Retirement

From Trials to Blessings: The Story of Patch the Pirate

February 18, 2021 by Hans Blake, CFA, CPA

Reading Time: 2 minutes

We never know when unexpected trials will come. Perhaps you’re left wondering why and how these trials could be part of God’s sovereign plan. Back in 1978, Ron and Shelly Hamilton were teaching at Bob Jones University when Ron started to notice reading difficulties in his left eye. After a series of tests, they discovered that he had cancer in his eye. Little did Ron and Shelly know that Ron losing his eye would pave the way to an incredible lifelong ministry of music and song. While at church, the children started asking Ron what’s over his left eye, and he responded that it’s a patch. He took it a step further and told the children to call him Patch the Pirate. Fast forward 4o years later, Majesty Music has produced over 40 adventure series of Patch the Pirate.

Shelly’s story about her husband Ron’s cancer and turning these trials into something beyond their wildest dreams is a humble reminder to trust in God’s bigger plan when the days are dark, scary, and lonely. We’ll be learning more from Shelly on several episodes of Intelligent Money Minute. We wanted to provide you with some background information before we dig deeper into financial related topics such as transitioning a family business, caring for a spouse in retirement, and much more.

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Shelly Hamilton Bio

Shelly Hamilton, the daughter of Frank Garlock, married Ron Hamilton aka “Patch the Pirate” in 1975. They have managed Majesty Music and written sacred music for children and adults since they joined the ministry in 1978. Shelly currently ministers at Majesty Music as pianist, composer, arranger, and recording producer. In 2013, their son killed himself after years of struggle with mental health issues. The family’s public struggle and acknowledgement of mental health issues has reached people around the world. Most recently her family faces a new challenge: Ron Hamilton’s early onset of dementia. Her insight and music will encourage anyone facing the challenges of life.

In January 2018 Majesty Music announced their third generation of leadership. After years of waiting for God’s timing, Ron and Shelly transitioned the ministry over to their son-in-law Representative Adam Morgan and his wife, Ron and Shelly’s daughter, Megan.

Cryptocurrency & How It Works

January 27, 2021 by Hans Blake, CFA, CPA

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Reading Time: 2 minutes

On this episode of Intelligent Money Minute, we interview Matt Hougan, Chairman of Inside ETFs on cryptocurrency and how it works. During this episode, Matt pulls back the curtain and sheds light on the nuances of cryptocurrency. According to Matt, cryptocurrency is the first native way that money can move over the internet. For example, if you go online today and pay your internet bill, it could take multiple days for that money to transfer. Contrast that with a Bitcoin transaction. Matt gives an example of a billion-dollar transaction that settled in less than 10 minutes with a fee of .0007%. There are many misconceptions regarding cryptocurrency. Simply put, it’s a new rail for the modern transfer of money.

I recently read a quote, “Knowledge acquired by reason will dispel ignorance and thus destroy the greatest evil—fear.” As Matt points out, when you hear of something new, it is best to do some research in order to gain knowledge and a better understanding. We think the same holds true of cryptocurrency, blockchain, and alternative asset classes. Just because something is new, doesn’t make it wrong. At the same time, just because it is new, doesn’t mean it’s better. To learn more about our philosophies, go to our philosophy page.

Matt Hougan Bio

Matt Hougan is one of the world’s leading experts on crypto, ETFs, and financial technology. He is Global Head of Research for Bitwise Asset Management, creator of the world’s first cryptocurrency index fund. Hougan is also Chairman of Inside ETFs, the world’s largest ETF conference. He was previously CEO of ETF.com, where he helped build the world’s first ETF data and analytics system. Hougan is co-author of the CFA Institute’s Monograph on ETFs. He’s also a crypto columnist for Forbes, and a three-time member of the Barron’s ETF Roundtable. For more resources from Matt Hougan click here.

The Dangers of Commission-Free ETF Trading

January 14, 2021 by Hans Blake, CFA, CPA

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On this episode of Intelligent Money Minute, we interview Matt Hougan, Chairman of Inside ETFs on the dangers of commission-free ETF trading. Recently, custodians have been offering commission-free trading on ETFs, but many believe this can encourage misbehaving. Matt lays out the big picture in regards to the market and the opportunity. During this episode, he highlights the benefit and the behavioral risk of commission-free trading. The benefit is that those paying commissions will experience a leveling of the playing field. On the flip side, the behavioral risk is resisting the temptation to trade more frequently. Just because you can trade something doesn’t mean you should.

