Retirement Answer Man

Working towards retirement can feel like rafting a river full of dangerous rapids. As you flow down the river of your life, your constantly having to navigate events that threaten to turn your life upside down. Unemployment, death, divorce, college costs, healthcare, recessions, corrections, inflation and countless others can put you on the rocks. This week, I discuss how to "self rescue" if the rapids of life put you into the water.

INVEST WISELY  The Folklore of Finance: Beliefs That Contribute to Investors’ Failure

Last week I read article in the New York Times discussing the release of a study by the State Street Center for Applied Research. It's titled:

The Folklore of Finance: Beliefs That Contribute to Investors’ Failure

The 2 year study tried to answer the question: "What does true investment success look like?"

Interestingly, according to the article, instead,  they found "that the way individual and professional investors made investment decisions was so skewed that achieving both high returns and long-term objectives was nearly impossible."

  • In the Podcast I discuss some of their findings, including
  • Overconfident in abilities
  • Unable to stay focused on long term objectives
  • Short term noise
  • Investors want to invest with a long time horizon yet react to short-term swings that derail the strategy
  • Come to distrust their advisors
  • Focus on the noise
  • Focus on short term results
  • A Culture of “beating the markets”

The study found that financial services firms spent 60 percent of their capital expenditures on resources to help generate short-term high performance. 60 Percent!! As a veteran of a major financial firm, I can attest that the value proposition of most major firs is that they can predict markets and guide you through them. I've always found this funny...having a value proposition based on predicting the future.

Better, I think, to accept the uncertainties of the world, have a prudent process and focus having lots of little conversations so you can adjust as life unfolds.

PLAN WELL   How to Ride the Rapids Towards Retirement

If you've every been on  a rafting trip you're probably familiar with the term "self rescue". How to self rescue is a talk given by your rafting guide before you venture onto the river. The Guide makes it very clear. If you get thrown into the what, do NOT wait to be rescued. It is YOUR responsibility to rescue yourself.

Self rescue involve 4 steps that you can use to rescue your financial future:

Get to the Surface

  • Stabilize your cash flow
  • Self assess your financial health (skills, assets, debts)
  • Clearly define your 1 year objective

Take a deep breath (you may be pulled down again)

  • Build some cash reserves
  • create margin in your cash flow (increase income/cut expenses)

Float down river

  • Take a little time to reflect.
  • Set clear 1, 3, and 5 years objectives
  • Identify initial action steps

Start to Swim

  • Learn from others
    • Seek out fellow travelers that you can emulate
    • Learn from online resources and books
  • Find a guide to help you navigate the rapids

Being thrown into the rapids by life can be scary. It's okay. You can self rescue. I know you can.

What Rapid Are You Most Afraid of?

Direct download: Retirement_Answer_Man_40.mp3
Category:general -- posted at: 7:29pm CST

Working towards retirement can feel like rafting a river full of dangerous rapids. As you flow down the river of your life, your constantly having to navigate events that threaten to turn your life upside down. Unemployment, death, divorce, college costs, healthcare, recessions, corrections, inflation and countless others can put you on the rocks. This week, I discuss how to "self rescue" if the rapids of life put you into the water.

INVEST WISELY  The Folklore of Finance: Beliefs That Contribute to Investors’ Failure

Last week I read article in the New York Times discussing the release of a study by the State Street Center for Applied Research. It's titled:

The Folklore of Finance: Beliefs That Contribute to Investors’ Failure

The 2 year study tried to answer the question: "What does true investment success look like?"

Interestingly, according to the article, instead,  they found "that the way individual and professional investors made investment decisions was so skewed that achieving both high returns and long-term objectives was nearly impossible."

  • In the Podcast I discuss some of their findings, including
  • Overconfident in abilities
  • Unable to stay focused on long term objectives
  • Short term noise
  • Investors want to invest with a long time horizon yet react to short-term swings that derail the strategy
  • Come to distrust their advisors
  • Focus on the noise
  • Focus on short term results
  • A Culture of “beating the markets”

The study found that financial services firms spent 60 percent of their capital expenditures on resources to help generate short-term high performance. 60 Percent!! As a veteran of a major financial firm, I can attest that the value proposition of most major firs is that they can predict markets and guide you through them. I've always found this funny...having a value proposition based on predicting the future.

Better, I think, to accept the uncertainties of the world, have a prudent process and focus having lots of little conversations so you can adjust as life unfolds.

PLAN WELL   How to Ride the Rapids Towards Retirement

If you've every been on  a rafting trip you're probably familiar with the term "self rescue". How to self rescue is a talk given by your rafting guide before you venture onto the river. The Guide makes it very clear. If you get thrown into the what, do NOT wait to be rescued. It is YOUR responsibility to rescue yourself.

Self rescue involve 4 steps that you can use to rescue your financial future:

Get to the Surface

  • Stabilize your cash flow
  • Self assess your financial health (skills, assets, debts)
  • Clearly define your 1 year objective

Take a deep breath (you may be pulled down again)

  • Build some cash reserves
  • create margin in your cash flow (increase income/cut expenses)

Float down river

  • Take a little time to reflect.
  • Set clear 1, 3, and 5 years objectives
  • Identify initial action steps

Start to Swim

  • Learn from others
    • Seek out fellow travelers that you can emulate
    • Learn from online resources and books
  • Find a guide to help you navigate the rapids

Being thrown into the rapids by life can be scary. It's okay. You can self rescue. I know you can.

