirement age.

He worked longer which exponentially increased the probability of wealth lasting through retirement.

In a recent National Bureau of Economic Research working paper, “The Power of Working Longer,” the research corroborates what tenured financial planners understood all along – remaining in the workforce longer greatly increases the probability of retirement plan success. However, the results of the study are surprising, even for professionals who have created countless financial plans and validated the financial benefits of working longer.

The authors discovered that working longer is more powerful than increasing saving for most people, especially if the primary wage earner defers the start of Social Security and takes advantage of delayed retirement credits which result in an annual 8% increase in income benefits up until age 70.

The research outlines that for many retirees, Social Security comprises 81% of sustainable retirement income. Therefore, increasing contributions to 401ks for example, (which makes up the remaining portion of sustainable income), is helpful, but pales in comparison to remaining in the workforce. What’s shocking about the findings is that only 3 months of additional work generates the same increase in retirement income as 30 years of saving an additional one percentage points of earnings.

He didn’t give a second thought to financial headline candy that espoused new highs for stocks or celebrate the length of bull markets.

After all, a blended portfolio of stocks, bonds and cash, is never going to participate fully in the reverence. However, the same portfolio shouldn’t bear the brunt of the downside, either. I know it seems improbable, but bear markets do arise.

Markets move in long-term secular trends, or cycles. Per analysis by Doug Short at www.dshort.com, secular bull market years total 80 vs. 52 for the bears, which is a 60/40 ratio. Most investors believe the ratio is closer to 80/20. A falsehood, a story perpetuated overwhelmingly by financial media outlets.

An astute investor should seek to partner with a Certified Financial Planner® fiduciary to create a personal rate of return. This rate is derived from asset class future return estimates, an allocation based on the results of a behavioral risk diagnostic, current household savings rate and inflation expectations that is compiled as a benchmark to assess progress towards financial goals.

In other words, beating a stock index is not an aspiration one can afford for long since the math of loss and time it requires to break even must be considered when bear markets hit. For example, if you require a 3% rate of return to meet your objectives, why take on more risk than necessary? Especially when stock valuations as measured by the Shiller PE ratio now stand at a rich 33.48X.

Keep in mind, markets are infinite. To Wall Street, it doesn’t matter how many years it takes to recover from corrections or bear markets. It’s a celebration! You however, are human and finite; there’s limited time available to rebuild lost wealth.

Per the FacTank at the Pew Research Center, ten years later, the only generation to recover wealth lost after the housing crash is Generation X. In the span of a human life, a decade is substantial. For markets, it’s an irrelevant speed bump. A blip in time. It’s important to keep this perspective.

Per the work of Gregory L. Morris, in his extensive tome “Investing with the Trend: A Rules-based Approach to Money Management,” which is a go-to reference edition in my RIA recommended reading list library, it takes six years for the S&P to recover from a 20% drawdown. Generally, a blended portfolio should take half that time or less.

You have the opportunity to conquer financial milestones that can appear fabulously in your financial Wikipedia (if a financial Wikipedia ever existed!)

Leave a legacy of good money decisions loved ones and others you care about would be proud to emulate.

Why Your Credit Score Just Improved

Are you one of the 8 million consumers who noticed a credit score improvement and wondered how it happened?

Here’s the scoop:

Beginning in March 2015, The National Consumer Assistance Plan, a consortium of the three major consumer credit reporting companies – TransUnion, Experian and Equifax, began an effort to make credit reports more accurate and make it less intimidating for consumers to correct errors. The three-year initiative outlined the following objectives:

  1. Allow consumers to access a free credit report sooner than 12 months if a dispute that causes a modification is initiated. This change provides consumers the window of opportunity to verify that modifications have been completed.
  2. Medical debts won’t be reported until a 180-day waiting period which allows insurance payments to be applied. Past medical collections that have been paid by insurance will be removed.
  3. Unpaid traffic, parking tickets and fines will no longer appear on credit reports.
  4. Consumers who are victims of fraud will receive improved communications about credit report disputes and additional options to rectify fraud situations.

As a result of these efforts, the number of individuals with collections accounts (as identified by Equifax), dropped dramatically in the fourth quarter of 2017.

The New York Federal Reserve Bank Quarterly Report on Household Debt & Credit, outlined that 8 million people had collections accounts removed from their credit reports.

Consumers with the lowest credit scores benefitted the most from the NCAP initiatives with 18 percent of affected consumers experiencing a rise of 30 points or greater. Those who experienced a 40 or more boost in their scores began with an average of 529.

So, what actions can you take to monitor, maintain or boost your credit score?

Check your credit reports once a year.

It’s not that difficult. Place an activity on your calendar in January of every new year. The only source for free credit reports is www.annualcreditreport.com. The site is authorized by Federal law to provide a free copy of your reports every 12 months from each of the three credit reporting companies. Based on improvements by the NCAP, it’s easier than ever to report discrepancies (in most cases, online), and follow up to make sure errors have been removed.

Check your credit score annually.

Your credit history, activity, open and closed accounts are listed on credit reports which feed into the scoring algorithms used to create your three-digit numerical credit score. Consider scores and reports as joined pieces of a financial puzzle which form a story about your overall relationship and use of credit. Elements of a credit score include payment history, amounts owed, credit history, types of credit used and your application for new credit. The FICO® Score is an industry standard and the most popular.

A growing number of credit card vendors including major providers like Discover, Capital One, Chase and Bank of America now provide FICO® scores to customers. In addition, www.creditkarma.com will also allow free access to scores and reports. They will make product recommendations and are paid by a bank or lender if you obtain a product through one of their recommendations.

Payment history comprises a whopping 35% of your FICO® Score. Paying credit obligations on time is paramount.

If you’re retired don’t be afraid to utilize smart credit strategies.

I find new retirees suffer drops in their credit scores and refrain from using credit, which could be a mistake. The goal is to know when it’s smart to use credit compared to tapping precious liquid resources. This can be an incredibly advantageous endeavor through the early years of retirement where spending on discretionary categories like vacations, travel and major purchases pertaining to home improvement are at their zenith.

For example, a new retiree client recently decided to take advantage of Best Buy’s zero-percent interest credit card offer for quality home electronic upgrades. He takes comfort in knowing he has the cash to pay in full immediately but why do it when he can make minimum monthly payments and have cash earn interest in an online savings vehicle for two years?

Those who budget stay disciplined and motivated to boost cash flow through similar methods and utilize credit to work for them, not against themIn addition, smart credit management that includes timely payments, helps keep his respectable FICO® credit score (over 780), intact which can come in handy for future credit-based decisions.

Smart retirees are not in a hurry to close their credit card accounts. They’ll look to aggressively utilize the ones that provide the greatest benefits to their households; whether gathering points for travel, cash back or rewards for goods and services, credit card companies want your business and new retirees are active enough to take advantage of special offers.

Flex your credit muscle but don’t overdo it.

Credit scoring models reward usage and disciplined credit management. Don’t be afraid to flex your credit muscles by rotating the use of credit cards and utilizing credit overall as long as you don’t push the limits on every card you own. It’s important for credit agencies to observe responsible ongoing utilization of credit in conjunction with timely payments.

The world of credit scoring consistently evolves.

A credit score of 800 or above is considered excellent. A good or excellent score can save a consumer thousand in interest charges on automobiles and homes. The Loan Savings Calculator at www.myfico.com, calculates how the FICO® Score impacts the interest you’ll pay for the life of a mortgage or auto loan.

Planting The Seeds For A Financial Harvest

Since the age of 16, my daughter has worked summer jobs. She’s been a waitress, a hostess. A cashier at the local HEB supermarket.

This isn’t a topic we’ve discussed formally, so it made me curious as to her motivations at the time. Sure, we’ve had countless small money moments as early as age 5. Formal conversations have been granular covering specific topics such as payroll tax withholding and where to invest her money.

On a side note, money discussions with your kids should be casual and occur in brief but impactful moments. A discussion over the price on a BRATZ doll at Target; is it worth spending the cash? How much to save, share and spend from a weekly allowance. You see, anytime is a good time to talk money with children. The casual the better. Over time, parents gain a sense of their children’s’ money scripts or how they’re wired. Are they ambitious savers or profligate spenders?

I recall my first job delivering “New York’s Picture Newspaper,” The Daily News, at 14 years-old. The route was one of the largest in my Brooklyn neighborhood. The lessons were indispensable and remain with me today.

Selling, customer service, handling complaints, the discipline to wake before 5am including weekends, to make sure papers were delivered before morning coffee, and the financial reward I earned sacrificing hours of my weekend to collect payment from subscribers. It was a challenge, yet I remember how the job fostered feelings of well-being through a challenging childhood.

I asked people through social media about their summer employment and what motivated them to take on the responsibilities while their friends were on vacation or at camp.

The positive responses were overwhelming. People couldn’t wait to share. The exhilaration was contagious. Many were vocal about how the qualities they developed working as teens, were unequivocally linked to prosperity, financial and otherwise, as adults.

Firs, you’re proud. Yet, there’s something strangely sad about the milestone. Perhaps your teen is embracing maturity with gusto, motivated to take on new responsibilities and taking a big step to adulthood, to independence, which makes you feel vulnerable, uncomfortable.


Ok, so that was MY issue.

So, you have a teen or grandchild who is wrapping up a summer job? Don’t let an opportunity to make the most of the experience fade away before the new school year starts.

What can you try?

Celebrate the ‘wrap up’ from payout to paycheck.

Most likely, there’s been a long-standing allowance agreement at home. Sure, you taught the basics of save, share and spend early on, helping your child formulate a simple yet impressionable strategy of monetary discipline. It’s time to re-visit the discussion. The addition of sweat equity adds another dimension to save, share and spend. Have a “big picture” talk and explore how take-home pay was allocated.

Celebrate the wrap-up of such an accomplishment at a special yet informal setting – Allow your child to share deeper thoughts around save, share and spend. Guide the conversation, provide reinforcement for good ideas and create positive memories around how proud you are of the transition from payout to paycheck. My daughter and I held our celebration at a pizza establishment named Mellow Mushroom.

Initiate the “Level 2, Triple S” protocol. 

No, it’s not the title of the new Mission Impossible movie. It’s how save, share and spend takes on renewed relevance in proportion to the past. It’s the “Triple S, Level 2” rite of passage. As a child, allocating an allowance or cash for chores, was important. With a summer job, parents and kids make allocation decisions with greater impact.

Oh, there’s another interested party looking to share in your child’s success: It’s the IRS. Taxes are now a consideration. As an employee, your child was to complete a W4 form to indicate the correct amount of tax to be withheld from each paycheck. For 2018, a dependent youth doesn’t require a tax return filed if earnings do not exceed $12,000, the standard deduction amount.

In my case, we felt comfortable writing “EXEMPT” on line 7 of the W4; as a dependent, my daughter will most likely not exceed $12,000 in earnings for 2018. I find most parents will recommend their children withhold taxes and receive a refund. I don’t think this is a good lesson as a refund is an overpayment of taxes, an interest-free loan to the government. Parents are unsure how to advise their kids, so they have them withhold taxes ‘just to be safe.’ Again, not an optimum financial decision and example for young adults.

Fund a Custodial Roth IRA.

Working leads to new investment vehicle opportunities. Fund a Custodial Roth IRA with a savings allocation of at least 30% of summer earnings directed into a Roth as a contribution. For 2018, the maximum that can be placed in an IRA is $5,500. Even invested conservatively, a $1,500 deposit, earning annually at 4% has the potential to be worth over $11,000 tax-free by the time your teen reaches 67 years-old.

Time is your child’s greatest ally; part-time employment provides the opportunity to jumpstart full-time retirement. At the least, they may tap into contributions in later years to fund a down payment on a primary residence. Not an optimum solution however, it’s better than tapping into a pre-tax 401(k) or traditional IRA and shelling out ordinary income taxes and possibly, early withdrawal penalties. For example, roughly 1 in 3 millennials withdraw or borrow from their retirement accounts to purchase a home.

Start a cash-flow discovery exercise.

As my girl had additional money to spend, we emphasized budgeting in our discussions. It’s crucial children maximize what’s left of a paycheck after taxes and savings. Teach kids to make saving a priority and to pay themselves first. It’s one of the best financial habits you can instill as parents. My daughter’s two biggest expenses – clothing and music downloads were monitored using a free Smartphone budgeting application she selected.

Set aside 20 minutes, initiate a “cash flow discovery” exercise to review expenditures and the overall work experience. I seek to learn the pros & cons of my daughter’s summer jobs. I want to hear how she handles customer complaints, interacts with other employees and working makes her feel.

After all, earning a pay check is exciting. Some kids get carried away and go through what I call an “independence splurge” where spending increases along with the first paychecks. Ironically, I’ve observed most of the spending is done at a teen’s place of employment as employer discounts are considered a “benefit.”

As a parent or grandparent, what have you lost and found again?

At our personal summer-job celebration, I shared my early work memories good and bad. I opened up about the time I got fired from Stern’s Department Store. Not my proudest moment. Overall, my daughter helps me re-live the best of my work habits and reminds me of why I’ve been motivated to succeed for so many years.

And teens?

Your family finds your initiative admirable; also, they’re observing how you handle multiple responsibilities outside of home and school.

Your work efforts are forging their confidence in you to handle future fiscal responsibilities.

The disciplines that begin as a working teen will sharpen and live on in you for many generations.

The financial seeds planted today have potential to grow large.

Money Lessons From George Washington

As a small child, Washington yearned to be a British officer.

While other children were playing games, doing what children do, Washington gravitated to rigorous study of famous battles as recreation.

He lived the victories and defeats; with extraordinary precision, a young George envisioned and documented battle strategies, actions he would have taken to turn around and win losing engagements.

Washington possessed an indomitable fire fed by love for the home country. In his view, Britain was an honorable, unstoppable world force. Washington’s plan, early on in childhood, was to be an English patriot, ready, perhaps even anxious, to fight and die for king and country.

So, what series of events occurred that turned a searing heat of unstoppable love, dedication and passion for a home country into the ice of disappointment? How did a boy and young man eager to die for king and country turn and become the father of a new nation?

How does a passionate believer in and contributor to a country to take over the world morph into a searing combatant against his first and greatest love? What does that do to a person inside? How did that twist him? How did he mourn? How did Washington reinvent himself? Turn love into hate, ostensibly dispassion, to calculate and fight against a home country he now perceived as an oppressor of people he loved?

Virginians first. Then a scraggy mess of countrymen, Americans, he took on to fight a beast 100x the size? Awaiting the French, attempting to keep the cause alive until they arrived.

Listen, I couldn’t build out a fictional drama character or develop a protagonist for a full-length feature film as perfect as the circumstances which turned Mr. Washington.

A change of heart so dramatic, men with less resolve would have folded or disappeared into private life never to be heard from again. Washington did indeed do just that for a period. At 27, he retired from military service to Mount Vernon only to become an innovator at agricultural techniques founded by farming expert Jethro Tull.

Why did Washington retire? Ah, you’ll find out soon enough.

A man lives and breathes false truth, encounters a series of adverse circumstances, (some emotionally devastating), which continually confront and mar that truth.

Concurrently, an alternate truth begins to emerge. A truth this man doesn’t want to admit and fights against until one, last devastating personal setback, turns him completely, causes him to retrench, only to emerge different, beholden by a new truth.

Listen, this is the formula for every great fictional protagonist we embrace (and sometimes hate). Rick Grimes & Father Gabriel (tertiary protagonist) from The Walking Dead, John Wick, Maximus from Gladiator, Lucas McCain in a revamped The Rifleman, Benjamin Martin in The Patriot.

And there’s Washington.

Is one man’s fiction another man’s reality? I l believe it to be so. Every fictional character is in some part, another’s reality. I’m sure we all know people who have overcome obstacles that would have broken others.

The stock market is fiction. Prices of stocks are based on stories those who get sucked in to the stories. Supply and demand of stories, possibilities, hopes. All regulated. Mostly, fiction.

So, how and why did Washington change so radically? What can we learn?


Washington embraced strategic retreat, avoiding major engagements until he felt the opportunity was right. On occasion, it was never right, and he needed to re-group and find an alternative plan to victory.

Self-preservation and those of his men was paramount. Live to fight another day. Small victories, flanking attacks forged morale for a ragtag army that at times didn’t even possess shoes.

Britain scorned Washington numerous times, turning him down for major battles. A tremendous disappointment.

In 1754, British leaders galvanized against Washington when at the Forks of Ohio not far from Fort Duquesne (occupied by the French), Washington, an officer in the British Army along with men he marched through mountainous and dangerous terrain of Maryland and Pennsylvania, met up with a band of Iroquois to confront a French party of 35 men, fifty-five miles from the Forks.

What Washington perceived as his contribution to a first battle between two of Europe’s greatest empires, turned out to be an eventual well-publicized massacre of diplomatic messengers. One of the messengers named Jumonville was carrying a letter which was to be delivered to English authorities declaring Ohio Country as French territory. He was the first to be slaughtered by the Iroquois.

The attack was particularly gruesome and later didn’t write well in periodicals back in the home country, especially due to the brutality of the Indians who split open French scalps with tomahawks and rinsed their hands in victims’ brains.