The adage, “There’s no free lunch” continues to ring true today. Custodians will make money somehow, and it is important for you to understand that. Investors should be grateful for the recent drop in commissions, but there is a behavioral risk that is attached to commission-free trading. You can learn more about these dangers and the need for having an investor behavioral coach by visiting our philosophy page.

Matt Hougan Bio

Lessons Learned From The ETF Flash Crash

December 2, 2020 by Hans Blake, CFA, CPA

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Reading Time: 2 minutes

On this episode of Intelligent Money Minute, we interview Matt Hougan, Chairman of Inside ETFs on lessons learned from the ETF flash crash. You’re right to realize that ETFs have different risks than mutual funds. Unlike mutual funds, ETFs trade like stocks so like all equities that day, ETFs traded down during the Flash Crash. There are ways to protect against those sharp downturns by avoiding sleeping limit orders which is true for stocks at ETFs. Once again, Matt Hougan reiterates that ETFs can have a lot of unique advantages compared to mutual funds, but it still requires sensible practices.

There will always be trade-offs in life, and the same thing is true when it comes to trading, risk, and your financial plans. At Intelligent Investing, we have the ability to show you your financial plan and let you choose some of the trade-offs to see how it impacts your plan. For example, what if you were to retire a few years early, what if you wanted to increase your spending in retirement, or perhaps you want to leave a larger bequest as a lasting legacy. We have the ability to show you how changing each of these factors will impact your financial plan’s success rate, and we’d be happy to have a coffee or call to discuss this in detail.

Matt Hougan Bio

Reasons Mutual Funds May Make Sense in Your Portfolio

November 11, 2020 by Hans Blake, CFA, CPA

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On this episode of Intelligent Money Minute, we interview Matt Hougan, Chairman of Inside ETFs on whether mutual funds make sense in your portfolio. Despite being the Chairman of Inside ETFs, Matt Hougan still believes mutual funds have great value in portfolios. For example, mutual funds can be great investments in the retirement space. His reasoning is due to the fact that tax efficiency isn’t as important during retirement and more privacy than ETFs. The inherent transparency of ETFs presents multiple trade-offs like less liquidity and the risk of daily disclosing of one’s portfolio. Some non-transparent ETFs exist, but they are relatively new.

At Intelligent Investing, we currently use mutual funds and ETFs in our portfolios. Since we are independent, we are able to build our own portfolios which drives out a lot of costs. One of our unique factors is to minimize fees, especially portfolio costs. To learn more about our firm and philosophies, visit here and consider scheduling a complimentary coffee or meeting.

Matt Hougan Bio

Women: A Retirement Income Roadmap

October 7, 2020 by Hans Blake, CFA, CPA

Reading Time: 5 minutes

More women are working and taking charge of their own retirement planning than ever before. What does retirement mean to you? Do you dream of traveling? Pursuing a hobby? Volunteering your time, or starting a new career or business? Simply enjoying more time with your grandchildren? Whatever your goal, you’ll need a retirement income plan that’s designed to support the retirement lifestyle that you envision, and minimize the risk that you’ll outlive your savings.

When will you retire?

Establishing a target age is important, because when you retire will significantly affect how much you need to save. For example, if you retire early at age 55 as opposed to waiting until age 67, you’ll shorten the time you have to accumulate funds by 12 years, and you’ll increase the number of years that you’ll be living off of your retirement savings. Also consider:

The longer you delay retirement, the longer you can build up tax-deferred funds in your IRAs and employer-sponsored plans such as 401(k)s, or accrue benefits in a traditional pension plan if you’re lucky enough to be covered by one.
Medicare generally doesn’t start until you’re 65. Does your employer provide post-retirement medical benefits? Are you eligible for the coverage if you retire early? Do you have health insurance coverage through your spouse’s employer? If not, you may have to look into COBRA or a private individual policy — which could be expensive.
You can begin receiving your Social Security retirement benefit as early as age 62. However, your benefit may be 25% to 30% less than if you waited until full retirement age. Conversely, if you delay retirement past full retirement age, you may be able to increase your Social Security retirement benefit.
If you work part-time during retirement, you’ll be earning money and relying less on your retirement savings, leaving more of your savings to potentially grow for the future (and you may also have access to affordable health care).
If you’re married, and you and your spouse are both employed and nearing retirement age, think about staggering your retirements. If one spouse is earning significantly more than the other, then it usually makes sense for that spouse to continue to work in order to maximize current income and ease the financial transition into retirement.

How long will retirement last?

