Financial Planning

Your Retirement Journey- How It Compares To Climbing Mount Everest (Part 1 of 4)

May 6, 2020 by Hans Blake, CFA, CPA

Avalanche

Reading Time: 3 minutes

The Slippery Slope of COVID-19- Navigating the Bear Market

Sadly, for many retirees, the slippery slope of retirement transition just got a lot more dangerous.

Unfortunately, as the world scrambles to deal with this pandemic medically, the economic fallout is also beginning to be felt. For those senior employees just a few short years away from retirement, it may be necessary to plan for an early exit. Most of us don’t work for companies making masks or vaccines and job security has become a real concern. While our thoughts and prayers are with patients, families, doctors, nurses and first responders, the medical crisis will certainly cause financial hardship for many. What we thought to be a walk in the park or a short hike has just become mountaineering. Retiring during a bear market or recession is something we can plan for, but it is quite different than planning to retire during a bull market.

We founded Intelligent Investing to minimize financial stress to maximize our clients’ lives, especially during these current stressful times. We combine world-class credentials and experience in both financial planning and investment management, along with over thirty different technology integrations to help our clients cope with their major life events.

Climbing Mount Everest successfully has been a goal of many people. Few have attempted it, and fewer still have done so successfully. Mt. Everest was first conquered by Sir Edmund Hillary and Nepalese Sherpa mountaineer Tenzig Norgay in 1953, and Hillary still features prominently on the New Zealand five-dollar bill. Even though Nepal issued a record 381 permits in 2019, last year’s climbing season had a limited number of good weather days, leading many people to set out at once when the skies cleared and the winds seemed calm. Unfortunately, this caused crowding, and at least 11 people died last May, even though most were experienced trekkers.

What caused those deaths, and what lessons can we apply to retirement and investing? There are many parallels between the climbers of Everest and retirees making a retirement transition. We will be covering additional parallels in future blogs, but to start, here’s the first one we observe.

The Descent Is Riskier Than the Ascent

One of the interesting things about Everest is that many deaths occur on the descent, not the ascent. In fact, depending on the years measured, over half of deaths are on the descent, and almost 20% occur to climbers who turn back.

Climbers spend their energy getting to the peak and are tired and less focused on the descent. Many die because they become careless once they reach the summit. After all, the goal is not just to climb to the top, but to make it down the mountain to be able to tell about it.

When it comes to careers and investing, many people have successfully climbed the corporate ladder and have a sizable nest egg. They faithfully contributed regularly to their retirement plan, or perhaps they were fortunate enough to have a pension plan. The natural compounding of their investments over their careers has produced a decent nest egg. Now they have reached the time to successfully spend down their nest egg in retirement or preserve it for the next generation.

Often, these successful executives and pre-retirees come to the realization that they aren’t sure what their next step should be as they perhaps planned more for their European cruise, than their actual retirement goals. When they step back or are forced to exit corporate America, they haven’t thought about how their nest egg will produce their retirement income and whether it will be enough. They haven’t thought about how expensive retirement can be, how many years they will be in retirement, and if their portfolio will be sufficient.

Successfully descending the other side of the retirement mountain and spending down our assets is often riskier than the accumulation phase of our lives. If we slip (go through a bear market or have an emergency need) while we are young, we can recoup the loss through our earning potential and our financial investments have more time to bounce back. In retirement, our income potential has fallen and our time horizon is shorter. The thought of running out of money while in retirement can be scary, and you don’t want to be forced to reclimb the mountain by getting another job, or worse going into debt.

Running out of money in retirement can be disastrous and affects our finances, our lifestyle, our health, and our loved ones. Many people work by choice in retirement, but working out of necessity or going into debt are not great options. The retirement transition is a slippery slope indeed.

Therefore, having a plan for both your ascent and descent is critical to success.

In our next blog, we will cover the next parallel between climbing Mount Everest and transitioning into Retirement.

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Remarriage Can Be a Tough Conversation

March 4, 2020 by Hans Blake, CFA, CPA

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On today’s Intelligent Money Minute, we’ll interview Kathleen Rehl on how remarriage can be a tough conversation. Kathleen gives advice on how to have the conversation of remarriage with your widowed clients. Speaking from personal example, she shares the process of becoming ready to remarry. She also sheds light on the types of conversations she and her new husband have had. Of top priority was the communication with and among their children. Also of importance was discussing their finances (i.e. estate plans, housing, prenuptial agreements, etc.) Maximizing communication with family and a new spouse is imperative because of the deep emotions that can be involved. A helpful article for having this conversation with your client can be found here.