As Russell Shorto wrote in his impressive tome – “Revolution Song,” – “The event, the series of fateful missteps by an inexperienced provincial officer, whose signatures carried the official weight of the British Empire, meant that, for the first time an event in North America would trigger a war in Europe.”

Back to the battle: It was only a matter of time before more than 1,000 French soldiers back at the Fork would know of the combat and seek to attack. Washington retreated with 400 men to a wide meadow and built a makeshift fort in the middle of it to await the next encounter.

French military head up ironically by the brother of Jumonville, passed through the gruesome massacre, now even more motivated to confront Washington and his men. With swift and diligent attack, the French took positions behind trees and rocks and precisely began to pick off Washington’s group.

They picked off men on horses, they killed more than 100, forcing Washington’s hand to surrender. The Indians had run off before the French arrived.

Military protocol at the time required George Washington surrender in writing. The French drafted a document. Washington signed it.

What the father of our country didn’t understand was that he was placing his name to a document that referenced the “assassination” of Jumonville. Washington believed the document referenced the death of the French leader, not an assassination. Unfortunately, it was probably due to the lack of skills by a novice interpreter. No matter. Washington signed a document of admission to the assassination which made the battle even more repulsive to the British.

To make matters worse (can you imagine?), a letter Washington wrote to his brother bragging about the encounter, referencing how the whistle of bullets to be a “charming sound,” was exposed and published in London Magazine.

A prominent writer portrayed Washington as foolish and the consequences dire – “The volley fired by a young Virginian in the backwoods of America set the world on fire.”

I’m not sure about you, but this series of events would have convinced me to leave the military and never be seen or heard from again. And Washington did indeed do so. For a bit. He went straight to the earth. He pondered a new life as gentleman farmer. He learned to grow tobacco on a commercial scale, he became a voracious reader and student of several heady topics including the law.

So, how do we take in what Washington experienced, how he reacted, and reinvented? Obviously, he was a Stoic in the making. He was a student of the German philosopher Nietzsche without knowing, either.

It was just who he was.

Nietzsche described human greatness as:

“Amor Fati or love of fate. Don’t bear what is necessary but love it.”

Marcus Aurelius said:

“A blazing fire makes flame and brightness out of everything that’s thrown at it.”

Epictetus lamented:

“Do not seek for things to happen the way you want them to; rather, wish that what happens happen the way it happens. Then you will be happy.”

Washington was an empath. He took in the pain of others. The Stamp Act and taxation by Britain forced oppression upon him and his brethren; denied him and his fellow man the freedom to prosper.

Thus, the rest is history. The man who loved and wanted so much to be loved by the British, found a new and greater love, a bigger mission, a higher truth. Mostly from great setback. Just like those incredible characters in films and series we are hooked on.

A non-fictional American story that resonates today.

A life we all can learn from.

At the time of his death in 1799, Washington’s estate was worth roughly $780,000 and that doesn’t include the valuation of his 7,000 acres at Mount Vernon. He was ranked as one of the richest colonialists. However, that wasn’t always the case. His finances dramatically ebbed and flowed. There were times in his life Washington was “land rich, cash poor.”

So, what lesson can we take from Washington’s life, good and bad? Here are 3 to consider.

Washington yearned for social status and went broke several times in an effort to keep up with the “Joneses.”

It was all about appearances. The finest clothing, expensive, outlandish accessories brought in from London designers. He borrowed (at 6%), to maintain his lifestyle for many years. Appears many Americans take after our first president when it comes to the use of credit to maintain standards of living.


Consumer credit per capita accelerated post-financial crisis as wage growth continued to suffer and job losses mounted. Unfortunately, unlike Washington who yearned for riding carriages with purple velvet-tufted seats and ivory handles, Americans are increasingly using credit to pay for the basics as wage growth although increasing, is not enough to keep up with rising costs, especially healthcare premiums.

According to the Pew Research’s Survey of American Family Finances, 46% of respondents reported making more than they spend; only 47% said they predictable household bills and income from month-to-month. More than third of those surveyed have suffered income volatility (a year-over-year change in annual income of 25% or more), in 2015.

Washington was a strong believer in education and the benefits of mathematics. He was also a gifted student throughout his life in agricultural sciences and the law.

A young Washington was fascinated with military strategy along with an aptitude for mathematics and geography. He was on the payroll of land baron Lord Fairfax at age 16 as a land surveyor of 5 million Virginia acres that was to be prepared for tenants arriving from across the Atlantic.

We are faltering as a country when it comes to math, science and reading proficiencies.

In a 2015 Pew Research Center report, only 29% of Americans rated their country’s K-12 education in science, technology, engineering and mathematics as above average or the best in the world.

As parents, we must help our children embrace these subjects. A Cleveland Fed study discovered that advancing past Algebra II strongly correlates with college graduation and thriving financially in the workforce.

Washington was a master networker.

America’s first president and one of its bravest leaders believed in the power of connections. He was not born of a rich family. He made connections, was a savvy social climber and married Martha Curtiss, one of the wealthiest widows in Virginia. Not that we all can marry wealthy, mind you!

Empirical studies outline how children who are better at socializing have above-average reading scores and better literacy skills. According to the Brookings Institute, social and emotional competence is critically important in the workplace. Traits that employers value in employees include self-esteem, goal setting, pride in work and interpersonal skills and teamwork.

Regardless of political affiliations, Americans can easily agree upon the respect for or relate to a trait or skill they admire when it comes to George Washington, the resilient leader of a new nation.

How Millennials Can Retire At 56 – Part 2

In Part 1, I shared several ideas for ambitious Millennials who seek to make retirement in their mid-fifties a reality. Those who take the initiative to retire early, especially close to a decade before Social Security and Medicare benefits eligibility, are going to need to think and behave differently than the masses when it comes to saving and debt management.

Live at home longer or find a roommate.

The share of young adults living at home has been on the rise since the Great Recession. According to the FactTank at Pew Research Center which deep dives into U.S. census data, as of 2016 15% of 25-35-year-old Millennials were living at home with their parents. Nearly double the share of the Silent Generation who lived at home in 1964. The median stay is three years and likely due to limited professional prospects coupled with burdensome student-debt obligations.

By the way, I support younger generations temporarily returning to the nest to play financial catch-up (not a popular opinion shared by partner Lance Roberts!) as long as they can contribute to their parents’ households whether it’s financial or in sharing of household responsibilities. Specific financial targets and timeframes should be established during this period; ambitious savings and debt reduction targets should be outlined in a budget and periodically reviewed by young-adult children and parents to showcase progress.

Young adults who are back in their old bedrooms or take in a roommate to reduce overhead or fixed expenses, shouldn’t feel ashamed or a failure to take a step back to move forward as long as the intention is to catch-up financially and parents witness the efforts.

The Millennials I counsel who have returned to parents’ residences are instructed to provide evidence of their ongoing commitment to improvement. For example, a young lady who moved back home in 2015 due to $52,000 in credit card and student loan debt she couldn’t get ahead of, provided a simple, monthly financial excel sheet to her parents, relevant proof of her commitment to be debt free. Today, she is down to her last $2,000 in student loan debt, has $4,000 in emergency savings and has been able to contribute 6% annually to her company retirement plan over the last couple of years. This young professional is now engaged and will live at home until her wedding in 2019. And speaking of weddings…

Get married.

Wait. What? Yes, marriage can be a financially beneficial step. Cohabitation or living together? Not so much. In a study from the Journal of Financial Planning – The Financial Implications of Cohabitation Among Young Adults,  authors Sonya Britt-Lutter, Ph.D., CFP®, Cassandra Dorius, Ph.D., and Derick Lawson, CFP® discover that co-habiters have lower net worth and financial asset accumulation than married respondents. Intuitively, this makes sense although the researchers do a formidable job obtaining data to prove their thesis.

Marital and co-habitation relationships up to the age of 30 were used to study net worth, financial assets and non-financial asset accumulation. Those with the highest net worth were married. People who never co-habitated possessed $16,340 more wealth than married couples who had co-habitated in the past and $18,265 greater wealth than married people who lived together with others two times or more. So, get married. Most important, marry someone who believes in fiscal responsibility and shares a similar money script.

Couples with similar money scripts grow or destroy their net worth at an exponential rate.

I don’t require academic or empirical backup to make the statement. I possess close to 3 decades of face-to-face meetings with couples to review their money habits and provide financial planning guidance. Couples that share similar philosophies about debt, savings and investing are a synergy to wealth creation or they’re the death of it.

It doesn’t matter if both are strong wage earners or if one remains home to care for children. In other words, household income isn’t as relevant a factor; the highest and best use of the net income or the utilization of household dollars, whatever level they are, is critical. Those who can allocate (or in some cases, misallocate) funds and mutually agree on the flow of their funds are likely to stick together through thick and thin, rich or poor.

Not to be morose, but it’s to the point where I can predict with respectable accuracy who is going to meet their forever marital obligations. I’m not a relationship expert by any stretch of the imagination. However, I do know that financial stress in a marriage can be toxic to its health.

The question is – how do you define stress? I understand couples who experience financial distress are more likely to part ways. However, two people together aligned as profligate spenders or passionate savers, in my experience, tend to stick it out.

According to Brad T. Klontz, Psy.D., CFP® & Sonya L. Britt, Ph.D., CFP®, money scripts as coined by Brad and Ted Klontz, are the core beliefs about money that drive ongoing behavior. Money scripts are unconscious beliefs about money formed in childhood, passed down from generations.

Marriage can be a catalyst to early retirement even if one party decides to work a couple of years longer to accelerate savings or maintain company healthcare insurance benefits.

Adhere to stringent debt guardrails.

Millennials should follow strict guidelines when It comes to debt control. At Clarity and Real Investment Advice, we have created debt control guardrails to help those looking to aspire to an early retirement.

Excessive debt and limited ability to buffer against financial emergencies will limit the ability to take on riskier but rewarding long-term ventures like career change and entrepreneurial endeavors.

A couple of our guardrails are as follows:

Mortgage debt: Primary residence mortgage = 2X gross salary.

Recently, an article for a national financial newspaper quoted an expert who said that purchasing a house is a good idea for Millennials looking to retire at 56. I was a bit dismayed by this guidance as a primary residence isn’t as much an investment as it is an expense. A house may be an anchor to mobility (go where the jobs are), and when taxes, insurance and upkeep are considered, it can turn an American Dream into a cash flow nightmare.

I’m not anti-house, I’m anti-house poor. Ostensibly, I created the above guardrail so potential homebuyers can focus unemotionally on how much mortgage debt to consider as not to place a future milestone like retirement in jeopardy.

Student loan debt:  Limit to one year’s worth of total expense – tuition, room & board, expenses.

Student loan debt has been a formidable obstacle for Millennials. The Center for Retirement Research in June 2018 report – “Do Young Adults with Student Loan Debt Save Less for Retirement?” outlines how student loan debt has nearly tripled in real terms between 2005 and 2017.

Using the NLS97 a dataset with information on borrowing by young workers for education, the regression analysis by the authors shows that 401(k) participation does not vary much among young workers with or without student loans or the size of the loans. However, the study does conclude that college graduates with outstanding student loan debts accumulate 50 percent less overall retirement wealth by the age of 30. The presence of a student loan materially impacts retirement saving which is why I created the student loan debt guardrail 6 years ago.

The objective is to limit student loan debt to one year’s worth of total tuition, room, board and other expenses. No matter what. I don’t care how you take it, either. All in one year or spread over four (or five). Sticking with the rule will force you to consider cost-effective solutions such as two years at a community college first for the basics (which is what my daughter decided and now has been accepted at University of Texas’ Cockrell School of Engineering), working a year to save while living at home, or to aggressively apply for scholarships.

Millennials should remain flexible when it comes to thoughts of retiring early. Regardless of good intentions and efforts, life has a way of altering plans as I recently shared my personal challenges with RIA readers in an imperfect retirement plan.  My strong fiscal habits proved beneficial in the face of divorce, career change, lawsuit and illness which made me grateful I’ve walked most of the steps I’ve shared with you here and in Part 1.

I wish an early retirement for the Millennials who strive for it. Frankly, I’m not confident yet remain positive. I hope these tenets serve you as well as they’ve served me.

How Millennials Can Retire At 56 – Part 1

A TD Ameritrade poll of 1,500 Millennials (those born 1981-1996 according to Pew Research Center), outlines how Millennials’ expectations about retirement age may be too ambitious. They expect to retire at 56 which is seven years younger than the current average retirement age.

Admittedly, it’s a lofty aspiration. Millennials are not going to hit their retirement goals at 70, let alone 56. Wholesale financial media advice such as invest aggressively in stocks and buy a house is offered up as solutions that ostensibly bankrolls Wall Street and the banking industry. This generation must embrace heterodox financial lessons to make retirement a reality. They must march to different drummers, be selective with the financial advice followed and take to heart the mistakes of Baby Boomers.

After all, secure retirement today is a privilege. At a time when Americans should be seeking to wind down and enjoy the golden years, 15 million households are in worse financial shape than the prior generation to do so.


Many Americans are victims to irresponsible financial industry guidance, aggressive actions of greedy corporate boards and organizations that have dismantled pensions and haven’t raised median incomes for the middle class going on close to two decades.

They’re victims of the lingering effects of the financial crisis including devastating job loss that forced them to tap retirement savings early, adherence to traditional financial industry dogma to load up on stocks for the long run, and the devastating loss of guaranteed income options like pensions.

The fortunate ones who can afford retirement have exhibited steeled fiscal resolve, ignored traditional Wall Street dogma, embraced vehicles to guarantee income for life and lived smaller than their fiscally-strained brethren.

Millennials – Listen up! I genuinely believe you can retire at 56 however, you’ll need to embrace the following Real Investment Advice steps to get there. I’ll warn you up front. An early retirement goal isn’t going to be easy. Open your mind. Think mental clean slate and maybe there will be hope for you.

Take to heart the previous generation’s mistakes.

Unfortunately, Baby Boomers are suffering from serious shortfalls, several out of their control, that you should do your best to understand and avoid. Boomers kept the faith in their employers to provide guaranteed retirement benefits, the banking, financial system not to implode and the buy and hold advice from the financial services industry which for many, proved to be detrimental to building wealth.

We are all now witnessing the damage that has been done. The aftermath. Toss in soaring prices for children’s education and healthcare, divorce rates rising for those 50 and older and cloying debt levels near to retirement, and 40% of Boomer households are now forced to remain in the workforce and or dramatically adjust their retirement lifestyle expectations.

Become an objective observer. Take notes. Don’t be afraid to respectfully ask Boomer family members and friends how they’re preparing (or not) for retirement.

The “pay and continually improve yourself” mantra must drive every action you take starting now.

To become a pay-and-improve yourself powerhouse is tantamount to turning an early retirement flame of desire into a raging fire.

Above all else and all that drives your behavior with money, this credo is the genesis you seek.

Frankly, if you stop reading here, decide to pay yourself first and continually improve your skills to earn more or increase your human capital, then my work is done!

So, what is human capital investment exactly?

The human capital investment is simply, YOU. Yes. YOU are an investment. The greatest investment. A lifetime money-making powerhouse. Earnings if directed wisely, result in long-term financial security and perhaps more important, a career passion that continues up to and far into retirement.

As adults, we have been counseled to invest financially through real estate, stocks, retirement, etc. but not always in ourselves…at least not to the same extent.  At Real Investment Advice, we believe that human capital investment is one of the biggest ROIs and should be treated with the same importance as traditional financial investment.  We call it “Return on You.”

The Census Bureau data shows the average American with a bachelor’s degree earned $2.4 million over their lifetime in 2013.  It is hard to argue with these figures when AARP published the average seasoned American (e.g. at least 55-years-old) had $255,000 in their retirement account during the same year.

Formal education is important to earnings potential, but it’s merely the beginning of a lifelong learning process. The economy and career paths appear to be in constant flux; it’s easier than ever to lose the competitive edge.

Fortunately, unlike financial investments where many variables are out of our control, we do possess the ability to strategize and take ownership of human-capital gains whether personal or professional.

Unfortunately, Millennials cannot depend on employers to provide consistent wage increases. They’ll need to take matters into their own hands by raising the bar on their skillsets and using them to switch employers or begin a part-time business to turn up the cash flow.

Plenty of dangerous financial rules of thumb exist. We passionately bust the myths and showcase the truth about your money. A tenet that indeed holds up however, is to pay yourself first.

You may want to sit down for what I’m about to share. Take a deep breath.

A Millennial born in 1981 is 37 this year. If I assume $1,000 currently saved for retirement, if I assume a realistic inflation-adjusted rate of return (3%), if the assumption is made Ms. Millennial earns a gross income of $50,000 and can pay herself first 30% of pre-tax income annually for 18 years (with the huge assumption that a financially disruptive life event doesn’t occur), Ms. M. would wind up with a nest egg of $363,455.

Taxes were not considered as I hope a Roth 401(k) and IRA would be utilized over the often-suggested tax-deferred alternatives. Wait. What? A Roth? Yes, a Roth. A 2017 Harvard Business School Study for the Journal of Public Economics suggests that most investors will have more money or retirement consumption dollars if they use a Roth 401(k) instead of a traditional choice. Roth accounts do not require mandatory retirement distributions at 70 ½ and qualified distributions including earnings are tax free.

