When people invest - and they focus on eye-popping returns- they forget a very simple fact:

Ultimately - at some point - you will need money for the day when you are no longer working. 

The correct question is: 

How much do you NEED  - for 20, 25, 30 years or more - in retirement?

That’s a much trickier question than how to Make 1,000% gain with THIS stock. 

So … One way that people answer this question is with something called the 4% rule. 

Which means  - in year one of your retirement, you withdraw 4% of the balance - and from then on, as the portfolio value changes, due to growth, withdrawals and inflation - you continue along with that 4% level of withdrawal.

Sounds reasonable, right? 


There are possibly some issues with that - BUT: The bigger point is: You HAVE to know how much you can withdraw every year. You can’t guess.

So what factors go into this?

And I know the thought process here: It’s doing well, so I’ll keep it and when it stops doing well I’ll sell!

Well, that sounds easy doesn’t it? But it’s like all those things that sound easy - if it were, everybody would do it - bada bing, bada boom, and nobody would EVER lose money in the market or own a poor performing investment. 

So that’s where it’s so important to have a plan, and where the 4% rule comes in. 

But here’s a problem with just saying, “I’ll withdraw 4%.”

For starters, that assumes that a portfolio is properly allocated to accommodate for a client’s risk tolerance, time horizons and goals. But, as I just mentioned, the overwhelming majority of portfolios are just a bunch of stuff all cobbled together - for a lot of reasons- but there’s no purposeful strategy behind it. 

In addition, you have to be cautious about today’s situation, with interest rates being kept near zero through 2023 - that means the yield from your bonds will be lower - Falling interest interest rates make bond prices rise and bond yields fall.

That DOES affect the income your portfolio generates.

You might not remember, but there WAS a time, way back in the past, when bonds were considered SAFE! There was the so-called “widows and orphans” portfolio - which consisted of bonds, and was designed to be low risk.

Today, and for a long time, the risk of bonds has been that you will NOT keep up with inflation and will not generate the return you need for retirement. 

So all of this relates back to simply withdrawing 4% every year.

You cannot just throw this into a spreadsheet and think you’ve done your job - this is a job for a REAL financial planner - and not just one who is really an insurance salesperson whose plan shows how you need to buy an annuity.

Another problem with the 4% rule is the reality of spending. 

I can’t tell you how many times a client has nodded in agreement when I’ve presented a financial plan with spending levels they can afford- all through retirement , but later - maybe weeks maybe months - I’ll hear that the client made a big financial decision that was nowhere in their plan. 

We could easily have run the numbers to get a better understanding, but clients - like everyone -else -  can exercise their freedom of choice! That includes freedom to make unwise financial decisions. 

Don’t be that person!!!! Find a fiduciary planner and work with them!!

Now, I totally understand: Legit spending needs pop up. Maybe you need a new roof or that shiny new Tesla sooner than you thought. Maybe you need to take some personal money and invest it into your business. Plenty of examples like that happen all the time, that could throw the 4% rule into disarray. 

So where does that leave you, if you are planning to retire soon, or are retired, and you want to understand how much you can spend, and how much you must have invested?

It keeps coming back to that plan, my friends! 

Start with a comprehensive financial plan that evaluates all aspects of your financial situation. That will give you a baseline of how much you will need, and how much risk you’ll need to take, to generate the necessary return. 

Should you incorporate the 4% rule? Maybe, but it shouldn’t be your default starting point.

Get your FREE copy of “Don’t Let Your Money Kick The Bucket Before You Do” E-book. Put fear & overwhelm to the side to confidently understand what to do with your investments.

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Trading stocks is fun - and potentially lucrative. I know this. After all, stock trading is where I cut my teeth in the finance world.

But retirement investing is a different process than trading. The former involves careful selection of global assets, to be sure you have the right mix to withstand any market condition - and yes, that includes big downturns!

Here’s a column I did for Forbes about investing in non-U.S. stocks. 

Global stocks have lagged domestics in recent years. Much of that is due to outperformance of the U.S.-based FANMAG stocks: Facebook, Amazon, Netflix, Microsoft, Apple, Netflix and Google.

Not only did this lead to the S&P 500 outperforming overseas indexes, but each of those stocks outperformed the index itself, as the image below illustrates.

For the past decade, US stocks have outperformed global stocks. That is a flip from the decade between 2000 and 2009, when large-cap U.S. stocks suffered in comparison to other asset classes, including non-U.S. large cap equities. 

The image below shows performance of the iShares MSCI ACWI ex U.S. ETF, which tracks an index of large- and mid-cap non-U.S. equities, vs. the S&P 500 index.

It’s advisable to hold a diversified portfolio, especially in your retirement accounts. That’s because different asset classes tend to diverge in performance. However, U.S. stocks and international stocks have been showing higher correlation in recent years - meaning their performance is growing more similar. 

For the past 50 years, adding International equities to a domestic-only portfolio decreased volatility, while only slightly decreasing the return.  

If you are investing in a retirement portfolio, take a minute to evaluate whether you are holding a range of asset classes, including non-U.S. equities from developed and emerging markets. 