What Rapid Are You Most Afraid of?

Category:general -- posted at: 7:26pm CST

If you're working towards retirement you know that investing wisely is a key part of reaching your goals. The problem is, investing means putting your money at risk. That's stressful. As a result, many of us tell ourselves lies or believe "trues" that can be dangerous to our financial future. In this episode, I'll discuss 7 lies we tell ourselves about investing and how to avoid them.

INVEST WISELY

The 7 Lies We Tell Ourselves About Investing

  1. There is too much uncertainty right now to invest
  2. I'm not wrong, the market is
  3. Thinking the current trend will continue
  4. I just need to hold a losing investment until I get back to even
  5. Past performance can predict future results
  6. I just need to find an investment guru
  7. Investing alone will make me wealthy

How to Avoid Them

  1. Come to peace with the fact that the future is unknowable
  2. Educate yourself about how investment markets work
  3. Use a sound process for investing
  4. Diligently monitor and adjust your plan as your life unfolds

PLAN WELL

Last month I conducted my 1st annual listener survey. A big thank you to all that participated.

Here are some interesting facts about you:

  • 100% of you are male (do ladies not take surveys!!!)
  • 73% of you are over 50 (makes sense)
  • 73% of you have been married over 20 years (great job!!)
  • On average you have 3 children
  • 42% of you say you never plan on retiring (I'm with you on this)
  • Top retirement concerns include
    • Investing and the economy
    • Healthcare costs
    • Running out of money
  • Top retirement goals include
    • Spending time with spouse
    • Spending time with family
    • Travel

Some of your top questions you need answered are:

  • What's the best way to invest for income?
  • When is a will sufficient (without a trust)?
  • When should I start social security?
  • How do I create passive income?
  • What is the right portfolio mix during the different stages of retirement?
  • Will the popularity of index investing cause more investment bubbles?

In future episodes, I'll work to answer each one of these questions. 

What is the #1 Thing You Struggle with As You Work Towards Retirement?

Tell me in the form below and I'll try to help.

Direct download: 39_Retirement_Answer_Man.mp3
Category:general -- posted at: 7:27pm CST

Category: -- posted at: 8:54am CST

I'm convinced that the most stressful part of planning for and living in retirement is that we don't know how to balance living well today, while not sacrificing tomorrow. As a result, most of us live out of balance.  Some of us are so worried about tomorrow that they sacrifice their current life in order to be "prudent". Others "live for the day", assuming without a thought for their future.  both are wrong. In this episode, I talk about my #1 retirement planning tool to help other find this delicate balance.

Invest Wisely--Investing Potholes in November and December

If you're planning on making large investments in your taxable accounts be careful. 

In December, most pooled investments, like mutual funds, distribute to shareholders the capital gains and dividends they've accumulated throughout the year. If you buy one of these products in a taxable account before this distribution, you could have a tax liability for capital gains that were realized before you even owned the fund. 

In this episode, I discuss how this works and some things you can do to avoid a potential nasty tax surprise.

Plan Well--My #1 Retirement Planning Tool to Help People Find Balance

  • Can I afford to retire a year earlier?
  • Do I need to change my spending plan after this market correction?
  • Can I save less now and still retire comfortably?
  • Do I need to take so much investment risk?

These are some of the frustrating questions that people struggle with every day as they plan for retirement. About 16 years ago, I discovered a tool to help me help people answer these questions and confidently live a more balanced life.It's called Monte Carlo engine. 

Today, I've integrated it into my Plan Well process to help other make smarter financial decisions and find some balance between living well today without sacrificing their tomorrow.

Like most tools, some are better than others and much of it's usefulness is dependent upon the skill of the user.

In this episode, I use a planning example to demonstrate how I use it and some of it's advantages and drawback. 

Note: Normally just read these show notes, it's best to listen to this one. Just click on the audio play at the bottom of this post.

Here is the Fact Set for John Smith

  • Age 55
  • Retirement goal 60
  • Investment assets $2,000,000
  • Retirement lifestyle goal, $100,000 annual 
  • Retirement lifestyle goal #2, $70,000 RV at age 60
  • Life expectancy, age 90
  • Target Portfolio, balanced II

To see the full report that I discuss, click here.

How Not to Use It

  • It's not a one time evaluation tool (you can't set it and forget it)
  • It does not determine or predict results
  • It can't overcome bad inputs or assumptions

How to Use It

  • As a important part of your annual financial review
  • As a tool to help you prioritize competing goals
  • As a tool to help you evaluate tradeoffs between competing priorities
    • Spending/Saving
    • Working/Retiring
    • Risk/Reward
    • College/Retirement
    • Giving/Investing
  • As compass to help evaluate and correct course as your life unfolds
  • As a guide an warning system to help you know when your plan may be unsustainable
  • To provide more color on the long-term impact of today's financial choices

There is no tool that will solve for all the uncertainty in your life or the world. 

The best we can do is acknowledge what we don't know (can't know) and use a sound compass to help guide our life's journey.

 

"He who is enslaved to his compass, will enjoy the freedom of the seas"

Ken Davis

Are You Confident in Your Compass?

Direct download: 38_Retirement_Answer_Man.mp3
Category:general -- posted at: 9:18pm CST

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