Although $363,000 isn’t a fortune, it’s a respectable effort. However, to retire at the ripe old age of 56, Ms. M is going to require a multi-step plan of attack. Consider an interminable pay yourself first discipline coupled with the ability to increase annual earnings [thus bolstering your 30% PYF (pay-yourself-first dollars)] as a solid financial two-step strategy.

Respect stock market cycles and don’t take excess risk because your age dictates you do so.

I believe the stock market should be a part of a Millennial’s wealth-building plan. It’s just not a panacea as relentlessly touted by financial media. Stocks appear to be the solution to every financial problem. If the pros didn’t make stock investing sound so definitively positive and objectively, equally exposed the risks, perhaps we’d see a healthier stock market participation rate from this group.

My first year in the financial services industry was 1988, in the midst of a great bull market. However, I expected the industry, those who preached stale theories and ostensibly set investor portfolios up for the kill, to change their tunes about allocations and risk after the tech bubble burst in 2000. I had encouraged investors to shift portfolios to more balanced, less aggressive allocations, as early as 1998. Markets cycle data has been out there for what feels like an eternity, yet now more than ever, it’s rarely discussed.

However, the facts are the facts. Markets shift; they’re more than just bull as the public is led to erroneously understand. Although bull markets occur historically with greater frequency, people are surprised to discover that since 1877, bear markets have accounted for 40 percent of market cycles.

Yet, the narrative doesn’t budge. In the media and in client meetings at brokerage firms, the stock market fantasy bull is the financial Energizer Bunny. The bullish flipcharts keep flipping; visuals are designed to foster regret if one “misses out,” on the endless bliss of stock returns. Those that outline risk of loss are nowhere to be found.

I believe it to be blatantly irresponsible. Retail big-box investment factories are steadfast “set it and forget it,” peddlers. I’m amazed at their tenacity.

The spiel is rarely altered. Minds never changed.

Respected academics do change their minds.

Objective students of market history do.

What has changed is how millennials and generations which follow, are on to the biased rhetoric. Sadly, chronic skepticism and trepidation is hurting younger generations as they should participate in stock investing. They just don’t know who to trust.

Unlike the pervasive, cancerous dogma communicated by money managers like Ken Fisher who boldly states that in the long-run, stocks are safer than cash, stocks are not less risky the longer you hold them. Unfortunately, academic research that contradicts the Wall Street machine rarely filters down to retail investors. One such analysis is entitled “On The Risk Of Stocks In The Long Run,” by prolific author Zvi Bodie, the Norman and Adele Barron Professor of Management at Boston University.

In the study, he busts the conventional wisdom that riskiness of stocks diminishes with the length of one’s time horizon. The basis of Wall Street’s counter-argument is the observation that the longer the time horizon, the smaller the probability of a shortfall. Therefore, stocks are less risky the longer they’re held. In Ken Fisher’s opinion, stocks are less risky than the risk-free rate of interest (or cash) in the long run. Well, then it should be plausible for the cost of insuring against earning less than the risk-free rate of interest to decline as the length of the investment horizon increases.

Dr. Bodie contends the probability of a shortfall is a flawed measure of risk because it completely ignores how large the potential shortfall might be. Sound familiar? It should. We write of this dilemma frequently here on the blog. Using the probability of a shortfall as the measure of risk, no distinction is made between a loss of 20% or a loss of 99%.

If it were true that stocks are less risky in the long run, it should portend to a lower cost to insure against that risk the longer the holding period. The opposite is true. Dr. Bodie uses modern option pricing methodology i.e., put options to validate the truth.

Using a simplified form of the Black-Scholes formula, he outlines how the cost of insurance rises with time. For a one-year horizon, the cost is 8% of the investment. For a 10-year horizon it is 25%, for a 50-year time frame, the cost is 52%.

As the length of horizon increases without limit, the cost of insuring against loss approaches 100% of the investment. The longer you hold stocks the greater a chance of encountering tail risk. That’s the bottom line (or your bottom is eventually on the line).

Short-term, emotions can destroy portfolios; long term, it’s the ever-present possibility of tail risks or “Black Swans.” I know. Tail risks like market bubbles and financial crises don’t come along often. However, only one is required to blow financial plans out of the water.

So, what does age have to do with how much of a portfolio is allocated to riskier investments like stocks?

I’m not willing to believe those who are younger should be more exposed or increasingly vulnerable to market risk than anybody else, when the reward from stocks is less for every investor going forward. You see, risk has no age. Risk is risk.

An investment allocation should be customized for your life, needs, and ability to withstand volatility. Most important, it should be based on the valuation conditions that exist at the time you’re looking to place dollars into the market.

I witness cookie-cutter dogma blindly followed and money invested immediately regardless of where stocks are valued. Ultimately, the forward returns are anemic, or wealth is destroyed altogether.

Financial consultants and brokers have needles deep stuck in thought grooves. It’s not just this rule per se. It’s the belief that younger people must, MUST be more aggressive because they have time to weather through disaster.

Risk couldn’t care less about how old you are. When the environment is favorable to take on greater risk for higher returns, then why be so focused on age?

How would you perceive my advice if I explained that Millennials shouldn’t fasten their seatbelts before driving however, grandparents should?

I mean, after all, if there’s an accident and injuries suffered, common sense tells me that nana and papa may require a longer convalescence period, correct?

Not to be flippant, but I can make a formidable case that based on savings accumulated and driver (investment) experience, older and perhaps wiser navigators may forgo seatbelts, but the novices cannot.

Think about it.

Don’t be shamed by financial media and professionals into investing aggressively into stocks at 32X which is the price-earnings ratio based on average inflation-adjusted earnings over the previous 10 years (known as the Shiller PE). Partner with a fiduciary or financial professional who studies and understands market cycles. Create an asset allocation that fits the environment or market cycle and doesn’t follow a meaningless rule of thumb created by Wall Street that your age should affect how much risk you take.

Regardless of age, the current risk vs. reward equation is not in your favor as a stock investor. Examining the S&P 500 (including dividends) since as early as 1919, there have been periods where forward 20-year returns have been close to zero. If you’re 37 and seeking to retire by 56, the reality is you may encounter a headwind to domestic stock returns. Set your expectations accordingly for below-average investment returns and focus efforts on bringing more cash into your household.

Get a side gig or start a part-time business.

According to a recent survey by Bankrate.com, 4 out of 10 Americans work a side job (think driving for Uber). Greater than 50% of Millennials have side hustles to make extra income. On average, these side gigs bring in an extra $686 bucks a month. Unfortunately, a majority take on a business or provide a service in addition to a full-time job, just to survive. Those who seek to retire at 56 should strive to use these dollars to pay off student loans and other debts including credit cards.

Take responsibility to guarantee your own basic income.

As a student of Social Security, I’m concerned full retirement age will be pushed to 68 years-old or later for Millennials and younger generations. Social Security is a good thing and essential for retirement survival, regardless of the negative information you hear or read. Social Security was created in 1935 to provide a basic income to supplement employer-provided pensions. Today, it is the pension replacement; Social Security provides guaranteed lifetime income for you or you and a spouse. Millennials who want to retire at 56 are going to need their portfolios to shoulder the income burden for at least 11 years before Social Security kicks in.

In addition, those who want to retire at 56 are going to inhibit the ability to maximize Social Security as benefits are based on a worker’s 35 highest earnings years. Those who exit the workforce in their mid-fifties are going to forfeit several peak earnings years that can make a big difference to lifetime Social Security income. The maximum amount of wages in 2018 subject to the 6.2% Social Security payroll tax is $128,400. When Social Security is considered, it’s crucial that Millennials focus on becoming earnings machines while in the workforce and meet Social Security wage limits.

Ten years into saving and investment, Millennials should look to direct financial resources into a deferred income annuity. Income annuities are solely designed to provide a stream of income now or later that recipients cannot outlive. These annuities are simple to understand and are generally lower cost when compared to their variable and indexed brethren.

Deferred income products where owners and/or annuitants can wait at least 5 years before withdrawals, may participate in market index gains (subject to caps) and have an opportunity to receive higher non-guaranteed annual income withdrawals depending on market performance. Withdrawals can never be less than the guaranteed withdrawal benefit established by the insurance company but may be higher depending on annual market returns. As with most annuities, there is never market downside risk.

In other words, Millennials are going to be responsible for creating their own pensions. Income annuities are a vehicle to accomplish the task. The objective is to ensure that fixed expenses like rents, mortgages, insurance, are covered by a lifetime income option especially until full retirement age is reached, and Social Security can be incorporated to boost guaranteed lifetime income.

Retiring at 56 can be doable for Millennials. However, most of mainstream financial information is not going to assist in the effort.

Next week, I’ll outline additional action steps that should be taken including rules to manage debt and several lifestyle or qualitative initiatives to consider.

The Psychological Side Of Retirement

16-mental and financial tips for a “successful” retirement. 

Retirement is easy, right? Said the newly minted retiree

You stroll out of your cushy, corporate job for the last time passing all the desperate souls who are stuck in their cubicles and think to yourself, “life is good”. You have dreams of laying by the pool, lavish vacations, time with family and friends, and maybe you’ll even pick up an old hobby or two.

Then you get home and reality sets in.

And you realize, “what in the world am I going to do”?

The problem is we have these grand ideas of what retirement is supposed to look like, but typically, it’s far from reality. When possible, we plan for the financial side of things, yet we disregard the emotional challenges retirement poses.

Retirement is hard, right? 6 months into retirement

It may start out like a dream: no alarm, no one micro-managing you, no one to answer to (except maybe your spouse). But ask almost any recent retiree – I mean really ask them how they are doing and more than likely, they’re having some trouble adjusting. Everyone will tell you they love it — they’re enjoying the slower pace of life, but if you dig a little deeper, you’ll reveal that many are experiencing a bit of an identity crisis.

Commercials, magazines, movies all portray the good life, but that is not the reality of most people.

We like to call the first year of retirement the black hole.

Most retirees go in, stumble around, tinker with some things but can’t quite seem to find their way. Unfortunately for retirees, there is typically no practice prior to retirement. Think about it, we practice EVERYTHING before we retire, but not the not-so-simple act of retirement?

My 5-year-old daughter just practiced 6 months for a dance recital, a 5-minute dance recital!

We practice sports several days a week prior to a ball game. We go to school for years prior to

our first real job, and we progress step by step.

Until we don’t…we retire.

Yet we never give the idea of a trial run or even writing a plan of what we want to accomplish during retirement, outside of “do we have the money.” If we do write down what we expect, often we don’t include our significant other. Trust me, that’s a big adjustment and a big no-no. My wife quit her job a year and a half ago to stay home with the kids, and we’re finally use to each other being home at the same time, but retirees are expected to rip the band aid off and act like we were made for this next stage in life.

Does this not seem broken to you? So not only are you supposed to begin drawing down your funds on which to live, which goes against everything you’ve ever done over the last 30, 40 or 50 years, but now you’re supposed to go blindfolded into retirement with no trial run and no real plan? What will give you purpose?

“Ah, screw it. We’ll just wing it, after all I am retired. I’ve got all the time in the world.”

PURPOSE– the reason for which something is done or created or for which something exists.

I know I’ve been a tad bit redundant, but I’d like to drive home the point. Your retirement preparation and plan should be way more than just money.

Here is your pre-retirement quick-list:

  1. Jot down what you envision for retirement
  2. Now be realistic and do it again (If you’re married do this independently and compare notes, then discuss)
  3. Track your expenses monthly (You can’t make improvements if you don’t know where you need to improve)
  4. Plan a dry run, now take time off work and do it
  5. Exercise or start a fitness regimen (there are thousands of millionaires who would trade every dollar for your health and thousands more who did)
  6. Find ways to stay social and vital
  7. Prior to retirement check your plan for appropriate baselines. If you have questions, look here for Richard Rosso’s Pre-Retirement Preparation Checklist
  8. Take a life expectancy quiz, we like livingto100.com (This will be used to help make social security and pension decisions, health care, using an appropriate timeline in your financial plan and long-term care)
  9. Hopefully long-term care has been addressed. If not, your plan should dictate if it’s a) needed, and b) affordable
  10. Do you have diversification of assets? Not positions, but registrations or flexibility for taxes
  11. Find an advocate, an advisor to keep you grounded. Emotion, laziness and lack of understanding are the biggest killers of a financial plan. Yes, I’m not just talking about you, but your advisor too. Buying low and selling high is easier said than done.
  12. Know your risk aptitude, not appetite. Aptitude. That’s what you’re more likely to follow
  13. Set guidelines, guardrails or parameters. Your advisor should live by some, if they don’t or you don’t, use these rules. 
  14. Get a good understanding of Medicare and your health care options
  15. What will you do that gives purpose, for you, for others? Not your family? You need your own “thing.”
  16. Volunteer; it will make you feel good, but it will help others much more.

“The greatest gift you can give someone is your time,” Rick Warren, author of the Purpose Driven Life.

“A man’s life may stagnate as literally as water may stagnate, and just as motion and direction are the remedy for one, so purpose and activity are the remedy for the other,” – John Burroughs.

“The man without purpose is like a ship without a rudder- a wait, a nothing, a no man,” – Thomas Carlyle.

We typically find that it takes at least the full first year to get out of the “black hole” and find your retirement groove, but if you heed this advice, our hope is you can hit the ground running and never look back.

I’ve been in the retirement business for almost 15 years, my partners more than twice that time. We’ve helped a lot of people retire but have also learned a lot from people with their feet in the fire.

I think we will all tell you the same thing.

Get out and move, find your purpose and enjoy this next stage. Life happens fast, so does retirement. Let’s make the most of it.

How To Protect Your Senior Parents From Financial Risks

“Hey mom, have you heard about the latest scam?”

There are several trends that have led to a rise in senior financial crimes. The most prominent being the usage of credit. Borrowing by older adults continues to trend higher which increases the need for financial vigilance as outlined in a recent paper by the Payment Cards Center of the Federal Reserve Bank of Philadelphia.

According to the 2010 study by Investor Protection Trust Elder Fraud Survey, one out over every five citizens over 65 already have been victims of financial and investment scam artists. The plethora of important elder-fraud prevention resources available at www.investorprotection.org, include brochures, important contact numbers and e-mails, and red flags or verbal cues caregivers, advisers, children and other loved ones should not ignore.

Cognitive decline can leave older adults vulnerable to financial deception including payment for services or goods that may not exist. Activities where caregivers or those with power of attorneys are forging signatures, cashing checks and draining investment and savings accounts are no longer rare occurrences. As a matter of fact, the U.S. House of Representatives Select Committee on Aging has reported that elder abuse is as prevalent as child abuse. Financial abuse is the second most common form of elder abuse after physical abuse.

Financial professionals and trusted caregivers including children should maintain open communication and look to forge a line of financial defense for elder loved ones. I have developed a sixth sense when it comes to the cognitive changes in aging clients I’ve advised over two decades. Situations have arisen where I felt it necessary to contact family when suspicious, unexplained transactions were detected or responses to otherwise simple questions were met with difficulty.

Consider these 6 proactive steps to help protect or limit aging adults from becoming victims of financial wrongdoings:

Become a delicate, respectful and informative interrogator.

The Philadelphia Fed analysis references a March 2011 AARP Foundation National Fraud Victim Study that estimated that for every 44 cases of senior financial abuse, only one is reported to authorities. This factoid isn’t surprising as victims prefer to deny involvement or ashamed to admit cognitive deterioration. In addition, many may not realize they’ve been victimized unless a third party discovers fraud.

Elders are proud. Perhaps in denial. So, it’s going to take diplomacy, maybe a little Columbo-like unassuming investigation to detect problems.

Become acquainted with the popular financial scams that target seniors and check for the latest on a regular basis. My personal go-to source is www.ncoa.org, the National Council on Aging. Click on the ‘Economic Security’ tab to discover the top 10 financial scams targeting seniors. From Medicare/health insurance to the grandparent scam, readers are going to be shocked to realize how simple and clever senior scammers are.

Ask questions designed to inform such as: “Hey, mom did you hear about the fake accident scam? Well, here’s how it works…” Actively listen for a response or lack of it. From personal experience, prolonged silence before acknowledgement or a stilted response stirs curiosity. It’s possible that mom is pondering whether that last phone call she received was indeed legitimate.

To further the discussion, print the list, highlight the title of each scam, discuss and leave with senior parents at your next visit or mail (not e-mail), the list and set a time to review. Also, the elder investment red-flag brochure available from www.investorprotection.org, is available for download. Print and share this important communication which includes a contact list of multiple resources and elder-abuse agencies.

Work with elders to examine their credit reports at least once a year.

Many seniors no longer feel the need to utilize credit; too bad criminals don’t feel the same. Scammers frequently use elders’ confidential information such as social security numbers to open new revolving credit lines including credit card accounts. Also, cellphone accounts tend to be a popular choice of scammers. Recently, an elderly client began receiving calls from a collection agency for a delinquent Sprint account opened in 2016. Open accounts can go unnoticed for years unless there’s a proactive method in place to check credit reports. It’s simple to retrieve and download reports for free at www.annualcreditreport.com. Today’s credit reports are easy to interpret, and discrepancies can be reported effortlessly online with all three credit reporting agencies.