We all hope to live to an old age, but a longer life means that you’ll have even more years of retirement to fund. The problem is particularly acute for women, who generally live longer than men. To guard against the risk of outliving your savings, you’ll need to estimate your life expectancy. You can use government statistics, life insurance tables, or life expectancy calculators to get a reasonable estimate of how long you’ll live. Experts base these estimates on your age, gender, race, health, lifestyle, occupation, and family history. But remember, these are just estimates. There’s no way to predict how long you’ll actually live, but with life expectancies on the rise, it’s probably best to assume you’ll live longer than you expect.

Project your retirement expenses

Once you know when your retirement will likely start, how long it may last, and the type of retirement lifestyle you want, it’s time to estimate the amount of money you’ll need to make it all happen. One of the biggest retirement planning mistakes you can make is to underestimate the amount you’ll need to save by the time you retire. It’s often repeated that you’ll need 70% to 80% of your pre-retirement income after you retire. However, the problem with this approach is that it doesn’t account for your specific situation.

Focus on your actual expenses today and think about whether they’ll stay the same, increase, decrease, or even disappear by the time you retire. While some expenses may disappear, like a mortgage or costs for commuting to and from work, other expenses, such as health care and insurance, may increase as you age. If travel or hobby activities are going to be part of your retirement, be sure to factor in these costs as well. And don’t forget to take into account the potential impact of inflation and taxes.

Identify your sources of income

Once you have an idea of your retirement income needs, your next step is to assess how prepared you (or you and your spouse) are to meet those needs. In other words, what sources of retirement income will be available to you? Your employer may offer a traditional pension that will pay you monthly benefits. In addition, you can likely count on Social Security to provide a portion of your retirement income. Other sources of retirement income may include a 401(k) or other retirement plan, IRAs, annuities, and other investments. The amount of income you receive from those sources will depend on the amount you invest, the rate of investment return, and other factors.
Finally, if you plan to work during retirement, your earnings will be another source of income.

When you compare your projected expenses to your anticipated sources of retirement income, you may find that you won’t have enough income to meet your needs and goals. Closing this difference, or “gap,” is an important part of your retirement income plan. In general, if you face a shortfall, you’ll have five options: save more now, delay retirement or work during retirement, try to increase the earnings on your retirement assets, find new sources of retirement income, or plan to spend less during retirement.

Transitioning into retirement

Even after that special day comes, you’ll still have work to do. You’ll need to carefully manage your assets so that your retirement savings will last as long as you need them to.

Review your portfolio regularly. Traditional wisdom holds that retirees should value the safety of their principal above all else. For this reason, some people shift their investment portfolio to fixed income investments, such as bonds and money market accounts, as they enter retirement. The problem with this approach is that you’ll effectively lose purchasing power if the return on your investments doesn’t keep up with inflation. While it generally makes sense for your portfolio to become progressively more conservative as you grow older, it may be wise to consider maintaining at least a portion in growth investments.
Spend wisely. You want to be careful not to spend too much too soon. This can be a great temptation, particularly early in retirement. A good guideline is to make sure your annual withdrawal rate isn’t greater than 4% to 6% of your portfolio. (The appropriate percentage for you will depend on a number of factors, including the length of your payout period and your portfolio’s asset allocation.) Remember that if you whittle away your principal too quickly, you may not be able to earn enough on the remaining principal to carry you through the later years.
Understand your retirement plan distribution options. Most pension plans pay benefits in the form of an annuity. If you’re married, you generally must choose between a higher retirement benefit that ends when your spouse dies, or a smaller benefit that continues in whole or in part to the surviving spouse. A financial professional can help you with this difficult, but important, decision.
Consider which assets to use first. For many retirees, the answer is simple in theory: withdraw money from taxable accounts first, then tax-deferred accounts, and lastly, tax-free accounts. By using your tax-favored accounts last and avoiding taxes as long as possible, you’ll keep more of your retirement dollars working for you. However, this approach isn’t right for everyone. And don’t forget to plan for required distributions. You must generally begin taking minimum distributions from employer retirement plans and traditional IRAs when you reach age 70½, whether you need them or not. Plan to spend these dollars first in retirement.
Consider purchasing an immediate annuity. Annuities are able to offer something unique — a guaranteed income stream for the rest of your life or for the combined lives of you and your spouse (although that guarantee is subject to the claims-paying ability and financial strength of the issuer). The obvious advantage in the context of retirement income planning is that you can use an annuity to lock in a predictable annual income stream, not subject to investment risk, that you can’t outlive.

Unfortunately, there’s no one-size-fits-all when it comes to retirement income planning. A financial professional can review your circumstances, help you sort through your options, and help develop a plan that’s right for you.