As Kathleen mentioned, money can be a topic that can divide spouses and family members. At Intelligent Investing, one of our unique factors that makes us different is how we strive to unify families in financial communication. We’d love to be the bridge between spouses and multiple generations to make sure everyone is on the same page when it comes to money. To learn more about our unique factors visit What Makes Us Different.

On upcoming podcasts, Kathleen will talk about the three stages of widowhood- Grief, Growth, and Grace, so be sure to subscribe by clicking here.

Kathleen Rehl Bio

Kathleen M. Rehl, Ph.D., CFP®, CeFT® wrote the multi-award-winning book, Moving Forward on Your Own: A Financial Guidebook for Widows. Experiencing widowhood herself, Dr. Rehl empowers widows financially™ and inspires their advisors. Her work has been featured in the New York Times, Wall Street Journal, AARP Bulletin, CNBC, USA Today, U.S. News & World Report, Journal of Financial Service Professionals, Journal of Financial Planning, and other publications. Rehl owned a financial planning firm for 17 years before retiring to her “encore” career. She walks an hour daily, practices yoga, enjoys art and music festivals, writes poetry and makes art, loves her grandsons . . . and continues to evolve on her journey.

Common Mistakes by Pre-Retirees

February 26, 2020 by Hans Blake, CFA, CPA

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Reading Time: 2 minutes On today’s Intelligent Money Minute, we’ll interview Larry Swedroe on common mistakes made by pre-retirees. Larry discusses several mistakes he has noticed made by pre-retirees. To begin, he states the well-known phrase, “Those who fail to plan, plan to fail.” Though a pre-retiree may have a well-thought-out investment plan, a plan must be made for a successful life after retirement. This can create a complex problem because necessary “ingredients” are left out. Important issues to consider are estate planning, long-term care, and elder abuse. Most noted is the need for a good wealth advisor or quarterback. A good wealth advisor incorporates all of the issues and creates a comprehensive plan. In conclusion, the financial advisor should coordinate with all involved: the tax advisor, the estate planning attorney, the family members, and, most importantly, the client. We know you’ve worked hard over the years to accumulate wealth, and you probably find it comforting to know that after your death the assets you leave behind will continue to be a source of support for your family, friends, and the causes that are important to you. But to ensure that your legacy reaches your heirs as you intend, you must make the proper arrangements now. We’d love to grab a coffee to see how we may best serve you and your family. Schedule a short discovery call or meeting We’ll be interviewing Larry on several podcasts regarding markets, passive investing, and diversification, so be sure to subscribe to our Intelligent Money Minute podcasts. Larry was among the first authors to publish a book that explained the science of investing in layman’s terms, “The Only Guide to a Winning Investment Strategy You’ll Ever Need.” He has since authored seven more books.

Larry Swedroe Bio

Since joining the Buckingham Strategic Wealth in 1996, Chief Research Officer Larry Swedroe has spent his time and energy educating investors on the benefits of evidence-based investing. In his role as chief research officer and as a member of the firm’s Investment Policy Committee and Board of Directors, Larry regularly reviews the findings published in dozens of peer-reviewed financial journals, evaluates the outcomes and uses the result to inform the firm’s formal investment strategy recommendations. Larry’s dedication to helping others has made him a sought-after national speaker. He has made appearances on national television shows airing on NBC, CNBC, CNN and Bloomberg Personal Finance. Larry is a prolific writer, contributing regularly to multiple outlets, including Advisor Perspectives and ETF.com. Before joining Buckingham, Larry was vice chairman of Prudential Home Mortgage and senior vice president at Citicorp. Larry holds an MBA in finance and investment from NYU and a bachelor’s degree in finance from Baruch College.

Three Things You Must Share with Your Financial Advisor

February 11, 2020 by Hans Blake, CFA, CPA

Reading Time: 4 minutes I recently had the opportunity of being invited back to the South Carolina Business Review on South Carolina Public Radio to discuss this topic. Mike Switzer interviewed me on the importance of core values in investing. You can hear the interview by clicking here.