Children and trusted caregivers should work with senior family members to establish duplicate statements on investment, saving and checking accounts.

Account owners should allow a trusted family member or caregiver to receive duplicate financial statements. I meet with children who regularly study duplicate documents and catch or question unusual activity. Usually, a financial institution will require a letter signed by account owners to establish instructions. A financial adviser or partner can take on the responsibility of broaching the subject with clients if family is uncomfortable to do so.

Consider a durable financial power of attorney for checking and investment accounts.

A DPOA allows an agent(s) to act on behalf of principals or account owners. Owners are still responsible for their own decisions. However, if incapacitated, principals can immediately rely on agents to handle investment and withdrawal decisions. Obviously, appointed agents must be trustworthy and should have a track record of financial responsibility. Schedule a meeting with an attorney to discuss and draft a DPOA. Mom and dad, it’s crucial to place pride aside and discuss this topic with prospective agents like adult children. Don’t be afraid to utilize your financial adviser to jumpstart a conversation, either.

Financial account and identity theft monitoring services make great gifts!

Nothing says you care like establishing financial account and identity theft monitoring services. Most likely elderly loved ones aren’t going to take the initiative to sign up for services designed to detect suspicious behavior and notify through smartphone alerts and e-mails. I recommend  www.lifelock.com’s Advantage service that includes SSN and credit alerts, bank and credit card activity alerts, dark web monitoring and address change verification for an ongoing monthly fee.

EverSafe is specialized protection for seniors and families. The company has developed a personal detection and alert system that examines historical financial behavior, then analyzes daily transactions to identify erratic activity. Their sophisticated software seeks out anomalies such as unusual withdrawals, irregular investment activity and changes to spending patterns. I like their online consolidated family dashboard which aggregates all accounts, institutions and allows access to designated family members.

Educate elders and yourself about “phishing,” make sure computer equipment isn’t ancient and virus protection software is installed properly and updated.

It’s common for me to hear of seniors who fall for phishing where scammers create fraudulent e-mails that appear to come from prominent financial institutions including banks and credit card providers. These e-mails are cleverly designed to create a sense of urgency and include links readers are encouraged to open to update or verify information. Once clicked, these links are programmed to capture personal and financial data or infect computers with viruses.

During visits, I’ve witnessed too many senior clients who own home computers that should have been replaced a decade ago. Their equipment is sorely outdated; virus software isn’t installed or missing numerous updates which increases chances of security breaches.

Grandchildren tend to be excellent at assessing whether nana’s computer needs to be retired from service. Thankfully, today a desktop system replacement isn’t a senior-budget buster.

Elder financial abuse is destined to be an ongoing dilemma given our aging demographics.

Loved ones, family members, financial advisers and institutions must galvanize to minimize the devastating impacts.

9-Minutes To Change Your “Financial” Life

The suicide deaths of celebrities like Anthony Bourdain and Kate Spade has brought an uncomfortable and tragic attention to a growing problem. According to a recent report by the Centers for Disease Control and Prevention, rates of death by suicide in the U.S. have risen by close to 25% over the last 20 years.

We’re not here to debate how and why. It’s not our area of expertise. However, suicide is a choice. Not a good choice. Suicide doesn’t know age, success, color, social status. Suicide knows demons. When they overwhelm, you listen.

Coming from a family where suicide and depression runs deep, to this day I wonder if I should have saved my mother the third time she tried to take her life. I needed 6 months absence from junior high school to care for her.

Before a person takes a horrible step, before you would make the choice, look for divine intervention. Search for a message, a sign, anything. That it’s not your time.

As I work on a few big projects, one being a book with business partner and individual I greatly respect, Lance Roberts, I try my best to listen to what I usually ignore. The divine intervention reaches to me through the tall pines that surround my house. When I assist someone overcome a money obstacle, I consider it divine intervention, too.

I firmly believe divine intervention was involved when I saved my mother for the third time.

She never attempted suicide again, but her existence was far from happy. So occasionally, I wonder.

Was saving her the best choice?

In your life, many questions will remain unanswered.

“You just learn to live with open circles, I guess.”

Lucas McCain delivers these words in my screenplay to bring the 50s western, “The Rifleman,” to the big screen.

Many of us must don’t learn to close open circles when it comes to poor financial decisions. Even the worst money habits can be turned around, changed for the better. It doesn’t take much effort to identify poor financial paths and initiate small steps to turn the tide.

The tragic events over the last two weeks reminded me of an incident that occurred when I was a boy. It was back then I realized that minutes can slow down and feel like forever.

Here are some lessons I learned back in 1976.

“Another nine minutes. She’d be dead.”

I wonder what he meant.

Almost 4 decades ago.

As memories fade leaving pin-hole punctures wrapped in thick haze of distant moments, there remain a few clear snapshots left in my head of what happened that August morning.

You know. Nine minutes that border life and death.

So specific. So odd.

Her body was glowing cold. Dressed in the previous day’s outfit. Low faded jeans, bell bottom style. Shoes. A floral halter top circa 1976.

Tight in a fetal position. Her head and neck awkwardly stuck between the bottom shelf of the refrigerator and a crisper bin.

The paramedic pulled 92-pounds of stiff limbs from a cold cage. He heaved her to the linoleum kitchen floor as easy as a person tosses a used candy wrapper.

She was solid.

An overdose of pills and booze.

I was certain it was rigor mortis. I’d witnessed enough of it spending time staging G.I. Joe adventures in the plush red-draped lobby of the neighborhood funeral parlor owned by my best friend Joey.

But she wasn’t dead.

The paramedic said in nine more minutes things would have been different.

But how did he know?

I looked up at the kitchen clock. He said those words with such confidence. Who was I to doubt him?


In nine more.

Game over: 3:00am.


May not be full release of the mortal coil but some kind of game changer is imminent.

As you read this a thousand of your skin cells just died.

A cancer you don’t know about yet grows larger.

The love of your life is about to enter your space.

You’re on track for an encounter with a jerk or the greatest inspiration you ever met.

A phone call away from a life-changer. A drive. A walk. A run. A jog.

You just made a purchase of something you really don’t need.

A fall. A rise.

Minutes humble you. Not years. Years mellow you. Minutes keep the receptors open. Allow the flood of your life and the lives of others to fill where you stand. The next move you make can change your world whether you want it to or not.


Never question why a challenge, a person, an illness, an opportunity, a setback, gets thrown in your groove. The intersection came upon you from a source you’ll never be able to explain or completely understand. It’s a waste of time to trace what lead you here but worth the minutes to live the steps you’re taking now.

Signs are all around if you just let go of skepticism, lessen the noise. Whose life remains in the balance once you open your eyes, mind and heart to the signs? When a change places a purpose in the road, your brain will hum endlessly until you follow it and hum the tune every day.


I can write the best 250 words of my life in 9 minutes. I can watch my pup Rosie monitor the neighborhood from the open blinds in the living room and ponder how happy I am to have adopted her from the animal shelter.

Greatness is defined by the whispers of time. In the small of actions that move and make you stronger, life is lived large. It’s when greatness appears.

Greatness is not earned through the validation of others. It comes when you recognize and develop talents you’ve had since youth.

When you positively affect one life, you’ve earned prominence.

We answer money questions, bust Wall Street myths, set lives on the right financial path every day. If we affect one life positively, help one individual meet a retirement goal, we’ve accomplished a noble mission.

Like a paramedic who believed he was nine minutes early. Able to save a life.

An unassuming master of greatness.


How many people do you know who died long ago?

You see them daily. They live in a perpetual fetal position. Stiff. Lifeless. Nine minutes closer to a dirt nap.

They work little corporate jobs, have little middle managers who define their big fates. They don’t have time to bask in their kids or the live life stories that add richness.

My former regional manager at Charles Schwab, told me “you don’t need to see your kids play baseball or attend dance recitals. You need to be at work.”

Not for me: I pulled my head out of the fridge.

Do something in nine minutes every day that makes you glad to be here. Breathe deep. Take your life back. Start a book from our RIA Reading List. Nine minutes of reading a day. Observe what happens over a year based on only nine minutes of reading a day.


Yes, I know we live to complicate things in the financial services business. Complicated is designed to sell product you don’t need. Simplicity is the key to financial success. The best long-term asset allocations are those designed using low-cost investment vehicles along with rules to manage risk which include liquidating stocks to minimize the effects of the time required to break even and meet financial goals.

If I ask, you already know what your greatest money weakness is. Take nine minutes to write it out. Spend another nine to consider one specific action to improve.

Ask yourself: Are you happy right now? Where is resistance coming from? Are you working for a future that never appears? When the future is the present do you look ahead to another future? In the silent noise that vibrates in the back of your head is there regret? Anxiety? Look inside yourself for answers. Others can’t be blamed. They’re not the cause. You’ll never discover truth if you’re not accountable.

In nine minutes can you write nine reasons why you feel the way you do? That’s the flow of your life. The time that bridges big events is where flow is discovered. Or changed, re-directed, improved.

Your choice.

We alternated nights in the only bed. Mom and I.

Monday couch (no sleep), Tuesday bed (sleep). There was a full-length mirror in our three-room walk up. I recall dad cursing, fighting to secure the clunky structure to the hall-closet door.

At the right angle the mirror provided a clear view of the kitchen. From the bedroom you could observe everything. The present events. Now I understand how it saw the future too.

Since mom always seemed to gravitate to the kitchen late at night, the reflection in the mirror of her pacing back and forth was not uncommon. I was a light sleeper. My habit was to wake, look in the mirror, turn away to the darkness of the wall. Many nights I was forced to get up and close the bedroom door, so I couldn’t see what was going on in the rest of the apartment.

10pm: Wake up. Glance in mirror. Observe kitchen. Fridge door open. More beer for mom I was sure. 12:02am: Wake up. Look in mirror. See kitchen. Fridge door open? Heavy drinking binge. Turn. 2:16 am: Wake up. Turn. Look in mirror. See kitchen. Fridge door ajar. Again? Still?


I was mad. So mad. I got up to see what was going on. Mom half on the floor. On her side. Tangled in the extra-long, engine-red cord of a dead Trimline phone. Her head inside the bottom shelf of the fridge. I touched her shoulder. Felt the freeze of her body.


I happened to glance at that damn kitschy cat clock. Waggy tail. Shifting eyes.

Tick. Tail. Tick. Tail. Eyes right. Eyes left.

Never forgot 2:18. Plastic cat eyes.

Taunting me.

A human accordion. She wouldn’t unfold. Still breathing. Shallow. I noticed the slight movement of a tiny chest. Up and down. Slow. Mouth open. Tongue shriveled. Lips colorless. Light blue.

I was in a panic. Half asleep. My mind reeling.


Cat eyes away.

Suddenly calm, I sat on the floor. Staring at her.


I watched mom’s chest go choppy. Still. Move. Move. Nothing.

Cat tail. Swing left. Right.

Extended on the exhale. Awaiting permanent stillness. Hoped for it. 2:22.

Crossroad. Intersection.

Whatever you call it. The power to make a decision that would change all. Slowed down everything. An inside voice, one I never heard before. Kept asking. Slightly teasing. The repetition of the question felt forbidden. But continued. Cat tick-tock.

A thousand pounds tied to a melamine tail.

Live or die? Choose. Now. No time left.


In nine minutes. Decide.

Go on the way you have been.

Or live.



Fiscally-fit people wait before making a purchase, especially a significant one. Waiting lessens the impulse to part with money for something you don’t need. Wait nine minutes. Then nine hours. Nine days. If you still want the item, buy it. Most likely the heat will pass. Your desire will grow cold.

The epidemic of suicide is real. And spreading. If you know of someone in crisis, reach out. The National Suicide Prevention Hotline is 1-800-273-8255.

The 4-Mistakes In Your Financial Plan

So, you’ve decided to undertake comprehensive financial planning.

A properly designed financial plan will cover important elements like retirement savings, insurance analysis and estate review; a qualified planner will target and outline specific areas of strength and weakness along with flexible, realistic routes to each financial goal.

If you’re stressing over the process, how long it takes to get a plan together: Don’t. Yes, there’s a financial self-discovery period on your part and that will take effort and homework. However, a plan can be modular based on your most important concern first, then built on over time.

Let me be one of the first to say congratulations on your decision!

You must be serious about financial awareness. After all, there are none of the day-to-day highs and lows of the stock market.

No sizzle. So boring.

Financial planning doesn’t make headlines or capture the attention of media talking heads.

It flies under the radar.

And to that I say:

Thank goodness.

Consider financial planning the mundane sentinel which forms the foundation of money awareness. When plans are attached to goals or life benchmarks as I call them, they take on a life of their own as progress markers along the path to a successful financial life.

A plan is a complete diagnostic of money chemistry. And the numbers don’t lie.

At times, it’s is validation, other times, an awakening.

On occasion, a warning.

See? Perhaps planning is exciting (we’ll keep that between us. Our own little secret).

Now that I have your attention and you’re ready to go, I’ll share 4-hidden dangers for investors to heed.

Mistake #1: You depend on the wrong tools to get the job done.

Online publicly-available financial planning calculators are the junk food of finance posing as nutritious choices. I guess it’s better than nothing, however just because a planning calculator is available from a reputable firm like Vanguard or Charles Schwab surprisingly doesn’t make it worthy of consideration.

As a matter of fact, per a study, the efficacy of publicly-available retirement planning tools from 36 popular financial websites was challenged and results were extremely misleading.

These quick (worthless) financial empty-calories don’t provide enough input variables to provide a level of accuracy. Most egregious is the dramatic over-estimation of returns and plan success.

If you trust an online calculator to adequately plan for retirement or any other long-term financial life benchmark and feel confident in the output (most likely because it provided a positive outcome,) then you’re ostensibly setting yourself for dangerous surprises.

Avoid them. They’re not worth it. Best not to do any planning at all if it’s this route.

Mistake #2 – The plan is used to sell product.

Antoinette Koerner, a professor of entrepreneurial finance and chair of the finance department at the MIT Sloan School of Management, along with two co-authors, set out to analyze the quality of financial advice provided to clients in the greater Boston area.

They employed “mystery shoppers” to impersonate customers looking for advice on how to invest their retirement savings. Unfortunately, it didn’t work out too well.

Advisors interviewed tended to sell expensive and high-fee products and favored actively-managed funds over inexpensive index fund alternatives. Less than 8% of the advisors encouraged an index fund approach.

The researchers found it disconcerting how advisor incentives were designed to motivate clients away from existing investment strategies regardless of their merit. They found that a majority of the professionals interviewed were willing to place clients in worse positions to secure personal, financial gain.

So, let me ask:

“Would you rather have a comprehensive plan completed by a professional who adheres to a fiduciary standard where your financial health and plan are paramount, or a broker tied to an incentive to sell product?”

Brokerage firms are willing to offer financial plans at no cost. However, the price ultimately paid for products and lack of objectivity, is not worth a ‘free’ plan. It’s in a consumer’s best interest to find a financial partner who works on an hourly-fee basis or is paid to do the work, not based on investments sold.

Last month, I met with a gentleman whose comprehensive financial plan inspired most of this blog post. The financial plan completed by his advisor was fraught with conflicts of interest and mistakes I’ll expand upon. The plan was not designed for an individual who was about to “cross over,” as I define it.

In other words, the plan was not designed for an individual preparing to retire within 5 years and look to begin a lifetime income distribution strategy. Nothing about longevity assessment (which we do through analysis to help people plan realistically based on health habits and family history), zero about proper Social Security strategy including spousal retirement and survivor benefits maximization, nada about how or if he should take his pension, along with erroneous inflation rates.

What stood out was the recommendation of a sizable investment in a variable annuity.

I couldn’t understand why an annuity was recommended, especially a variable choice with an income rider that was not required. Based on my analysis, this successful earner, saver and investor had enough to meet joint fixed expenses for life based on pension and Social Security optimization alone.

Annuities are usually sold, not planned.

However, in this case a plan was purposely engineered to roll a lump-sum investment into a product that wasn’t needed. No other option for the pension was provided but to roll it over into an annuity without further investigation.

It felt like the plan was patchworked to conclude in a product sale. A variable annuity may have been suitable, but it certainly wasn’t in the highest and best or fiduciary interest of the prospective investor. Be careful out there. Get a second opinion from a registered investment adviser who offers a fiduciary level of care.

Mistake #3 – Beware of the inflation-scare method 

At Clarity we provide countless second opinions on financial plans; a trend that consistently emerges is the omnipotent annual 3% inflation rate. Regardless of the expense goal, even medical (which should be higher), the 3% blanket annual inflation rate in my opinion is left in as the default selection that never gets updated perhaps as a method to scare investors into managed product and possibly overweight stocks. Candidly, many financial professionals do not understand inflation.

When having a financial plan completed, consumers must be smarter about inflation rates and make sure their planners are knowledgeable when it comes tying applicable rates of inflation to each goal.

Keep in mind – inflation is personal to and differs for every household.

My household’s inflation rate differs from yours.

Thanks to an inflation project undertaken by the Federal Reserve Bank of Atlanta, there’s now a method to calculate a personal inflation rate. A smart idea is to compare the results of their analysis to the inflation factor your financial professional employs in retirement and financial planning. Instruct your adviser to complete an additional planning scenario which incorporates your personalized consumer price index and see how it affects your end results or outcomes.