Schedule a short discovery call or meeting

Source: Some of the material comes from Broadridge Investor Communication Solutions, Inc.

Staying on Track with Your Retirement Investments

July 23, 2020 by Hans Blake, CFA, CPA

Reading Time: 4 minutes

Compounding is your best friend

It’s the “rolling snowball” effect. Put simply, compounding pays you earnings on your reinvested earnings. Here’s how it works: Let’s say you invest $100, and that money earns a 7% annual return. At the end of a year, the $7 you earned is added to your $100; that would give you $107 in your account. If you earn 7% again the next year, you’re earning 7% of $107 rather than $100, as you did in the first year. That adds $7.49 to your account instead of $7. In the third year with a 7% return, you’d earn $8 and have a total of $122. Like a snowball rolling downhill, the value of compounding grows the longer you leave your money in the account. In effect, compounding can do some of the work of building a nest egg for you.

The longer you leave your money at work for you, the more exciting the numbers get. For example, imagine an investment of $10,000 at an annual rate of return of 8%. In 20 years, assuming no withdrawals, your $10,000 investment would grow to $46,610. In 25 years, it would grow to $68,485, a 47% gain over the 20-year figure. After 30 years, your account would total $100,627. (Of course, these are hypothetical examples that do not reflect the performance of any specific investment and assume that no taxes are paid or withdrawals are made during that time.)

If your workplace savings plan contributions are made pretax, as most people’s are, compounding really becomes a powerful force. Not having to pay taxes from year to year on either your contributions or the compounded earnings helps your savings grow even faster (though you’ll owe taxes on that money when you start withdrawing from your account). The value of compounded tax-deferred dollars is the main reason you may want to fully fund all tax-advantaged retirement accounts and plans available to you, and start as early as you can. Investing money over time can help compounding produce potentially significant returns. With time on your side, you don’t necessarily have to aim for investment “home runs” in order to be successful.

Diversify your investments

Asset allocation is the process of deciding how to spread your dollars over several categories of investments, usually referred to as asset classes. A basic asset allocation would likely include at least stocks, bonds, and cash or cash alternatives such as a money market fund. The term “asset classes” also may refer to subcategories, such as particular types of stocks or bonds.

Asset allocation is important for two reasons. First, the mix of asset classes you own is a large

factor–some say the biggest factor by far–in determining your overall investment portfolio performance. How you divide your money between stocks, bonds, and cash can be more important than your choice of specific investments. Second, by dividing your portfolio among asset classes that don’t respond to market forces in the same way at the same time, you can help minimize the effects of market volatility while maximizing your chances of long-term return. Ideally, if your investments in one class are performing poorly, assets in another class may be doing better and may help stabilize your portfolio.

Remember that during any given period of market or economic turmoil, some asset categories and some individual investments historically have been less volatile than others. You can manage your risk to some extent by diversifying your holdings amongvarious classes of assets, as well as different types of assets within each class. Taking steps that can help manage the amount of volatility you experience can help you stay with your game plan over the long term.

Take advantage of dollar cost averaging

One of the benefits of participating in your workplace savings plan is that you’re automatically using an investment strategy called dollar cost averaging. With dollar cost averaging, you acquire shares of an investment by investing a fixed dollar amount at regularly scheduled intervals over time. When the price is high, your investment buys less; when prices are low, the same dollar investment will buy more shares. A regular, fixed-dollar investment should result in a lower average price per share than you would get buying a fixed number of shares at each investment interval.

The accompanying graph illustrates how share price fluctuations can yield a lower average cost per share through dollar cost averaging. In this hypothetical example, ABC Company’s stock price is $30 a share in January, $10 a share in February, $20 a share in March, $15 a share in April, and $25 a share in May. If you invest $300 a month for 5 months, the number of shares you would buy each month would range from 10 shares when the price is at $30, to 30 shares when the price is $10. The average market price is

$20 a share ($30+$10+$20+$15+$25 = $100 divided by 5 = $20). However, because your $300 bought more shares at the lower prices, the average purchase price is $17.24 ($300 x 5 months = $1,500 invested divided by 87 shares purchased = $17.24).

In addition to potentially lowering the average cost per share, investing the same amount regularly automates your decision-making, and can help take emotion out of investment decisions.