You’ve probably heard it said, “You’re the average of the five people you spend most of your time with.” The people around you matter. Especially the ones you are entrusting with your wealth and family. We generally share common beliefs with those who are closest to us. If you’re married, think about where you met your spouse. Most of the time it isn’t random. Typically, there was a common bond, a shared activity, or a mutual friend who introduced you to each other. Now, think about who you ask for recommendations. Typically, I start with my family, and then I may ask some friends on Facebook or some other social media platform. Have you ever stopped to wonder, why we ask them for recommendations? It is likely that we know them, and we trust them. What if your car mechanic gives you some recommendations, or perhaps your dentist or doctor? Depending on your relationship with such person and whether you trust them or not will determine whether you act upon their recommendation. What about when it comes to money and working with a financial advisor who has recommendations. In order for the relationship to work best, there must be a common bond, but we think it goes beyond that. In fact, we think if you are going to work with a financial advisor, you must share three things with them.

You should share common values with your financial advisor.

We don’t mean that if the client is Presbyterian, they shouldn’t work with a Baptist financial advisor. Nor do we mean that you must line up exactly on the political spectrum with your advisor. However, we believe that the client’s core values should closely align with the one who is managing their wealth. Talking about money and families, and sometimes faith can be a very intimate conversation. We believe it best that the client and advisor align.

Simon Sinek says you should start by answering the question, “Why?” People like Martin Luther King Jr., Steve Jobs, and the Wright Brothers had little in common, but they all started with WHY. They realized that people won’t truly buy into a product, service, movement, or idea until they understand the WHY behind it. I don’t have time to go into each one of them in this blog, but our core values are an acronym for the word, “CLIENT.” They are Compassion, Legacy, Integrity, Excellence, Nimbleness, and Truth. They answer the question of “Why we are in business.”

How to Know If You Share Common Values?

When we interview prospects to see if they would be a good fit, we are constantly processing whether we can trust them and if they are understanding the basic tenants of our investment philosophy. At the same time, we are hoping they are listening and asking good questions to decide whether they can trust us with their wealth and whether our process makes sense. If we get any sense the prospect isn’t going to be a good fit in the long run, we’ll probably walk away. We think of this interview process as the dating phase. If you aren’t careful, and just focus on the assets the prospect has, you could end up needing a “financial divorce” down the road, which could prove inefficient and costly. Intelligent Investing has found that the clients we most enjoy working with are those who:

Share our core values and investment philosophy.
Understand our process and how we integrate their financial goals, plan, and risk.
Have wealth we can manage. We are after all a boutique wealth management firm.

Notice the order of those three. Sharing our core values and philosophy is much more important than whether the client has a lot of assets we can manage.

You should share an unbreakable trust with your financial advisor.

If you see headlines about fraud or a financial institution being sued because of misappropriation of funds, and you say to yourself, “I wonder if my financial advisor would ever do something like this” it is time to pull the plug. At Intelligent Investing, speaking the truth in love is one of our core values. Speaking the truth in love means that sometimes we have to have a difficult conversation with a client. Perhaps they are spending too much…perhaps they are being taken advantage of by their children. Whatever the issue, we must have the ability to communicate with them…even though at the time they may not want to hear it. Wars and divorces begin with a lack of trust. If you aren’t comfortable with your dentist or doctor, then pick another one. If you aren’t sure your financial advisor has your best interests in mind as they manage your wealth, then pick another advisor. Life’s too short to miss out on a great experience you could be getting from another professional. We believe that technique and technology are important, but trust is of utmost importance.

You should share a common financial interest with your financial advisor.

I chose this profession because it afforded me the opportunity to build my own family’s wealth by helping other people build (and protect) theirs. Intelligent Investing’s fee is based on a percentage of the assets we manage. We are an independent 100% fee-only fiduciaries who must always act in the best interest of our clients. Intelligent Investing never sells any products (such as annuities or insurance), nor makes any money off of commissions, nor are paid by anyone other than our clients. We believe this creates perfect alignment of interests between us and our clients. When our clients prosper, then we prosper. When our client’s suffer due to inevitable and temporary declines, then we suffer.