The bank has undertaken a massive project to break down and study the elements of inflation along with the creation of a myCPI tool which captures the uniqueness of goods that individuals purchase.

Researchers estimate average expenditures using a calculation which incorporates various cross-demographic information including sex, age, income, education and housing status. The result is 144 different market baskets that may reflect a closer approximation to household’s personal cost of living vs. the average consumer. It’s easy to use and sign up for updates. Try it!

My personal CPI peaked in July 2008 at an annualized rate of 5.2%. Currently, it’s closer to 1.2%. For retirement planning income purposes, I use the average over the last decade which comes in at 2.3%.

The tool can help users become less emotional and gain rational perspective about inflation. Inflation tends to be a touchy subject as prices for everything must always go higher (which isn’t the case). I’ve witnessed how as a collective, we experience brain drain when we rationalize how inflation impacts our financial well-being. It’s a challenge to think in real (adjusted for inflation) vs. nominal terms.

I hear investors lament about the “good old days,” often where rates on certificates of deposit paid handsomely. For example, in 1989, the year I started in financial services, a one-year CD yield averaged 7.95%. Inflation at the time was 5.39%. After taxes, investors barely earned anything, but boy, those good old days were really somethin’ weren’t they?

We’re so-called inflation experts because it co-exists with us. It’s an insidious financial shadow. It follows us everywhere. We just lose perspective at times as the shadow ebbs and flows, shrinks and expands depending on our spending behavior. Interestingly, as humans, we tend to anchor to times when inflation hit us the hardest.

Worried about inflation in retirement? Let’s whittle down this myth of massive inflation in retirement. Decreased spending in retirement offsets price increases based on conclusions of multiple studies. For example, according to David Blanchett, CFA, CFP® Head of Retirement Research at Morningstar in his Working Paper titled “Estimating the True Cost of Retirement,”  the following holds true:

While a replacement rate between 70% and 80% may be a reasonable starting place for many households, when we modeled actual spending patterns over a couple’s life expectancy, rather than a fixed 30-year period, the data shows that many retirees may need approximately 20% less in savings than the common assumptions would indicate.

Real retiree expenditures don’t rise (or fall) in nominal terms simply as a function of broad-based inflation or expected health care inflation. The retirement consumption path, or “spending curve,” will be a function of the household-specific consumption basket as well as total consumption and funding levels.

When correctly modeled, the true cost of retirement is highly personalized based on each household’s unique facts and circumstances.”

A generic inflation rate used by most planners overstates the inflation risk most retirees will experience.

While at Clarity we use a 1.7% inflation rate in planning for most needs (except certain categories of healthcare, higher education and long-term care costs which we increase at 4.5% annually), a personalized rate for those who go through the myCPI is highly recommended.

According to an insightful myth-busting analysis by John Kador for www.wealthmanagement.com, prices don’t inflate equally. Now if more financial professionals would get the picture and use the information for accurate planning purposes (let’s not hold our breaths).

Mistake #4 – Market return projections only for vampires

I am 100% confident that stocks always move higher in the long run.

I know for certain the Dow will reach 60,000. I probably won’t be alive to witness it, but I know it’s going to happen. I do. Markets are infinite. Unfortunately, humans are finite. Unless you’re a vampire, there are going to be times when you’ll battle through return headwinds or glide easy thanks to tailwinds. There will be extended periods (hopefully not yours), when dollar-cost averaging will seem like treading wealth through thick sludge. Other times, it’ll feel like your money is lithe and positive returns occur with minimal or zero effort.

As Lance Roberts states:

“The most obvious is that investors do NOT have 118 years to invest. Given that most investors do not start seriously saving for retirement until the age of 35, or older, most investors have just one market cycle to reach their goals. If that cycle happens to include a 10-15 year period in which total returns are flat, the odds of achieving their savings goals are massively diminished. If an investor’s 30-year investment cycle happens to end with a major market crash, the result was devastating. Time, duration and ending dates are crucially important to expected investor outcomes.”

What if you’re in retirement and distribution mode? Market headwinds can be devastating.

James B. Sandidge, JD in his study “Adaptive Distribution Theory,” for the Investments Wealth Institute, provides several eye-opening examples of drawdown risk. As we monitor portfolio distributions over rolling three-year periods, Clarity is prepared to have retirees make changes to withdrawal rates or dollars as they cannot count on time to breakeven from combined market and portfolio distribution erosion. What does matter is the timing of returns, especially losses.

Whether you retire in a market head or tailwind is good or bad luck.

If recently retired, we believe at RIA that you’re going to expect overall market headwinds over the next 10 years (sorry) and must prepare to reduce portfolio distributions.

I’m sorry. Again, it’s just a drawing of the straws. Nothing personal.

James includes several effective charts and tables in his work. Table 4 hits home for me.

An investor in a 60/40 portfolio who retired at the end of February 2008 suffered a 26.8% loss in the first 12 months of retirement. A 5% withdrawal was recommended for living expenses through that period. This hits home for me personally because I witnessed financial professionals suggesting 4-5% withdrawals that year and recite the “stocks always move higher in the long run,” mantra. It was almost like these pros wouldn’t believe what was happening and couldn’t help retirees adjust their spending expectations. The triple deadly combo of market loss, unrealistic withdrawal rate and investment managements fees lead to a first-year devastating principal erosion of 32.8%!

In 2010, the new retiree is probably anxious to return to the workforce. Subsequently, with a smaller asset base of $672,000, a 5% withdrawal is no longer $50,000. It’s $33,600. What a horrific life-changing experience. I never want to be the adviser on the other side of the desk delivering this bad news.

James outlines –

Thus the “risk three-step” – a rapid reduction of principal, followed by a reduction in cash flow, followed by investor panic. Many retires can tolerate gradual principal erosion, but many fewer would find a 33-percent drop in principal and cash flow acceptable after one year of retirement.”

Lance Roberts and I had to adjust down our return estimates for every asset class in our planning software; international and emerging markets have the greatest opportunities for long-term asset class returns, however they’re adjusted lower, too. If we model higher returns, the risk to get those returns increases thus putting clients in danger of not reaching their financial goals unless they increase their savings rates, reduce debts/expenses or work longer than anticipated.

Most likely, your plan investment return estimates are too optimistic. Again – Designed more for blood suckers. Not people.

To a broker, flat or bear market cycles don’t exist. Realistically, the dogma is false narrative. If you fall for it, you may wind up spending an investment life making up for losses or breaking even.

Most financial planning software generates outcomes based on something called “Monte Carlo” simulation. It’s as close as planners get to represent the variability of market returns over time.

Monte Carlo generates randomness to a portfolio and simulates, perhaps thousands of times, around an average rate of return. Unfortunately, asset-class returns most Monte Carlo tools incorporate tend to be optimistic.

In addition, even though Monte Carlo simulates volatility of returns, it does a very poor job representing sequence of returns which I think of as a tethered rope of successive poor or rich returns.

Per friend and mentor Jim Otar, a financial planner, speaker and writer in Canada:

“Markets are random in the short term, cyclical in the medium term, and trending in the long term. They are neither random, nor average, nor trending in all time frames. Secular trends can last as long as 20 years (up down or sideways). The randomness of the markets are piggybacked onto these secular trends. Assuming an average growth and adding randomness to it does not provide a good model for the market behavior over the long term and it makes the model to “forget” the black swan events.” 

It’s why at Clarity, as a backstop, we employ various planning methodologies which incorporate how market cycles operate and where your goals may fall within them.

Granted, a comprehensive plan experience won’t be the talk of your next cocktail party. However, it just may allow you the freedom and peace of mind to enjoy the benchmarks you work hard every day to reach.

Last, the only person who will succumb to the hidden dangers in financial plans, is you. However, you’re now aware of the financial minefields that are a ‘must avoid.’

The Care And Nurturing Of An Imperfect Retirement

“Dad, that grass looks fake!” – Spring, 2018.

My daughter recalls how she couldn’t determine the difference between the once lush landscape of my front yard and the set for a movie about the aftermath of nuclear blast. The grass was a sea of brown bestrewed by tiny islands of a green Southern lawn fighting for life.

Azaleas once thriving were reduced to long thin brittle branches that resembled skeletal fingers rising from the dust.

One summer of zero care and nurturing destroyed years of prosperous growth.

I’ve given myself credit for being a good saver and respectable steward of money. I better be as financial planner and money manager. Consistent at socking away 30% of my gross income. I’ve been fortunate to earn enough to be in the top 5% U.S. households.

Then life got in the way.

I needed to resign from a long-term employer due to my beliefs that the institution was ethically breached. Subsequently, I got sued and the stress caused permanent breakdown in the function of my right kidney. Oh, and then there was a divorce and the start of a new business. All in my late 40s.

At an age I should have been winding down, thinking of retirement, I was starting up again. My life was wrought through a wash/dry cycle and spinning completely different than originally planned.  My decades of savings began to rapidly dwindle. Divorce, attorney costs, medical costs, and the capital required to grow a business took me back financially to a net worth I haven’t benchmarked since my early 30s. Thankfully, my daughter has a well-funded 529 for college or that would be yet another formidable expense or financial setback.

Great starts to late starts and later finishes. The road of life can deviate far off an anticipated course; even tenured navigators with the most sophisticated of tools can lose their way.  Like riding out a storm, you get through it with what you got then assess the aftermath. For me personally, the irony wasn’t lost. Here I was assisting others financially map out imperfect retirements. Little did I realize that I too was about to embark on an all-too-similar journey.

Care and nurturing encouraged by a healthy dose of current reality, forced me settle in, get comfortable in a thinner fiscal skin. I began to reevaluate an imperfect retirement plan. One that was very different than what began twenty years ago. Thankfully, the money I accumulated over the years was sufficient to make it through the shocks. However, when it came to my retirement goal, I was back in the first inning, batting for the minors. A financial landscape that once thrived was as unhealthy as my lawn. I decided to get to work. It all began with the basics, breaking my situation down to the foundation. I had to rewind. Start digging. And it was deep in the soil that I learned how far I was willing to go to get back on track.

First step: A holistic, micro-assessment of what makes me, ‘me,’ or: Do I have the stamina to rebuild?

I had to emotionally prepare to move forward. The bucolic retirement I originally designed was postponed indefinitely. The past as a weight on me had to be lifted. As Ramit Sethi author of the New York Times’ best seller “I Will Teach You To Be Rich,” says – “To launch a rich life you must first acknowledge where you are, then trust it’s the start.” Easier said than done. The truth in the statement motivated me to realize that the game wasn’t over. I made the decision to hit the restart button and acknowledge. No. Enthusiastically embrace where I was now.

I began to painfully and objectively question each potential obstacle to rebuilding wealth. I had to be tough. There was little room for compromise. From a thorough assessment of the new money management firm’s lofty goals and formal business plan progress (ahead of schedule; good to begin on a positive note), downsizing my primary residence which meant returning to a modest home in the ‘burbs that served as a rental property (formerly occupied by a responsible young couple who didn’t know much about landscape care), to my overall physical condition which included a dramatic change/improvement in my diet and exercise regimen that impressed my physicians, I was beginning the journey of the care and nurturing of an imperfect retirement.

It’s well-documented how healthcare has the potential to be an eternal cash-outflow concern in retirement, especially as life expectancies increase. Fidelity estimates that a healthy 65-year-old couple retiring today will require $280,000 to cover healthcare costs in retirement. Of course, this isn’t a lump sum a retiree needs to shell out. However, I think seeing costs in total is an effective “scared straight” tactic; it hits one in the face with reality that being unhealthy in retirement can a formidable, ongoing expense. Keep in mind, this is Fidelity Investment’s assessment of AVERAGE healthcare costs which include premiums for Medicare Part B and D. It doesn’t include the cost of long-term care.

The analysis assumes retirees are healthy. Based on my analysis of retirement distribution plans over two decades, poor health in retirement increases Fidelity’s total by 30%. Flip your mindset: Consider lifestyle changes such as regular workouts, diet improvements and annual checkups complete with full diagnostics, as investments. For example, when clients look to cut expenses, the gym membership is one of the first on the chopping block. It’s the one expense I urge them to continue. Consider every workout, each diet change, as dollars added to a future retirement investment bucket or as less distribution dollars spent on health and more on bucket list activities.

Medicare Part B, D, and supplemental medical (Medigap) premiums allow planners like me to better estimate healthcare costs for retirees. It’s important for future retirees to understand and account for the impact of inflation on these expenses. As a rule of thumb, consider healthcare inflation at double the current U.S. annual inflation rate of 2.36% (as of March 2018), in your planning.

The Kaiser Foundation estimated using the 2016 Consumer Expenditure Survey from the Bureau of Labor Statistics, that the share of average total household spending on health-related expenses was more than twice as large for Medicare households than for non-Medicare households in 2016. Middle-income Medicare households allocated a greater share of their household spending to health-related expenses than either the lowest or highest-income Medicare households.

You got me. Consider this my attempt at a “scare straight” moment. It scared me. A future retiree cannot avoid the inflation in Medicare premiums. However, a healthy individual can look to work longer, retire later, and save more to minimize the pain of the annual growth in Medicare beneficiary costs which leads in to my next personal hurdle.

Second step: I hit turbo-drive on savings and investment contributions combined with working longer.

Along with the big hit to the net worth, my savings rate went on hiatus. Well, actually, it hit ground zero. Goose egg. For three years. Downsizing the primary residence, cutting the mortgage payment by 70% combined with expense reduction has provided an opportunity to turbocharge my savings rate to 40% of annual gross income that I’ll need to accomplish consistently over the next decade. Working until 70 is now a reality because I love what I do; I’ll find a way to add flexibility into my schedule over the years. The life blood of a successful retirement plan is income. Pre-retirees who boost their savings rate and work on average an additional two years beyond a planned retirement date can dramatically increase retirement plan positive outcomes.

Third step: Mitigate potentially devastating financial risks & let an insurance company take the hit.

Three out of every five financial plans I create reflect deficiencies to meet long-term care expenses. If my health continues to fire on all cylinders, then it’s likely I’ve added years to my life and will require assistance with activities of daily living. Medical insurance like Medicare does not cover long-term care expenses – a common misperception.

The Genworth Cost of Care Survey has been tracking long-term care costs across 440 regions across the United States since 2004.

Genworth’s results assume an annual 3% inflation rate. In today’s dollars a home-health aide who assists with cleaning, cooking, and other responsibilities for those who seek to age in place or require temporary assistance with activities of daily living, can cost over $45,000 a year in the Houston area where I reside. On average, these services may be required for 3 years – a hefty sum of $137,000. We use a 4.25-4.5% inflation rate for financial planning purposes to reflect recent median annual costs for assisted living and nursing home care.

Long-term care insurance is becoming cost prohibitive. Not only is insurance underwriting to qualify draconian to say the least, insurers are increasing annual premiums at alarming rates. In some cases, by more than 90% ostensibly forcing seniors to drop coverage or find part-time work to pay premiums.

In addition, the number of insurers available is dwindling. Today there are less than 12 major insurers when at one time there were 106.

As I examine policies issued recently vs. those 10 years or later, it’s glaringly obvious that coverage isn’t as comprehensive and costs more prohibitive. The long-term care crisis is rarely addressed by the media; there isn’t a governmental solution to the growing needs of an aging population. Unfortunately, the majority of those who require assistance will place the burden on ill-prepared family member caretakers or need to undertake drastic measures to liquidate assets. According to Genworth, roughly 70% of people over 65 will require long-term care at some point in their lives.

So, what to do?

One option is to consider a reverse mortgage. The horror stories about these products are way overblown. The most astute of planners and academics study and understand how for those who seek to age in place, incorporating the equity from a primary residence in a retirement income strategy or as a method to meet long-term care costs can no longer be ignored. Those who talk down these products are speaking out of lack of knowledge and falling easily for overblown, pervasive false narratives.

Reverse mortgages have several layers of costs (nothing like they were in the past), and it pays for consumers to shop around for the best deals. Understand to qualify for a reverse mortgage, the homeowner must be 62, the home must be a primary residence and the debt limited to mortgage debt. There are several ways to receive payouts.

One of the smartest strategies is to establish a reverse mortgage line of credit at age 62, leave it untapped and allowed to grow along with the value of the home. The line may be tapped for long-term care expenses if needed or to mitigate sequence of poor return risk in portfolios. Simply, in years where portfolios are down, the reverse mortgage line can be used for income thus buying time for the portfolio to recover. Once assets do recover, rebalancing proceeds or gains may be used to pay back the reverse mortgage loan consequently restoring the line of credit.

Our planning software allows our team to consider a reverse mortgage in the analysis. Those plans have a high probability of success. We explain that income is as necessary as water when it comes to retirement. For many retirees, converting the glacier of a home into the water of income using a reverse mortgage is going to be required for retirement survival and especially long-term care expenses.

American College Professor Wade Pfau along with Bob French, CFA are thought leaders on reverse mortgage education and have created the best reverse mortgage calculator I’ve studied. To access the calculator and invaluable analysis of reverse mortgages click here.

Insurance companies are currently creating products that have similar benefits of current long-term care policies along with features that allow beneficiaries to receive a policy’s full death benefit equal to or greater than the premiums paid. The long-term care coverage which is linked to a fixed-premium universal life policy, allows for payments to informal caregivers such as family or friends, does not require you to submit monthly bills and receipts, have less stringent underwriting criteria and allow an option to recover premiums paid if services are not rendered (after a specified period).