Stick to your strategy

Try to resist the impulse to change your investment strategy with every news headline or investing tip from a relative or coworker. Timing the market correctly is very difficult; even professionals find it a challenge. Most people fare better by having an investment game plan that can weather good times and bad, and then sticking to it. That doesn’t mean you should simply forget about your investments altogether. At least once a year, you should review your portfolio to see if your choices are still appropriate. Even if your circumstances haven’t changed, market movements can affect how your money is divided among various types of investments. For example, if one type of asset has been very successful, it may now represent too large a share of your holdings. To rebalance your portfolio, you could sell some of an asset that’s now larger than you intended and buy more of a type that is lower than desired. Or you could keep your existing allocation but shift future investments into an asset class you want to increase. But if you don’t review your holdings periodically, you won’t know whether a change is needed.

Schedule a short discovery call or meeting

Source: Some of the material comes from Broadridge Investor Communication Solutions, Inc.

Financial Planning: Helping You See the Big Picture

July 16, 2020 by Hans Blake, CFA, CPA

Reading Time: 3 minutes

It starts with your goals

Do you picture yourself owning a new home, starting a business, or retiring comfortably? These are a few of the financial goals that may be important to you, and each comes with a price tag attached. That’s where financial planning comes in. Financial planning is a process that can help you target your goals by evaluating your whole financial picture, then outlining strategies that are tailored to your individual needs and available resources.

Why is financial planning important?

A comprehensive financial plan serves as a framework for organizing the pieces of your financial picture. With a financial plan in place, you’ll be better able to focus on your goals and understand what it will take to reach them.

One of the main benefits of having a financial plan is that it can help you balance competing financial priorities. A financial plan will clearly show you how your financial goals are related–for example, how saving for your children’s college education might impact your ability to save for retirement. Then you can use the information you’ve gleaned to decide how to prioritize your goals, implement specific strategies, and choose suitable products or services. Best of all, you’ll know that your financial life is headed in the right direction.

The financial planning process

Creating and implementing a comprehensive financial plan generally involves working with financial professionals to:

Develop a clear picture of your current financial situation by reviewing your income, assets, and liabilities, and evaluating your insurance coverage, your investment portfolio, your tax exposure, and your estate plan
Establish and prioritize financial goals and time frames for achieving these goals
Implement strategies that address your current financial weaknesses and build on your financial strengths
Choose specific products and services that are tailored to help meet your financial objectives*
Monitor your plan, making adjustments as your goals, time frames, or circumstances change

Some members of the team

The financial planning process can involve a number of professionals.

Financial planners typically play a central role in the process, focusing on your overall financial plan, and often coordinating the activities of other professionals who have expertise in specific areas.
Accountants or tax attorneys provide advice on federal and state tax issues.
Estate planning attorneys help you plan your estate and give advice on transferring and managing your assets before and after your death.
Insurance professionals evaluate insurance needs and recommend appropriate products and strategies.
Investment advisors provide advice about investment options and asset allocation, and can help you plan a strategy to manage your investment portfolio.

Remember, the most important member of the team, however, is you. Your needs and objectives drive the team, and once you’ve carefully considered any recommendations, all decisions lie in your hands

Why can’t I do it myself?

You can, if you have enough time and knowledge, but developing a comprehensive financial plan may require expertise in several areas. A financial professional can give you objective information and help you weigh your alternatives, saving you time and ensuring that all angles of your financial picture are covered.

Staying on track

The financial planning process doesn’t end once your initial plan has been created. Your plan should generally be reviewed at least once a year to make sure that it’s up-to-date. It’s also possible that you’ll need to modify your plan due to changes in your personal circumstances or the economy. Here are some of the events that might trigger a review of your financial plan:

Your goals or time horizons change
You experience a life-changing event such as marriage, the birth of a child, health problems, or a job loss
You have a specific or immediate financial planning need (e.g., drafting a will, managing a distribution from a retirement account, paying long-term care expenses)
Your income or expenses substantially increase or decrease
Your portfolio hasn’t performed as expected
You’re affected by changes to the economy or tax laws

Common questions about financial planning

What if I’m too busy?

Don’t wait until you’re in the midst of a financial crisis before beginning the planning process. The sooner you start, the more options you may have.

Is the financial planning process complicated?

Each financial plan is tailored to the needs of the individual, so how complicated the process will be depends on your individual circumstances. But no matter what type of help you need, a financial professional will work hard to make the process as easy as possible, and will gladly answer all of your questions.

What if my spouse and I disagree?

A financial professional is trained to listen to your concerns, identify any underlying issues, and help you find common ground.

Can I still control my own finances?

Financial planning professionals make recommendations, not decisions. You retain control over your finances. Recommendations will be based on your needs, values, goals, and time frames. You decide which recommendations to follow, then work with a financial professional to implement them.

Schedule a short discovery call or meeting