Last Thoughts…

So, in conclusion, the three things we think clients should share with their financial advisor are:

Common Values
Unbreakable Trust
Financial Interests

If you aren’t working with a financial advisor who shares these three things with you, we’d love to have a quick coffee and introduce ourselves. We’d be happy to have a short conversation with you to see if we can serve you and your family. The families we can serve best have between $500k to $5M of investable assets. Click here to learn more about our firm, or click the link below to schedule a stress-free call or meeting. Schedule a short discovery call or meeting

Why Widows Are Hot

February 6, 2020 by Hans Blake, CFA, CPA

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Reading Time: 2 minutes

On today’s Intelligent Money Minute, we’ll interview Kathleen Rehl on why widows are hot. During this episode, Kathleen explains why widows are hot and how the future is female. First, she states several statistics concerning the high percentage of widowed/singled women at death. Compared to men, significantly more women are widowed or single when they die. Kathleen also mentions that most of the world’s wealth is being controlled by women today. This is due to many women being beneficiaries of an inheritance. Lastly, Kathleen remarks on the number of women today in higher education. Investors, and professionals alike, should plan on working with women due to the rise in widowhood.

At Intelligent Investing, we understand there is a current shift and the statistics are clear that there will be a rise in widows and widowhood. Here is a link to the book Kathleen mentioned- The Longevity Economy on our blog page. We also have a page dedicated to widows at investedwithyou.com, where you can find information and content geared towards widows and women.

On upcoming podcasts, Kathleen will talk about the three stages of widowhood- Grief, Growth, and Grace, so be sure to subscribe by clicking here.

Kathleen Rehl Bio

How to Help a New Widow

January 1, 2020 by Hans Blake, CFA, CPA

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Reading Time: 2 minutes

On today’s Intelligent Money Minute, we’ll interview Kathleen Rehl on how to help a new widow, and things not to say. Kathleen initially gives the advice to simply listen to a widow. Such a simple gesture may sound easy, but it is often more difficult than expected. Let her recall memories, remembering her husband, and even letting her cry. This simple act of kindness, listening, goes further than one might imagine. Next, Kathleen gives advice on what not to say to a widow. Phrases such as “I’m so sorry for your loss,” or “at least you still have your children, etc.” are not helpful. Instead, these phrases can be more self-focused than thoughtful. A more insightful phrase may be, “I can’t begin to understand your loss, but I’m going to be here with you.” Lastly, Kathleen mentions how much more beneficial specific questions or gestures may be. Asking “How are you eating/sleeping?” or offering to come over for a visit may be greatly appreciated.

Talking about spouses that have passed away can be difficult, but part of the healing process for a widow. Consider removing cliché phrases such as “At least…., and I’m sorry.” and replacing them with heartfelt questions such as “How are you eating? How are you sleeping.” Let the widow know you are going to be there for them in the days and weeks ahead and consider scheduling a coffee or tea to spend genuine time listening to their grief. For more information on widows, visit our website page for widows by going to investedwithyou.com.

On upcoming podcasts, Kathleen will talk about the three stages of widowhood- Grief, Growth, and Grace, so be sure to subscribe by clicking here.

Kathleen Rehl Bio

What Does the New SECURE Act Mean for Me?

December 23, 2019 by Hans Blake, CFA, CPA

Reading Time: 3 minutes The full House passed by a 297-120 vote on December 17, 2019 the year-end spending bill, which includes the Setting Every Community Up for Retirement Enhancement (SECURE) Act. The SECURE Act, HR 1994, is being billed as the most comprehensive retirement security legislation in more than a decade. The Senate voted 71 to 23 to approve the legislation. The president signed it into law on December 21st.

What does the SECURE Act accomplish?

The SECURE Act:

simplifies the 401(k) safe harbor rules;
expands portability of lifetime income options;
allows long-term part-time workers to participate in 401(k) plans;
allows plans adopting by the filing due date to be treated as in effect as of the close of the year;
provides a fiduciary safe harbor for selection of a lifetime income provider;
modifies the treatment of custodial accounts on termination of 403(b) plans;
extends the current required minimum distribution requirements to age 72;
requires disclosures regarding lifetime income; and
modifies the nondiscrimination rules to protect longer-service participants.

How the SECURE Act Affects…

Retirees

Current law requires that participants start withdrawing from their retirement savings accounts at 70.5. The new bill raises that minimum age to 72. The law also changes the maximum age for contributing to a traditional IRA, also currently set at 70.5. This is good for retirees because it delays the time when they have to take their required minimum distributions which are taxed at ordinary tax rates.