Unfortunately, to purchase these policies you’ll need to come up with a policy premium of $50,000 either in a lump sum or paid over five to ten years. However, for example, paying monthly for 10 years can be more cost effective than traditional long-term care policies, payments remain fixed throughout the period (a big plus), and there’s an opportunity to have premiums returned to you if long-term care isn’t necessary (usually five years from the time your $50,000 premium is paid in full). Benefit periods can range from 3-7 years and provide two to five times worth of premium paid for qualified long-term care expenses. As a benchmark, keep in mind the average nursing home stay is three years.

I decided on this hybrid strategy. For a total of $60,000 in premium, I purchased six years of coverage, indexed for inflation, for a total benefit of close to $190,000 in future dollars.

It’s crucial to complete a comprehensive financial plan before investigating available long-term care products. A plan will help quantify how much coverage is necessary. In other words, your long-term care plan can be subsidized by a reverse mortgage or liquidation of assets. From there, a financial and insurance professional educated in long-term care can assist with the proper amount of coverage required.

Fourth step: Annuitize a portion of my future income and maximize Social Security retirement benefits.

Do not underestimate the lifetime income that Social Security can provide. After generating hundreds of Social Security benefits payout scenarios it’s rare I recommend future recipients claim benefits before age 70 especially if I must consider survivor benefits for a younger, lower-earning spouse.

According to a The Nationwide Retirement Institute® Consumer Social Security PR Study conducted by Harris Poll, it’s not surprising to discover than ½ of a retiree’s fixed expenses are covered by Social Security benefits.

Per the study, surprisingly few retirees have a financial advisor who provides advice on Social Security strategies. The total incidence of having a financial advisor who provided Social Security advice was a dismal 11%.

A 2015 study by the Consumer Financial Protection Bureau indicates that more than 2 million consumers choose when to begin collecting Social Security retirement benefits. Many make the decision based on limited or incorrect information.

Of those given Social Security advice by their advisors, roughly half or more had to initiate the discussion themselves.

Now with pensions all but gone, Social Security is the only guaranteed monthly income for roughly 69% of older Americans.

Unfortunately, in 2013, 75% of retirees chose to start collecting before full retirement age which results in a permanent reduction in lifetime benefits. This may be a very shortsighted decision.

As Wade Pfau, Ph.D., CFA and professor at the American College outlines in the 2nd edition of his Retirement Researcher’s Guide to Reverse Mortgages:

“Delaying Social Security is a form of insurance that helps to support the increasing costs associated with living a long life. It provides inflation-adjusted lifetime benefits for a retiree and surviving spouse, and those lifetime benefits will be 76 percent larger in inflation-adjusted terms for those who claim at seventy instead of sixty-two.”

According to Social Security expert Elaine Floyd, ignorance is the primary reason. The CFPB report outlines studies that represent how much people don’t know about claiming. One study for example outlined that only 12% of pre-retirees knew how benefits differed if benefits were claimed before, at, or after full retirement age.

If you’re having a difficult time finding the help required, it’s worth the investment in a comprehensive Social Security analysis tool. The one I suggest was created by Laurence Kotlikoff, Professor of Economics at Boston University and available at www.maximizemysocialsecurity.com. The tool will guide you to the highest benefit you or you and a spouse may receive from Social Security.  It will assess thousands of strategies before it suggests the one that maximizes lifetime benefits. The output is easy to interpret. There’s the ability to run “what if” scenarios, too.

The $40 annual license for a household is good for a year and worth the cost.

Respected Professor Emeritus of Finance at the Yale School of Management and Chairman, Chief Investment Officer for Zebra Capital Management, LLC Roger G. Ibbotson, PhD, in a comprehensive white paper released recently, outlined how fixed indexed annuities which provide upside market participation and zero downside impact may be attractive alternatives to traditional fixed income like bonds.

In an environment where forecasted stock market returns may be muted due to rich valuations and bond yields still at historic lows, FIAs eliminate downside stock market risk and offer the prospect of higher returns than traditional asset classes.

Per Roger Ibbotson:

“Generic FIA using a large cap equity index in simulation has bond-like risk but with returns tied to positive movements in equities, allowing for equity upside participation. For these reasons, an FIA may be an attractive alternative to (long-term government bonds) to consider.”

In financial services, Ibbotson is a god. Brokers and advisors have been misrepresenting to consumers his seminal chart of 100-year stock market returns for as long as I’ve been in the business. The chart outlines how domestic large and small company stocks compound at 10-12% and beat the heck out of bonds, bills and inflation; financial professionals showcase the lofty past returns and convince customers that without buying and holding stocks for the long term (whatever that is), they’ll succumb to the vagaries of inflation. Adhere to the chart and your portfolio will have it made in the shade! (if invested in stocks for 100 years plus).

In all fairness to Roger Ibbotson, it’s not his fault that his data and graphics have been used to seduce investors to bet their hard-earned wealth on investment fantasy. He’s been in favor of annuities in retirement portfolios and in accumulation portfolios leading up to retirement for years.

I found his study compelling enough to allocate 30% of my investment dollars to a fixed index annuity.

So, what are fixed indexed annuities?

First, they are not products that invest directly in stock markets. They are insurance vehicles that provide the potential for interest to be credited based on performance of specific market indexes. Selections within these fixed annuities allow owners to participate in a fixed percentage of the upside of a market index or earn a maximum rate of interest that’s based on the percentage change in an index from one anniversary date (effective date of ownership), to the next. A strategy identified as “point-to-point.”

Second, fixed indexed annuities are characterized by a ‘zero floor,’ which simply means there’s no risk of market downside. Owners may get a goose-egg of a return for a year, that’s true. However, there’s no need to make up for market losses, either.

As stated in the academic research published by Mr. Ibbotson:

“This downside protection is very powerful and attractive to many individuals planning for retirement. In exchange for giving up some upside performance (the 60% participation rate), the insurance company bears the risk of the price index falling below 0%. The floor is one way to mitigate financial market risk, but also gain exposure to potentially higher equity performance than traditional fixed income investments.”

Third, Roger Ibbotson and his team analyzed fixed index annuities performance compared to periods of outperformance and underperformance for long-term government bonds. They isolated 15 three-year periods where bonds performed below the median like above, where the average 3-year annualized return was 1.87% compared to the FIA average of 4.42%. Through fifteen 3-year timeframes where bonds performed above median, returns for bonds and fixed index annuities averaged 9% and 7.55%, respectively.

Last, the research is limited to a simulation of the net performance of a fixed index annuity tied to a large cap equity index with uncapped participation rates. A participation index rate strategy is mostly effective under strong stock market conditions as interest credited is a predetermined percentage multiplied by the annual increase in a market index’s return. For example, a fixed indexed annuity offers an uncapped point-to-point option with a 40% participation rate. If the chosen market index the participation rate is connected to increases by 10%, your return for the year will be 4%. The participation percentage may be changed annually.

A “point-to-point” cap index strategy incorporates a ceiling on the upside and will not perform as well during periods when stocks are characterized by strong performance. The point-to-point cap index choice is best when markets are expected to provide limited growth potential and provides 100% participation up to the annual cap set by the insurance company. Let’s say a fixed indexed annuity has a 3% index cap rate and is tied to the performance of the S&P 500. For the year, the S&P 500 returns 2%. The interest credited to your account would be 2%, which is under the 3% cap. Under the participation index rate strategy outlined above, interest credited would be less at 40% of the S&P return, or .8%.

Since credited interest increases the original investment and downside protection is provided, money compounds in the true sense of the definition since compounding works only when there is NO CHANCE of principal loss.

I’m assured with a fixed indexed annuity as part of my overall portfolio that may be converted to an income stream I cannot outlive, to not suffer downside risk; along the way perhaps I’ll earn better returns than a traditional stock and bond allocation to top it off.

Fifth step: Reduce portfolio risk due to below average estimated future returns.

I’m bracing for a future of low returns for risk assets like stocks and bonds. You should too. Despite the unprecedented stock market volatility so far this year, the Shiller P/E, a measure of inflation-adjusted earnings over rolling prior ten-year periods at 32.34X, has not worked off excess valuations.

The Shiller P/E is a poor predictor of short-term market performance; over long periods, lofty valuations today portend lower future returns. Displayed below is our analysis of the growth of $1,000 over 30 years when the Shiller PE is at 20X or higher.

I’m preparing for a minimum of one decade of investment-return stagnation; therefore, I reduced my asset allocation to stocks last year from 70% to 40%. In our firm’s planning software, we reduced return estimates for every domestic asset class, with the greatest long-term return potential coming from international investments including emerging markets (where valuations are attractive compared to the United States). Shorter-term, we don’t see a reason to enter developed international and emerging markets. However, we monitor daily; Lance Roberts informs clients and newsletter readers of our asset allocation changes on a regular basis.

When creating comprehensive financial plans for clients, we explain and show through in-house analysis, how going forward until valuations normalize, greater risk will not lead to a commensurate increase in return. In fact, all additional risk is going to do is add risk and dampen returns.

Today, my front lawn is the finest in the neighborhood.

Two years later after care and nurturing of the soil, the grass is as robust and greener than it has ever been. So green that it compelled my daughter to do a double-take as she remembered how hopeless the situation appeared back then.

The creation of an imperfect retirement can require tough decisions, hard work and discipline, but the results can be magnificent.

10-Effective Habits Of The Fiscally Fit

We wonder how they do it.

Those who make handling money look effortless.

I have documented and monitored the money habits of fiscally-fit people for years.

The following ten appear prominently on the list.

1 – The fiscally-fit crowd considers “paying yourself first” sacrosanct.

They passionately believe that saving is equally as important as paying fixed expenses like rents or mortgages. This rule has been a part of their lives early on. Back to their youth. They never compromise this habit.

The “pay yourself” mindset is the foundation to their overall financial success. Whether a specific dollar amount or a percentage of income is directed monthly into savings or investments, the action is as important as the money itself. It represents a display of control which in turn enhances confidence.

2 – Thinking in monthly payments is detrimental to long-term financial health.

The fiscally-fit are not compelled to take on recurring obligations because they can afford the payments. The long-term financial impact of the liability is a deciding factor. For example, a $30,000 auto loan at 3% interest for 3 years results in a monthly outlay of $872.44. A 5 year loan calculates to $539.06. Many consumers gravitate towards lower payments. This crowd is motivated to pay less in total interest charges. With a saving of $937 over the life of the loan, the 3-year obligation is favored.

3 – Money is a consistent and healthy “worry.”

Like a low hum in the background of their lives, worry is a factor that resonates throughout the minds of the fiscally fit. A dose of worry is perceived as healthy since it fosters discipline, encourages patience and prevents this group from becoming complacent when it comes to monitoring financial progress. Professionals who preach a “don’t sweat it I’ll make the investment decisions,” mantra and come across as overconfident are dismissed. Financial advisors especially are sought as partners and sounding boards. Decisions are not made in haste.

4 – Unforeseen risk is right around the corner.

These individuals anxiously plan for risks that can hurt their financial standing no matter how remote the possibilities. They perceive disabilities, accidents or deaths as foreseeable threats. They prepare through formal insurance planning, usually in partnership with an objective financial professional. Insurance benefits available at work are maximized first. From there, additional coverage is purchased to cover spouses and fill in gaps that employer benefits do not. Term and permanent life insurance options are popular.

5 – Credit card debt is anathema.

Credit cards are popular to gain rewards and perks. Although having access to credit is important, debt is paid in full monthly to avoid usurious interest rate charges. Travel benefits are especially attractive. NerdWallet has identified the best travel cards. At the end of the year, credit card statements which consolidate expenditures and organize them by categories are utilized as a self-check on spending patterns and areas of overspending are target for correction.

6 – Planning especially for retirement, strengthens financial success.

Formal planning validates good habits, uncovers weaknesses and outlines actionable steps to meet goals. There’s no fear or denial when it comes to facing money truths that emerge when a written plan is developed. A clear plan should prioritize financial life goals that motivate the fiscally fit to achieve results based on personalized return benchmarks and not some comparison to an arbitrary stock index.

There’s little discouragement when monetary changes occur as a good plan allows flexibility for various outcomes. Occasionally, expectations need to be tempered as progress doesn’t meet expectations. I’ve known members of this set who have taken radical steps to secure a strong financial future including massive shifts in spending and impressive downsizing in lifestyles.

7 – Paying retail is not an option.  

They’re not cheap, just savvy shoppers. There’s no such thing as immediate gratification when it comes to purchasing goods and services like autos, appliances and furniture. Even organizing vacations is an assignment in frugality. This group does their homework and are endless seekers of deals. They favor used and are known to scoop up floor models. Even “lightly damaged” items are not out of the question. Blemishes are usually cosmetic in nature and prices too attractive to pass up on washers, dryers, refrigerators and other durables. They do not fall for long-term “no-interest” offers unless the debt can be paid off before interest charges are applied.

8 – Money mistakes are forever lessons.

Financial mishaps are never forgotten. The fiscally-fit do not languish in the past. They take responsibility for mistakes and never repeat them. Whether it’s an investment “too good to be true” that busted or lending money to friends or family that was never paid back, they are not afraid to say no, mark financial boundaries and move on without guilt.

9 – Emergency reserves are a priority.

There’s a passion, a slight paranoiato preserve capital for emergency spending. Anywhere from three to six months of fixed living expenses is optimum. If reserves fall, resources are re-directed even if it means postponing retirement funding until replenished. Online banks are increasingly popular compared to brick-and-mortar options due to higher yields, no monthly fees and surprisingly easy access to funds when needed. Want to run with this elite financial pack? Examine NerdWallet’s list of top high yield online savings accounts.

10 – A 401(k) isn’t all that.

The fiscally fit use several investment vehicles that complement tax-deferred accounts like 401(k) plans. This provides flexibility when distributions are required at retirement. Having various buckets that allow retirees to blend tax free, capital gain and ordinary income results in greater tax control and can make a difference to how much Social Security is taxed.

Financial success comes down to good habits.

These habits are common sense forged to simple actions applied long term.

However, simple is never as easy as it sounds, is it?

Don’t fret.

Small improvements lead to big results over time.

The Value Proposition Of “Likeability”

Written By Byron Kidder and Richard Rosso, CFP.

“Let me introduce an entity called You, Inc. This is a small, tightly controlled, privately-held company with the bulk of its productive assets invested in nontraded units of your future salary and wages. Your objective as CEO, CFO, and chairman of the board is to maximize shareholder value of You, Inc. while minimizing the financial risks faced by the corporation.” – Moshe A. Milevsky, Ph.D. – Author of “Are You A Stock Or A Bond?”

We get so tied up in our work and performing that we forget or (worse) put off the Human Capital Investment until we have time between projects.  It drops on our priority list because there is never any “left over” time available after our commitments are finished.

The human capital investment means YOU are your greatest investment.  A lifetime money-making powerhouse.  You need to be higher on the priority list.

Rosso’s Input:

The top .01% of American households have ruled the roost, foremost since the Great Recession where stocks and real estate have been blessed with turbo tailwinds to returns (thank central banks and low/manipulated rates for much of the windfall).

Ostensibly, owners of capital have seen their wealth move far ahead since the 1970s. Those who build wealth through household income and rely on wages haven’t been so fortunate as the annual percentage change of real hourly wages for the bottom 80% of workers have been on a steady downward slope, especially since the onset of the financial crisis.

Those in the bottom 90% of household wealth held 35% of the nation’s wealth in the mid-1980s. Three decades later, the percentage has fallen 12 points or exactly as much as the wealth of the .01 percent rose according to Matthew Stewart in an enlightening and thorough analysis titled “The 9.9 Percent Is the New American Aristocracy,” where he describes the 9.9% as meritocratic winners who left the 90% or “middle class,” in the dust. They are the professionals – lawyers, doctors, dentists, mid-level investment bankers, MBAs. You get the picture.

Per Stewart’s analysis, as of 2016 it took $1.2 million in net worth to make it into the 9.9 percent, $2.4 million to reach the group’s median and $10 million to get into the top .9 percent.

What am I getting at with all this data? Do you perceive opportunity or discouragement?

An investment in YOU, education, mastering a technical skill that’s in demand, increases the odds of escaping the bottom 90%, especially if synergized by likeability. In fact, likeability can get you hired. A field study by Chad A. Higgins & Timothy A. Judge in the Journal of Applied Psychology outlines how ingratiation (likeability), wins over self-promotion when it comes recruiter perception of fit.

In the popular book “The Science Of Likeability” by Patrick King, likeability is the ability to be more human, to appear genuinely approachable and relatable which could be a challenge in the age of electronic communication such as e-mail and text.

Back to Byron Kidder:

We have become desensitized to the fundamental skills necessary for social and business interactions in our quest for improving efficiency and productivity.  My book, “It’s All About Everything,” is an easy to read step-by-step guide that refreshes these skills while simultaneously awakens your sought-after desire to reconnect with your passion, re-engage with those around you, and produce your vision of success.