If you need help evaluating your portfolio, I can help. Contact us here 

Even with marriage equality, LGBTQ couples have unique financial planning challenges.

As a financial planner, I’ve worked with numerous LGBTQ couples and individuals. 

Despite the 2015 Supreme Court decision that allowed marriage equality, significant planning challenges remain. I wanted to take a deeper look at that in my US News & World report column. Here’s what I found

There’s plenty of advice out there about investing and retirement saving. Yet, people continue to make the same old excuses about why they don’t invest and plan for their financial futures. 

Today I’m going to highlight some of the most common excuses I’ve heard over the years. 

Caution: I’m not going to mince words! I’m less concerned about being “nice” and protecting people’s feelings, than I am about pointing out some of the misguided reasons people avoid retirement saving.  

I’m not trying to be mean. But I’ve found that some “tough love” is often better than being overly accommodating. The truth can be hard to hear. 

Buckle up - this might get bumpy! 

  1. I need more education. I hear this one all the time, and it bugs me.  

Free investing and retirement education is everywhere. It’s not difficult to Google fee-only fiduciaries and read their blog posts. You’ll find plenty of tips and resources. 

Every single brokerage, such as TDAmeritrade, Schwab, Vanguard (and many more) offer educational content on their Web sites. 

There are podcasts and YouTube channels run by financial advisors who talk about asset allocation, the economy and investment strategies.

So why do people keep saying they want education, when it’s everywhere?

Here’s my take: People don’t really want education. They just don’t want to make a decision about which advice sources they trust, or how to proceed with investing in the face of uncerainty. (Note: Even though I’m writing this in the midst of the pandemic, when uncertainty is rampant, we all know that life is always uncertain. At times like this, the uncertainty is just magnified.) 

Let’s face it: Educating yourself about investments is tough, and it’s ongoing. This is why there are academic degrees, licensing exams and credentials for people who manage money. Even though I believe it’s possible to get a very good baseline education through self-study, it’s not something that interests most people.

Do you wait to get car repairs until you educate yourself about the workings of the engine? Do you wait to work out until you educate yourself about new findings in kinesiology and nutrition? Do you wait to see a doctor until you educate yourself about the intricacies of medicine - all of it? 

Of course not. 

Don’t make the same excuse when it comes to investing. Yes, I’m all in favor of you learning about your investments. I always explain to clients the pros and cons and risk profiles of each investment, to be sure they understand why a certain asset class has a place in a portfolio. 

But don’t put off getting started because you don’t feel knowledgable. Find an advisor or planner who spends the time to teach you about your investments, and is open to continuing the conversation. 

2. I don’t want to play the market. 

This is related to the education excuse. Some people believe that retirement investing is the same as stock picking and market timing. 

In reality, the practice of retirement investing - or any investing for a long-term goal - is different from trading stocks for a quick profit. 

Unlike many financial advisors, I actually have no problem with clients earmarking certain funds for trading, or play money. I’ve been a stock-trading teacher, and I understand how price and volume action, along with technical indicators, can help determine whether a stock should be bought, sold or left alone. 

However, I never, ever EVER trade client accounts that way. 

Investing and trading are not the same. When you invest, you’re not looking for a quick flip. You’re allocating assets for the long term. 

Asset allocation is not putting together a willy-nilly collection of stocks and calling it a day. 

It is a philosophy that incorporates some very specific asset classes in a very specific way, tailored to your risk tolerance, financial goals and time horizon. These asset classes include large and small domestic stocks; large and small foreign stocks; short-term, high-quality bonds; investable real estate and perhaps some alternatives, such as commodities.

Pic from DFA - benefits of diversification 

If you want to take a flyer on something like cannabis or gold (two popular investments that clients ask for frequently), I’m happy to consult with you, but none of my clients are ever betting their retirement on single assets like that. Broad asset allocation has the best probability of smoothing your return over time, and giving you exposure to the top-performing asset classes at any given time. 

Asset allocation is not “playing the market.” In fact, it’s pretty much the polar opposite. Asset allocation is the way to invest your retirement resources, and is a scientific way of designing your portfolio to best achieve your desired outcome. 

You don’t need to understand stock trading to be a successful retirement investor. 

3. The market is too risky

I understand that it can be scary and nerve-wracking to see big plunges to the downside. 

But I’ve found that many people who fear the market don’t realize that stocks go up more often than they go down. 

Insert DFA “market up” picture here 

Yes, investors can (and almost always do) lose portfolio value in a downturn.  But the mind plays tricks: Investors who are overly fearful of the market only focus on downside risk, and fail to recognize the upside potential. 

As shown in the above image from Dimensional Fund Advisors, between 1926 and 2019, stock indexes had 70 positive years vs. 24 negative years.

But you wouldn’t know that if you talk to someone who is terrified of market risk! 

As an advisor, I’ve focused on mitigating risk. That’s crucially important for anyone who is setting savings goals for retirement. If you take too much risk - which typically means loading up on single stocks or just having a bunch of “stuff” in your portfolio with no rhyme or reason - then you are absolutely endangering your future.

Yet … and it sounds paradoxical …. too little risk is also a problem! 