Beneficiaries

The SECURE Act would make significant changes to inherited retirement plans like 401(k)s, traditional IRAs, and Roth IRAs. In the past, beneficiaries of these accounts could typically spread the distributions or “stretch” them over their own life expectancy (which could be a long time if the beneficiary was a grandchild for example). However, under the SECURE Act, the “stretch” provision has been removed and the new bill requires most beneficiaries to distribute the account over a 10-year period. This change would accelerate the depletion of inherited accounts for many large IRAs and retirement plans.

Students

The SECURE Act would also expand the uses for 529 accounts, an investment vehicle that helps individuals save for college and certain education costs. Currently, taxpayers who use 529 plan money for anything other than qualified education expenses are subject to a 10% federal tax penalty. However, the new bill allows individuals to use 529 funds for qualified student loan repayments of up to $10,000. This is great for HENRYs and millennials who have large student loans.

Parents

The bill would allow new parents to withdraw up to $5,000 from their retirement accounts to cover qualified costs associated with a new birth or adoption. Since Compassion is one of our Core Values, we are excited about this provision as it may encourage more adoptions.

Employees

Current laws allow employers to exclude their part-time employees from eligibility for a 401(k) plan. However, under the SECURE Act, your employer must allow you to participate in its defined contribution plan if you work at least 500 hours a year and have been at the firm for at least three consecutive years.

The bill also requires defined contributions plans to deliver a lifetime income disclosure to participants. This disclosure would essentially show how much income the lump sum balance in the retirement account may generate–in hopes of encouraging saving.

Employers

The SECURE Act would essentially allow small employers to come together and offer 401(k) plans with less fiduciary liability concern and less cost. The goal is to try to expand small employers’ capability to offer some form of retirement savings to employees.

The Act also offers a new tax credit of $500 to help some smaller employers encourage automatic enrollment into their retirement plan. This small credit could help offset some of the costs of operating a plan at the beginning. According to behavioral finance which is one of our three pillars of financial thought, automatic enrollment has seen great success in increasing plan participation by employees.

Last Thoughts…

The SECURE Act has sweeping and broad implications for financial, tax, and retirement planning. If you aren’t working with a fee-only fiduciary advisor, we’d love to introduce ourselves. If you would like to consider outsourcing your financial stress, please consider giving us a call. We’d be happy to have a short conversation with you to see if we can serve you and your family. Click here to learn more about our firm, or click the link below to schedule an anxiety-free call or meeting. Schedule a short discovery call or meeting

Practical Tips for Lump Sum Recipients

December 18, 2019 by Hans Blake, CFA, CPA

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Reading Time: 2 minutes On today’s Intelligent Money Minute, we’ll interview Rick Ferri on practical tips for lump sum recipients. During this episode, Rick divides lump sums into two different types and explains practical ways to handle both situations. He spends time on the emotional considerations that come with lump sums because there can be regret. Intelligent Investing believes we all have purposes in life and have been given money to help accomplish these purposes while building relationships along the way. We’d love to share the different wealth management options available to you. Read more here. Check out our previous podcasts with Rick on Practical Tips for Pre-Retirees and Three Military Discipline Investing Values. We’ll be interviewing Rick on several podcasts regarding index investing, behavioral finance, and practical tips for retirees, so be sure to subscribe to our Intelligent Money Minute podcasts. Rick Ferri is a fellow CFA Charterholder, Marine veteran, author, and owner of Ferri Investment Solutions. He continues to write books and articles, provide educational webinars, and teach financial lectures.

Rick Ferri Bio

Rick Ferri earned a B.S. in Business Administration and an M.S. in Finance. He also holds a Chartered Financial Analyst (CFA) charter through the CFA Institute. After college, Rick served as a U.S. Marine Corps officer and fighter pilot for 20 years of active duty and reserve service. Rick’s investment career spans three decades and offers a history of empowering people to achieve their goals. He landed in the brokerage industry in 1989 where he learned the wrong way to invest. As a result of 10 frustrating years, Rick founded one of the country’s first low-fee investment advisory firms. Rick’s firm grew to a sizable business over the next two decades due to the explosion of interest in low-fee investing. This growth provided good-paying jobs to dozens of people and allowed Rick to take on business partners with whom he generously shared his equity. Ferri Investment Solutions is Rick’s new firm. This modern concept provides even greater value to investors by “unbundling” adviser services whereby clients pay only for the time it takes to assist them. In addition, Rick’s industry consulting firm helps other advisers build their investment practices, and he has launched Core-4 Portfolios to provide simple model portfolios for use by a wide variety of investors.