Fundamentally, people want to be around and associated with people they like but far too many have difficulty in this area.  They may have picked up bad habits or felt like being likable contrasted with being successful.  Being likable will positively affect your growth, promotions, relationships, etc.  You don’t need to sacrifice being likable to being successful.  It is not a tradeoff.  The great news is that likability can be learned!

Rule 7: Being likable.

Being likable is high on the list since it is Rule 7 of my book and let me assure you that it is in your power to raise your overall likability.  How many times have you worked with somebody who is not likable?

They may have been arrogant, abusive, braggart, inattentive, malicious, or lacked integrity.  After you have worked with them, do you choose to be around them again?  Realistically, you would avoid working with them in the future if possible even if it means a cut to your bottom line.  If you are like me, you remember unlikable people as well as the likable people, just for all the wrong reasons.

Being unlikable is not a career-ending move nor does it mean you should succumb to fate that comes with it.  Few people start out unlikable but end up stuck in a set of patterns that turns into second nature.  Bad habits can be ingrained just as well as good habits.  You may be in a stressful situation, so you start getting grumpier as an attempt to cope.  You may have in your mind a certain personality that is required to do your job, which dictates you need to behave a certain way, but it isn’t part of your natural personality and you are tired of pretending to be something you’re not.

Likeability encompasses a myriad of actions or attitudes that can be learned and changed.  The goal is to increase the positive traits that compliment your integrity.  If you have some set value system in place that dictates how you respond, interact, or live when nobody is watching, then you have a foundation that all scenarios can be measured against and dealt with accordingly.

Ever notice that negative people tend to attract each other?  The same is true for those with integrity.  Your reputation is bolstered by the company you keep.  In my experience, integrity is everything and is the foundation of my book.  I don’t want to have to think about somebody’s motives.  Start small and add likable traits over time.  Rome wasn’t built in a day.  If you act with integrity, your positive energy will draw people to you.  This leads to being consistently inspirational, which is a likable trait.

As with most things in life, there are a few traits that can be implemented for a quick reward and ROI.  Try these first and expand your repertoire over a span of weeks to months.  This includes being:

  • Attentive and focused.
  • Sincere and authentic.
  • Intellectually curious and anxious to learn.

Being attentive to those you work with – a client, colleague, or vendor, will help you provide best in class service.  You would not be successful if it were not for people choosing to do business with you.  Because of this, never let appreciation for your clients go unsaid.  I regularly share with clients that I enjoy working with them and value their relationships.

Get to know internal and external clients.  Internal clients include colleagues, bosses, receptionists – everybody you encounter should have a positive impression of you.  Small tokens of appreciation can simply come down to remembering birthdays or favorite hobbies.

Inform clients how you will be there. Provide several points of contact including a cell phone number. Accept calls above and beyond normal business hours. Back up words with actions.  How many times have people told you they’ll be there if you need anything but disappear or disappoint when needed the most?  Being present when things go wrong will boost reliability and reputation.  When the inevitable happens and mistakes are made, face them head on, never make excuses.  Own up to them. Then propose a corrective plan of action. You’ve now forged a relationship, made a client for life. Based on your reputation for follow-up and follow-through, odds are your chance of promotion will increase, too.

Etiquette cannot be emphasized enough because it shows empathy and inherently directs your focus on serving others. An action as simple as smiling when talking on the phone can make your voice sound more pleasant and confident.

Respond to inquiries quickly and professionally, even if to say you will follow up within the next few hours.  You know the golden rule – treat others as you expect to be treated.

Sincerity and Authenticity Leads to Stronger Relationships.

Focus on client needs is valuable and produces amazing results only if you are sincere and authentic.  Otherwise, you run the risk of coming across as fake or shady.  When positive and focused on others, the energy is contagious.  You are essentially creating a positive feedback loop.  As my buddy Richard Rosso, says, “You know within 3 minutes if someone is genuine or not.”  Likability inherently means you exhibit a certain amount of vulnerability when you are authentic.

Face-to-face meetings with clients are important to building likeability.  You are showing them that you will always be there in a reliable fashion while adding value to the relationship.  Only time can reinforce that you are walking the walk. Trust is the end result of consistently showing attention, care, and appreciation.  Being likable helps get you the time and interactions necessary to build trust.

Trust is built over time, maintained through a myriad of actions and is a big component of likability.  Don’t be afraid to show vulnerability (it’s human!)  Richard has pointed out that “this adds to your memorability.”  He is right.  Likability will be one reason you’re remembered and called upon for repeat business or to handle an important task for superiors.

Intellectually curious and anxious to learn.

Likeability and genuine curiosity are linked. To be curious about other’s interests, family, hobbies, and concerns allows people to open up, share their stories. Taking the time to learn about the people you interact with exhibits care and authenticity.  Focus allows you to understand a client’s unique situation so that solutions may be recommended. Working for a company? Be a detective and learn as much as possible. Study the annual report, learn the mission statement, ask questions to display genuine interest and likeability may gain you a mentor in influential places!

Being likable is a habit; habits are formed through routine and consistency.  Self-assessment and objective discovery are crucial. What are those traits that make you likeable?  Which skills seem foreign but worthwhile to learn?  Taking an internal inventory will allow you to prioritize areas of improvement. Likeable people aren’t afraid or hesitant to ask for help or ask questions to gain understanding, either.

What if you feel overwhelmed and struggle to remain motivated? It’s easy to grow discouraged as wage growth has remained stagnant; most likely you’ll be expected to accomplish tasks that years ago were delegated to two employees. Listen, you’re human. You’re going to feel frustrated. It’s important to remain centered on the positive. For example, a morning ritual of gratefulness, catching and stopping yourself from complaining and focusing on the bigger picture of serving others will help work through tough periods.

Bottom line? People want to work with people they like.  Likability is one part innate, another part learned behavior. Control over your attitude will boost likability. There are going to be times you won’t care about being likeable.  We all have rough days. The goal is to prevent a string of bad days from changing your personality. Negativity spreads quickly. Likeability and negativity do not mix.

The rules listed in my book, “It’s All About Everything,” will help you raise the bar on likability.  Be yourself, be vulnerable; focus on others and watch the positive energy returned to you.

Have fun with it.  You’ve got this.

You’re on the right path to master likeability!

The Greatest Financial Mismatches In History

The spectacle of modern investment markets has sometimes moved me towards the conclusion that to make the purchase of an investment permanent and indissoluble, like marriage, except by reason of death or other grave cause, might be a useful remedy for our contemporary evils. For this would force the investor to direct his mind to the long-term prospects and to those only.  – John Maynard Keynes

It’s time we expose a few of the greatest financial mismatches in history. At the top of my mind, due to a myriad of behavioral and cognitive hiccups, are select retail investors (you know who you are), who must come to grips with how they’re handling current stock market volatility.

It’s a moment of truth

Too many investors possess a hook-up mentality with stocks. Holding periods are at historic lows. According to the New York Stock Exchange’s extensive database, the average holding period for stocks in 1960 was 8 years, 4 months.

As of December 2016, it was 8.3 months.

Last year’s unprecedented stock market performance for the S&P 500 was the worst event for investor psyche.

I’ll explain.

No doubt, it was a magical year. The market closed higher every month (first time in history). The Sharpe Ratio, or returns on the S&P relative to the risk-free (Treasury Bills) and volatility was 3.7. Since volatility was non-existent last year, risk-adjusted returns for the market were among the best I ever lived through; at least the highest in over 50 years.

Think of it like dating the most popular girl (or guy), in high school. In the beginning, you wonder how the heck it happened. Such luck! Eventually, you believe you’re entitled to dating prom kings and queens in perpetuity. The problem is ego. You convince yourself the perfect prom date is the norm and begin to compare every date after to “the one.” What a great way to set yourself up for failure, missed opportunities and myopia that slaughters portfolio returns (and possibly, relationships!)

In 2017, equity investors witnessed a storybook investment scenario. This year so far? Reality bites. It’s not that your adviser doesn’t know what he or she is doing; it’s not the market doing anything out of the ordinary, either. The nature of the market is volatility, jagged edges and fractals. The sojourn, the Sunday drive in perfect weather with the top down on a newly-paved road in 2017, was an outlier. The environment you’re investing through today is the norm; therefore, the problem must be the driver, the investor who doesn’t realize the road conditions are back to resembling 5pm rush-hour in a downpour.

Do you experience frustration with a purchase your adviser implements or recommends if the price doesn’t quickly move in your favor? Do you question every move (or lack thereof), a financial partner makes?

How often do you say to yourself – “She didn’t take enough profit. Why did he buy that dog? Why isn’t he or she doing anything? (Sometimes doing nothing is the best strategy, btw).

Do you constantly compare portfolio performance every quarter with a stock market index that has nothing to do with returns required to meet a personalized benchmark or long-term goal like retirement?

Ostensibly, the ugly truth is there may be a mismatch between your brain and your brain on investments. Listen, stocks aren’t for everyone. Bonds can be your worst enemy. Even the highest quality bond fluctuates and can be sold at a loss before maturity. This is the year as an investor you’re going to need to accept that volatility is the entrance fee to play this investment game.

According to Crestmont Research, volatility for the S&P 500 tends to average near 15%. However, volatile is well, volatile. Most periods generally fall within a band of 10% to 20% volatility with pockets of unusually high and low periods.

The space between gray lines represents four-year periods. Observe how volatility collapsed in 2017, lower than it’s been in this decades-long series.

Per Crestmont:

“High or rising volatility often corresponds to declining markets; low or falling volatility is associated with good markets. Periods of low volatility are reflections of a good market, not a predictor of good markets in the future.”

So, as an investor, what are the greatest financial mismatches you’ll face today?

Recency Bias

Recency bias or “the imprint,” as I call it, is a cognitive affliction that convinces me the trade I made last Thursday should work like it did when I placed a trade on a Thursday in 2017 when the highway was glazed smooth for max-market performance velocity. This cognitive hiccup deep in my brain makes me predisposed to recall and be seduced by incidents I’ve observed in the recent past.

The imprint of recent events falsely forms the foundation of everything that will occur in the present and future (at least in my head). Recency bias is a mental master and we are slaves to it. It’s human. It’s the habit we can’t break (hey, it works for me). In my opinion, recency bias is what separates traders from long-term owners of risk assets.

When you allow volatility to deviate you from rules or a process of investing, think about Silly Putty. Remember Silly Putty? Your brain on recency bias operates much like this clammy mysterious goo.

Consider the market conditions. The brain attaches to recent news, preconceived notions or the financial pundit commentary comic-of-the-day and believes these conditions will not change. To sidestep this bias, at Clarity and RIA we adhere to rules, a process to add or subtract portfolio positions.

Unfortunately, rules do not prevent market losses. Rules are there to manage risk in long-term portfolio allocations.

Losses are to be minimized but if you’re in the stock market you’re gonna experience losses. They are inevitable. It’s what you do (or don’t do), in the face of those losses that define you. And if you’re making those decisions based on imprinting or Silly Putty thinking, you are not cognitively equipped to own stocks.

Hindsight Bias

When you question your adviser’s every trade or the big ones you personally missed, you’re suffering from hindsight bias. Hindsight bias is deception. You falsely believe the actual outcome had to be the only outcome when in fact an infinite number of outcomes had as equal a chance. It’s the ego run amok. An overestimation of an ability to predict the future.

The market in the short-term is full of surprises. A financial partner doesn’t possess a crystal ball. For example, to keep my own hindsight bias under control, I never take credit for an investment that works gainfully for a client. The market must be respected. Investors, pros or not, must remain humble and in infinite awe of Mr. Market. A winning trade in the short term is luck or good timing. Nothing more.

With that being said, stock investing is difficult. Unlike the pervasive, cancerous dogma communicated by money managers like Ken Fisher who boldly states that in the long-run, stocks are safer than cash, stocks are not less risky the longer you hold them. Unfortunately, academic research that contradicts the Wall Street machine rarely filters down to retail investors. One such analysis is entitled “On The Risk Of Stocks In The Long Run,” by prolific author Zvi Bodie, the Norman and Adele Barron Professor of Management at Boston University.

I had a once-in-a-lifetime opportunity to break bread with Dr. Bodie recently in Nashville and spend quality time picking his brain. I’m grateful for his thoughts. He expressed lightheartedly how his retail books don’t get much attention although the textbook Financial Economics co-written with Robert C. Merton and David L. Cleeton is the one of choice in many university programs.

In a joking manner, he calls Wharton School professor and author of the seminal tome “Stocks for the Long Run,” Jeremy Siegel his “nemesis.” He mentions his goal is to help “everyday” people invest, understand personal finance and be wary of the financial industry’s entrenched stories about long-term stock performance. He’s a man after my own heart. He’ll be interviewed on the Real Investment Hour in early June.

In the study, he busts the conventional wisdom that riskiness of stocks diminishes with the length of one’s time horizon. The basis of Wall Street’s counter-argument is the observation that the longer the time horizon, the smaller the probability of a shortfall. Therefore, stocks are less risky the longer they’re held. In Ken Fisher’s opinion, stocks are less risky than the risk-free rate of interest (or cash) in the long run. Well, then it should be plausible for the cost of insuring against earning less than the risk-free rate of interest to decline as the length of the investment horizon increases.

Dr. Bodie contends the probability of a shortfall is a flawed measure of risk because it completely ignores how large the potential shortfall might be. Sound familiar? It should. We write of this dilemma frequently here on the blog. Using the probability of a shortfall as the measure of risk, no distinction is made between a loss of 20% or a loss of 99%.

If it were true that stocks are less risky in the long run, it should portend to a lower cost to insure against that risk the longer the holding period. The opposite is true. Dr. Bodie uses modern option pricing methodology i.e., put options to validate the truth.

Using a simplified form of the Black-Scholes formula, he outlines how the cost of insurance rises with time. For a one-year horizon, the cost is 8% of the investment. For a 10-year horizon it is 25%, for a 50-year time frame, the cost is 52%.

As the length of horizon increases without limit, the cost of insuring against loss approaches 100% of the investment. The longer you hold stocks the greater a chance of encountering tail risk. That’s the bottom line (or your bottom is eventually on the line).

Short-term, emotions can destroy portfolios; long term, it’s the ever-present possibility of tail risks or “Black Swans.” I know. Tail risks like market bubbles and financial crises don’t come along often. However, only one is required to blow financial plans out of the water.

An investor (if he or she decides to take on the responsibility), must follow rules to manage risk of long-term positions that include taking profits or an outright reduction to stock allocations. It’s never an “all-or-none” premise. Those who wholesale enter and exit markets based on “gut” feelings or are convinced the stocks have reached a top or bottom and act upon those convictions are best to avoid the stock market altogether.

The Pre-Retirement Preparation Checklist

Are you prepared?

Most important: Are you aware? Aware of the common mishaps and misperceptions that may curtail a happy & healthy retirement?

The Real Investment Advice and Clarity Financial pre-retirement preparation checklist can help identify potential mistakes and navigate a smooth transition to a revitalized and fulfilling retirement.


Do you maintain an exercise regimen that includes activities such as yoga, Pilates, weight training, walking and other types of aerobic activities for at least 30 minutes a day?  Y / N

Leisure-time physical activity is associated with longer life expectancy, even at relatively low levels of activity and regardless of body weight, according to a study by a team of researchers led by the National Cancer Institute (NCI), part of the National Institutes of Health.  The study, which found that people who engaged in leisure-time physical activity had life expectancy gains of as much as 4.5 years.

Do long life expectancies run in your family?  Y / N

Your parents may largely dictate how long you’re going to live. And your mom appears to have most of the control over your “aging gene.”

Do you smoke or a regular user of nicotine products?  Y / N

Cigarette smoking causes more than 480,000 deaths each year in the United States. This is nearly one in five deaths.

Do you consume alcohol more than twice a week?  Y / N

Alcohol use is related to a wide variety of negative health outcomes including morbidity, mortality, and disability. Research on alcohol–related morbidity and mortality takes into account the varying effects of overall alcohol consumption and drinking patterns. Alcohol use increases the risk for many chronic health consequences (e.g., diseases) and acute consequences (e.g., traffic crashes), but a certain pattern of regular light–to–moderate drinking may have beneficial effects on coronary heart disease.

Have you taken advantage of a life-expectancy calculator to better plan for the length of portfolio withdrawals needed in retirement?  Y / N

The Living to 100 Life Expectancy Calculator uses the most current and carefully researched medical and scientific data in order to estimate how old you will live to be. Most people score in their late eighties… how about you? Check it out at www.livingto100.com.

Medical costs affect retirees differently. Unfortunately, it’s tough as we age to avoid healthcare costs and the onerous inflation attached to them. Thankfully, proper Medicare planning is a measurable financial plan expense as a majority of a retiree’s healthcare costs will be covered by Medicare along with Medigap or supplemental coverage.

At Clarity, we use an annual inflation factor of 4.5% for additional medical expenses (depending on current health of the client), and the cost of long-term care.

Good health is a significant contributor to financial and physical wellness in retirement. 

In a report from Healthview Services, a provider of cost-projections software, healthcare costs in retirement are rising twice as fast as the typical annual increase in Social Security benefits.

Latest estimates outline total out-of-pocket spending for an average 65-year old couple retiring today could exceed $400,000 when Medicare premiums, supplemental insurance and deductibles are included. Keep in mind that cost-of-living adjustments for Social Security are overwhelmed by the rising costs of Medicare Part B premiums.