It’s not a bad thing to be worried about running out of money in retirement. Too many in the Boomer generation failed to save, and many may be forced to accept the reality of scrimping and saving in their old age. It’s sad to see. 

The era of “widows and orphans” bond portfolios is pretty much gone. The time I saw a retirement portfolio with all bonds was six or seven years ago. And that particular person received oil-well royalties, so there was a fairly reliable income source. 

These days, the so-called “conservative” bond portfolio has been replaced with a stockpile of cash. Over and over again, I see new clients who have hundreds of thousands in cash, parked at the bank or in a money market account. 

Sounds safe, doesn’t it? 

Here’s the problem: 

While a cash stash can help you sidestep market whipsaw action in the short term, too much means you won’t keep up with inflation.

Plenty of market history shows that stocks - dividend payers especially - are a good way to stay ahead of inflation. The current inflation rate as of May 2020 is a paltry 0.62%.

A couple points: Some economists believe the current cycle of government cash infusions will result in runaway inflation. 

Also, for retirees, inflation rate of health care is a big concern. 

The price tag of health care in retirement has been growing by about 3.6% per year,  —a critical retirement planning consideration - is increasing by an estimated 3.6% per year, according to research from Fidelity. That number, from early 2019, actually represents a slowdown from previous a previous rate of 12%!

That’s one of the best examples of how inflation can chip away at portfolio value - and real retirement spending power! The stock market is a proven way to grow your hard-earned nest egg, and avoid losses in spending power due to inflation. 

Stop Making Excuses! 

Eventually, the lack of investing will catch up with you. As retirement closer, the speed at which it catches up gets faster. 

But if you are willing to do some behavioral changes, and move past all the mental blocks and excuses, you really can get started on the path toward a better financial future. Yes, even during a pandemic. But it’s like many things: Once you start, you gather momentum, and it becomes easier. 

Doesn’t it sound better to put a little work in today, and have a better future? 

Please note the date this article was written: May, 2020. Smack dab in the middle of all the debates and fights about the pandemic and the political response. 

Far from being tone deaf about the ability to save and make money at this moment, I’m acutely aware: A laser focus on your personal finances is more important now than probably ever before in your lifetime. 

This post lays it out bare. I’ve seen way too many client mistakes, and way too many advisors who silently allow them. I refuse to do that anymore. That’s not the way to help people live their best lives - even in challenging and uncertain times. 

For the past decade, I’ve been a financial planner, working with Boomers who are either retired or planning for retirement. For the decade before that, I helped people understand their stock-market investments and how to profitably invest and trade. 

I’ve seen a ton of sad situations, and some that are just plain dumb. 

But sometimes there are bright spots. 

A few years ago, I was giving a presentation on Social Security at a library in Santa Fe, New Mexico. A woman in her late 60s approached me afterwards, and shared a cautionary tale: As part of the “hippie” generation, born in the 1940s and early 1950s, she enjoyed life as a free spirit, and never worried about saving for her retirement. 

As with many in that generation, age and time caught up with her. She was still healthy, sharp and vibrant, but essentially broke. 

Now, unlike others who default to excuses or magical thinking, this woman was determined to create an income for herself. She launched an editing business, working with book authors to polish their work. She told me she regretted not saving in her younger years, but at least she was taking steps now! 

This woman stuck in my mind because she didn’t just throw caution to the wind, or believe that $10,000 in the bank (or even less) and a monthly Social Security check would sustain her for two decades or longer. I’ve talked to many people with that belief, and it’s flat-out wrong, and very dangerous. 

Basic financial planning - even the DIY, back-of-the-envelope kind - starts with a calculation of expenses. How much do you spend every month on housing, food, clothing, utilities, transportation, entertainment, medical bills, pet care, debt payoff or any of the things you routinely purchase?

In addition to that very straightforward exercise, there are some mindset shifts: 

Some of this sounds harsh, and I understand this. Years ago, I attended a seminar given by a gentleman who is a very successful self-made money manager, a man who himself overcame addictions and other poor choices. He said something I’ve never forgotten: “Financial advisors enable clients’ bad behaviors because they want to keep the business.” 

He’s 100% correct. 

Most people are not accustomed to financial planners calling them out on bad behaviors. That’s a huge problem with the planning industry. Planners want the business, so they are overly forgiving and enabling of clients who do horrible things with their money, or have limiting beliefs and behaviors. 

I’ve seen it myself. A client agrees to the steps laid out in a financial plan, but a month later turns around and buys a new property, or spends thousands of dollars on a piece of equipment for a “business” that makes no money and has zero customers. Not much the advisor can do in this case, but if he or she is managing significant assets for the client - and that could be anywhere from around $200,000 or more - the advisor probably will be reticent with criticism, lest he or she offend the client and they pull their money.

Sadly, the chickens do come home to roost. Even before COVID-19 and the accompanying job losses, furloughs and pay cuts, too many retirees and pre-retirees were taking an unrealistic approach to their future income needs. 

I’m not saying this behavioral shift is necessarily easy. But you can avoid some misery and agony by dropping the wishful thinking, or mere avoidance, and commit yourself to a brighter financial future regardless of what is happening in the world today! 

Just start. It does get better. 

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