Healthview Services projects a 5.5% annual increase in healthcare costs over the next decade.

Per Medicare Trustees as reported by Savvy Medicare, a training program for financial planners, Part B and Part D insurance costs have averaged an annual increase of 5.6% and 7.7% respectively, over the last 5 years and are expected to grow by 6.9% and 10.6% over the next five years.

Preventative actions such as regular workout regimens, eating properly and healthy sleep habits can work to reduce the financial stress of the most significant costs retirees face.


Are you prepared for the emotional transition to retirement?  Y / N

There exists a level of anxiety for new retirees even though we as professionals feel a sense of accomplishment. Years ago, I deemed this discomfort as “crossover risk.” Clients who told me they were going to “retire,” were back at work a year later and the opposite occurred too.

Eventually, crossover risk lessens. However, the first year of retirement, the bridge, has become increasingly stressful. Enough to where I now call the first year: “The Black Hole”

Have you given thought to your social networks or activities you’ll partake in during retirement?  Y / N

The closer retirement gets, the nearer the exit sign, the stronger your commitment to go through a return-on-life exercise should become. A successful evolution occurs when new retirees redefine success on their own terms.

Transition steps that I’ve seen initiated successfully: Working part-time to ease into a retirement mindset, giving of time to a favorite charity, family vacations especially with grandkids, a new pet, a house renovation project, courses on photography and cooking, and rigorous physical endeavors like yoga and aerobics.


Have you undertaken comprehensive financial planning to determine whether you’re on track?  Y / N

A plan that assesses income, medical and housing needs along with wishes and wants can crystallize actions that need to be taken to succeed, validate current habits and expose financial vulnerabilities. A holistic plan encompasses all assets, liabilities, insurance, savings, investments and employs realistic rates of returns for risk assets like stocks and bonds.

Financial planning is far from perfect. After all, working with projected returns on risk assets like stocks, estimating how long a person may live and where inflation may be at the time of retirement, is an intelligent guessing game at best.

Consider the plan a snapshot of your progress toward financial life benchmarks. Where you are, outlined direction of where you need to go. Are you on track to meet your needs, wants and wishes? A plan is a diagnostic; the exercise is one of financial awareness.

Studies show that people who follow a retirement plan are more successful than those who don’t. But know the common pitfalls you’ll face, depending on the professional who creates the plan and where his or her loyalties lie.

Unfortunately, most planning systems as well as planners tend to provide overly-optimistic outcomes with asset return projections and life expectancies that may be far from what you’ll experience living in real world.


Most financial plans are created to push product. They’re a means to a lucrative end for brokers. An afterthought.

When in fact, a comprehensive financial plan should stand alone as a roadmap to financial success, and that includes recognition of how stock markets flow through cycles – bull, bear, flat and realistic assessments of inflation and life expectancies.

Consider a second opinion of a completed plan if your first was generated by an employee of a big box financial retailer. Always seek a Certified Financial Planner who acts as fiduciary.

Have you considered a formal retirement income strategy?  Y/N

To re-create a paycheck in retirement, you’ll seek to prepare for a steady, middle lane approach to an income stream. In other words, a withdrawal rate that meets requirements to meet fixed expenses and reasonable discretionary spending, then tested through a simulation of real market returns over decades.

Unfortunately, when traveling retirement road there will always be unforeseen curves throughout the journey.

We believe at Real Investment Advice and Clarity Financial, that distribution portfolios may be in for an extended period of a sequence of low or flat returns for stocks and bonds. This will require a right lane shift to less income or a lower portfolio distribution rate for a sustained period. At the minimum, distribution portfolios will require ambitious monitoring.

Wade D. Pfau, Ph.D., CFA and professor of Retirement Income at The American College in a study titled Capital Market Expectations and Monte Carlo Simulations for the Journal of Financial Planning, outlines how sequence-of-returns risk can send your financial car into a ditch. He writes–

“…with less time and flexibility to make adjustments to their financial plans, portfolio losses can have a bigger impact on remaining lifetime standards of living once retirees have left the workforce.”

It’s recommended to assess withdrawal rates and spending habits over rolling three-year periods. This ongoing exercise helps to identify cyclical trends and whether adjustments need to be made.

Have you incorporated Social Security and Medicare planning into your analysis?  Y / N

Social Security is an inflation-adjusted income you cannot outlive. Make sure pre-conceived notions aren’t part of your strategy. Read: The One Social Security Myth.

The correct Medicare strategies can save thousands of dollars in lifetime penalties. Read: 4 Ways To Plan For The Retirement Apocalypse.

These topics are uncomfortable for many financial professionals. The wrong decisions may cost you thousands of dollars in retirement. At Clarity, we are trained and well-versed in Social Security and Medicare planning strategies.

This checklist isn’t intended as a pass/fail. It should be perceived as a wake-up call.

Retirement just doesn’t happen. There’s work to be done. Small improvements like cutting expenses and working two years longer than originally planned can add exponential positive impact.

Investors Must Be Their Own Fiduciaries

The latest confusion front-and-center in financial industry news is how the SEC is seeking to define how the brokerage business should consider clients’ interests first.

The latest attempt to create an “advice rule” by the SEC (Release No. 34-83062; File No. S7-07-18), is a 900+ page alt-fiduciary universe. This best interest of clients/brokerage combo doesn’t mix easy. It clashes. The ethos of brokerage is to sell products. A fiduciary standard and the brokerage industry get along like the silver balls and bumpers in a pinball machine.

What the SEC’s “Advice Rule,” or a “Regulation Best Interest,” (you can’t make this stuff up,) may do is confuse consumers more than ever. For the life of me, I can’t split the hare’s hair to decipher the difference between a Registered Investment Adviser’s fiduciary role vs. a broker-dealer’s “Best Interest” standard. I don’t see any changes to the dog; the SEC just added another flea to it.

At the end of all this is a proposed 4-page handout for customers or a “Disclosure Form CRS,” that every brokerage financial representative or Registered Investment Adviser would be obligated to provide clients and prospects. There are 8 sections to the disclosure that appear to read like an investor “how-to” or educational guide to brokerage and/or investment advisory services, fees and costs, conflicts of interest and account types. Surprisingly, the disclosure documentation appears to be decent financial education material if only clients and prospects will study it. Hey, some people require a product solution to fill a need and thus a transactional relationship works and still must exist. Others require ongoing, holistic financial advice that a fiduciary can provide. The disclosure helps consumers better understand the differences.

I have no clue what the final SEC rule is going to be. In my albeit naïve opinion, until the industry guard dogs discourage endless sales quotas and helps retrain front-line representatives to focus on customer best interests over the fear of failure (and possible job loss), to meet senior management initiatives, I don’t expect much change to current operating procedures.

I’ve observed and been told by investors (including family members), that several brokerage organizations are ‘politely nudging’ or downright threatening (“you won’t be able to work with me if to don’t do this,”) clients to transfer their assets to accounts under a ‘Fiduciary Standard’ which generate fees for the firm and appear to include an immoderate allocation to proprietary products.

So, clients who weren’t paying ongoing fees previously are now doing so. They’re also getting sold out of investments they’ve held for years to be positioned into an asset allocation in a box. Financial big-box retailer compliance departments are going to make sure a Fiduciary or Best Interests Rule is primarily followed to protect the firms they serve. Financial retailers are going to make it their business to morph  any rule into an incredibly profitable venture for their organizations.

I’m glad there’s attention. In some cases, there’s a firestorm around doing what’s highest and best for clients. Even the CFP Board is jumping on the bandwagon. Under a new rule and revised ethics standards that become effective on October 1, 2019, a Certified Financial Planner® mark holder who is employed by a brokerage firm must disclose and manage conflicts of interest and act in a client’s best interest. Listen, this is a big deal.

Many CFPs employed by brokerage firms use the marks to gain credibility with prospects and grease the wheels of the selling process. I mean, if a CFP recommends a product it must be in a client’s best interest, correct? Not necessarily.

Today, CFP Standards include what I perceive as an ‘out-clause’ which outlines expected loyalty to an employer. Ostensibly, the CFP marks aren’t attached to any kind of fiduciary responsibility to the client first unless the scope of the engagement is financial planning.

The revised CFP Board standard doesn’t appear to be going over well with the broker-dealer industry; I find their discourse encouraging. Don’t be surprised to see less Certified Financial Planners employed by brokerage firms over the next few years. Nor will obtaining the marks be paid for or encouraged by these organizations. Frankly, it’s a proper and very bold move by the CFP Board and it makes me proud to maintain the certification.

Bottom line: Should it be so difficult to do what’s in the best interest of the client and still make a respectable living? Common sense portends that doing right by the client should lead to more clients and increased profits. 

Currently, there are multiple bureaucratic hands taking shots at crystalizing or postponing fiduciary or “fiduciary-like” standard initiatives. On a positive note, at least the discussions continue.

Investors must be vocal about what they expect from their financial professionals. They must gain confidence to know what they want, what they expect to foster trust, write it out and share those expectations.

Here are several ways, as an investor, you may forge a path and form a PFS, a “Personal Fiduciary Standard.”

The journey starts with asking yourself tough, self-reflective questions that delve into personal motivations, fears which place you in the shoes of an adviser who you hope would connect with you on a higher, perhaps emotional level. Keep in mind, your needs and concerns are fiduciary in nature. Unless, you don’t want the highest and best for you and your family. Highly unlikely.

For example, I’ve always followed my own ethical compass when it came to directions I’ve taken for clients and their money. I envisioned “what would clients ask for from me?” and then wrote down my thoughts.

I listen to my gut. After more than two decades in the business, I trust my gut to alert me to ethical boundaries crossed.  I made a promise to myself that even if the ethical breach emanated from an employer, I’d still do what I needed to do for clients. Clearly, I was willing to breach the loyalty to a firm over loyalty to a client. I just believed it would never happen. That I’d never need to worry about it. Until I did. I then followed through on my personal promise. You know what I learned? If a broker seeks to take on a fiduciary mentality, his or her career will be in great danger.

Here are several questions I ask(ed) myself. I created them after my first experience at a brokerage firm. My first job in finance as a broker. I was sponsored for my industry licenses by an organization named J.T. Moran, after its founder. The company was the inspiration for the 2000 theatrical movie “Boiler Room,” which starred Vin Diesel in his first major film role.  Little did I know what I was walking into. An unscrupulous penny-stock peddler. A den of thieves. The questions I created for myself back then still work. They’re as effective now as they ever were. They motivated me to flee from that environment in the late 80s. Literally. I walked in early one work day, threw the stuff off my desk into a waste basket and fled out the back of the Garden City, Long Island facility.

  1. Would I personally own or purchase for people I love the same investment or product I suggest to clients?
  2. Would I sell an investment an employer suggested I hold for clients?
  3. Could I represent an employer that expected or allowed every client to own the flavor of the month?
  4. Will I earn more compensation if I offer a specific product or investment over another? How will it affect my judgment?

As an investor and consumer, you require insightful questions which define your expectations from a fiduciary or a professional who has your highest and best interest in mind. Just a few examples to kick-start your process. Consider the series of queries the spirit of the knowledge you wish to gain.

After all, how in heck do you expect regulatory bodies to define “highest and best” if you can’t? The industry can’t seem to pin it all down. So, you must as a client or prospective consumer of financial products. I’m sorry, but this falls responsibility falls on all of us who partner with financial professionals to meet our goals.

  1. Is my financial professional paid more for product A over product B. Why?
  2. Does my financial partner own what is recommended?
  3. Will he or she liquidate or move me away from an investment that no longer serves our needs due to a material change to that investment or our situation, even if it means giving up income?

Investors must perceive themselves as ultimately responsible for the growth and safeguarding of their wealth. Empowerment comes from asking financial partners tough questions and trusting your gut to walk if you don’t like the answers received.

I’ve outlined crucial questions to ask.

“Suitability” guides a broker to recommend an investment that is appropriates for your situation, is not held to the same standard. A broker is required to know your risk tolerance, tax bracket, and time frame for the money you seek to invest. All skeletal in nature. Yet legitimate. Well, it’s suitable. This may be fine for what you require. If there’s a financial product you’re looking to purchase, then suitability is well, suitable for your needs. If there’s something more required like a holistic, ongoing relationship. Think fiduciary over suitability.

Are you a fiduciary? Yes or no?

The Fiduciary Standard is a high calling. It’s there to position the client front and center in the financial advice model, as it should be for every professional who assists consumers with their financial decisions.

How much will I/we pay for your services?

Simple question deserves a simple answer. Unfortunately, not so simple. People share with me their frustration as they’re unclear how their current financial professionals get paid or are compensated for selling investment products.

It’s especially perplexing for mutual fund investors sold multiple share classes and perpetually unclear of how charges are incurred. A clear comprehension of the class share alphabet (A, B, C), is as thick and jumbled as the inside of Campbell’s Soup can. B &C share classes are popular selections on the product-push list. They represent the finest alchemy in financial marketing.

 As consumers are generally hesitant to pay up-front sales loads like in the case of A shares (even though when taking into account all internal fees and expenses, they’re the most cost-effective choice for long-term investors,) B & C shares were created to mollify the behavioral waters.

To avoid having a difficult conversation or facing reluctance about opening your wallet and shelling out 1-4% in front-end charges that reduce the principal amount invested, the path of least resistance is to offer share classes with internal fees, marketing charges and deferred sales charges. Either way you pay.

With B & C shares generally, you pay more. However, big fees reduce returns, they’re stealth. Thus, they feel less painful to invest in (even though they’re not). A financial professional may be compensated hourly, by annual flat fee, a percentage based on assets under management, commissions or perhaps a combination.

Regardless, to make an informed decision, you must understand how your adviser puts food on the table. If you can, get it in writing. There’s no ‘right way’ to be compensated as long as it’s fair and reasonable for services rendered. You also want to understand what motivates your broker or adviser to recommend investment vehicles.

How do you incorporate my spouse, life partner and children when it comes to planning?

You don’t exist in a vacuum. An adviser should maintain a holistic approach to financial planning and that includes communicating with loved ones and teaching children how to be strong stewards of money. The meetings, communication must be ongoing. At least semi-annually.

Why did you select financial services as a career?

This question should be used to gauge a perspective financial partner’s penchant for helping others and passion for his or her role as a mission, not a job. How do you know whether a professional sincerely cares about your financial situation and goals? You’ll know it, intuitively.

What are your outside interests?

A successful life is about balance. This question gets to the weekend and evening person behind the financial professional you observe from behind a desk, charts, book, and computers. You may discover activities you have in common and develop rapport on a personal level, possibly for decades. To gain a complete picture of the kind of person you’re entrusting with your investments is a crucial element of your interviewing process. By the way, it’s not prying. It’s curiosity. Ostensibly, you should like the individual you and your family may be working with, possibly for decades.

Please tell me about your firm’s service standards.

You want to know how many times a year you’ll be meeting with your financial partner whether in person (preferably), over the phone or web meeting like Go-To-Meeting®. Is it quarterly? Every six months? How would you like to communicate as a client? What are your preferences? Will I be receiving calls and e-mails throughout the year about topics important to your financial situation like the market, economic conditions, financial planning, and fiscal changes that may affect us/me?

What is your personal investment philosophy?

You seek to discover whether an individual is towing the employer’s line or does outside research and shares his or her personal opinion based on independent research and study. In other words, does your prospective partner have a passion for ongoing education and learning?

How do you manage for portfolio and investment risks?

Markets can’t be timed. That’s true. However, risk management is about controlling downside risk which can be devastating compared to possible gains. Your broker or adviser should have a strategy you believe in to guard against market storms. Whether it’s a conservative asset allocation right from the beginning, or a specific sell and re-entry discipline to minimize portfolio damage, a risk-management strategy is crucial. Academics and influential financial service providers are on the band wagon when it comes to sell disciplines. Whether it’s Dalbar, the nation’s leading financial services market research firm, or MIT Professor of Finance Andrew Lo, there’s a growing body of work that shows how investors spend most of their investment life (20-30 years), making up for losses, playing catch up. Losses are inevitable. Significant losses must be avoided.

How often do you review my accounts and investments?

With this question you’re attempting to gain understanding of a financial partner’s workload and number of families served. There’s no ‘right’ answer. It’s based on how comfortable you feel with the response. Monthly, quarterly schedules are generally acceptable. Weekly, even better. Now, that doesn’t mean changes will be made. The query is about engagement with and monitoring of investment selections.

How do I/we have access to you and your team?

A caring pro will make sure you possess the ability to text, access to a cell phone number, phone contacts and e-mails of support staff and make you feel comfortable to reach out at any time. You should also expect a prompt response to voice mails – usually within 24 hours or less.

I have no idea when or how all this fiduciary regulatory scramble settles out. I do know however, that the definition of fiduciary begins with you: The client, the customer, the investor.

Questions will help you to define what you want and subsequently find a financial professional you’re comfortable with.

Questions are an integral part of any relationship.

You’re not being nosy.

You’re seeking information to make an informed decision regarding a topic close to your heart: Financial well-being.

No questions asked.

For a PDF copy of these questions along with adequate space to document responses, please click here and download for free, the “The BS (Broker Survival) Guide” or any of the several other guides located there to help you as well.