A Positive Viewpoint – The American Tailwind

It’s common practice for the president or CEO of a company to include a letter to shareholders in the annual report. Berkshire Hathaway’s chairman and CEO, Warren Buffett, doesn’t buck the trend.

His annual letter (http://www.berkshirehathaway.com/letters/2018ltr.pdf) captures plenty of attention, and this year was no exception. The focus is on the investments and operating performance of Berkshire Hathaway, but the Oracle of Omaha also includes many sound principles for wealth creation as well as his general thoughts about the U.S. economy.

Buffett’s record

From 1965-2018, the market value of Berkshire Hathaway has posted a compounded annual gain of 20.5%, more than double the S&P 500’s advance, which averaged 9.5%, including reinvested dividends.

There are two things that pop out here. First, Buffett’s enviable record and his ability to create long-term wealth using time-tested principles. Second, the S&P 500’s record illustrates that a well-diversified stock portfolio has been a critical component of a long-term financial plan.

In case you’re wondering, Berkshire Hathaway’s overall gain has been 2,472,627% versus the S&P 500’s still-impressive 15,019%.

One more data point – Buffet continues to perform well, topping the S&P 500 Index in eight of the last 11 years.

Focus on the forest–not the trees

Your financial plan is comprised of many parts. This would equate to what Buffett calls the “economic trees.” In other words, let’s not get to caught up on any one investment.

“A few of our trees are diseased and unlikely to be around a decade from now. Many others, though, are destined to grow in size and beauty,” Buffett writes.

He won’t get every investment right. Neither will we. Berkshire holds a substantial position in Kraft Heinz (KHC), whose shares recently tumbled after the company delivered poor results and slashed its dividend.

But, if we review the portfolio as we’d view the forest, we find a diversity of trees, wildlife, and plants. It’s a work of beauty. Your portfolio is built from the bottom up. Like the forest it’s very diversified, and it is created with your financial goals in mind.

As Buffett opines (and we agree), “I have no idea as to how stocks will behave next week or next year. Predictions of that sort have never been a part of our activities.”

That said, how did the 19.8% drop in the S&P 500 Index (September peak to Dec 24th trough) sit with you? With your input, we do our best to gauge your tolerance for risk. If you found yourself fretting over the volatility, let’s talk.

On the other hand, if you slept soundly, it would suggest your investment mix in relation to risk is on target.

“At Berkshire, the whole is greater–considerably greater–than the sum of the parts.” We feel the same way about your financial plan.

The American tailwind

Warren Buffett is bullish on America.

In 1942, he invested $114.75 in three shares of Cities Service preferred stock. At the time, the country was mobilizing for what would be a massive war effort.

If Buffett had invested his $114.75 into a no-fee S&P 500 index fund, and all dividends had been reinvested, his stake would have grown to $606,811 (pre-taxes) on January 31, 2019 (the latest data available before the printing of his letter).

The U.S. was victorious in WWII, but challenges never cease.

We’ve endured the cold war, the divisiveness of the 1960s, OPEC’s oil embargo, double-digit inflation, soaring interest rates, a rising federal deficit, the tragedy of 9-11, the war on terrorism, the financial panic of 2008, the ensuing Great Recession, falling home prices, and more.

Let’s say that you had had the foresight to see the oncoming explosion in the federal deficit, one that is up 40,000% over the last 77 years.

“To ‘protect’ yourself,” Buffett said, “You might have eschewed stocks and opted instead to buy three ounces of gold with your $114.75. And what would that supposed protection have delivered? You would now have an asset worth about $4,200.” Compare that to the performance of the S&P 500!

What is this nation’s secret sauce? The answer is complex and difficult; yet, the overarching theme lies in front of us.

The experiment called the United States has birthed and attracted the best and the brightest. Freedom and opportunity are its calling cards. Today, we are the wealthiest nation on Earth, and we continue to ride the wave of innovation and enjoy the benefits.

But, is that wave about to crash on the shore?

A recent piece by Morgan Stanley entitled, Millennials, Gen Z and the Coming ‘Youth Boom’ Economy, complements Buffett’s optimistic viewpoint. The population of the Millennials will overtake the Baby Boomers this year, and “Gen Z, born between 1997 and 2012, will overtake the Millennials as the country’s largest cohort by 2034,” it said. For the U.S. economy, “The demographic tailwinds created by these high-population cohorts could be significant, delivering the kind of ‘youth jolt’ that the Baby Boomers were famous for.”

Sure, we can’t know when the next recession will ensue or some of the challenges we’ll face as a nation in the coming years. Yet, as Buffett sums up his annual letter, “Over the next 77 years, the major source of our gains will almost certainly be provided by The American Tailwind. We are lucky–gloriously lucky–to have that force at our back.”

Call us at (804) 277-9734 or email croberts@financialfreedomplanners.com for more information.

Financial Freedom Planners

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HOW TO SPEND MONEY DURING THE HOLIDAYS WITH MORE JOY & LESS STRESS

The upcoming holiday season can be joyful, but many people find it one of the most stressful periods of the year. Most of us are in the Spend Money/Buying Mode until the New Year begins, and then need to deal with the financial aftermath.

As a father of three and 2 grandchildren, I have some experience at this…the “I Wantitis” (a technical financial planning term) we experience with our kids, and these items add up to hundreds, and perhaps thousands of dollars at year end. We’ve heard how friends already have it, the cool kids have it, I’ll take care of the new pet, etc., etc.

Then there’s us, the “adults.” It’s very easy to fall prey to the myriad ways merchants help us decide to part with our money. Generally with us adults, the price tags of these items go up considerably.

This article is not to judge, nor is it going to discuss coupons, timing sales, or other ways to still spend money, albeit a bit less. Is it possible to spend money during the holidays without feeling guilt, stress, or weakening our financial situation?

We believe the answer is yes, absolutely, and have some thoughts about how to accomplish this. If you’re still with me, let’s explore some ideas and concepts to help you get through the holidays with less stress and more joy in your life.

Be Conscious and be Intentional

Having just downsized as an “empty nester,” my wife and I had the opportunity to sift through piles and piles and piles of “Must-Have” items that diminished our finances over time. It’s astounding how much of it became meaningless over time, and ended up donated, auctioned or thrown away. I mean a LOT!

Stuff is highly overrated, and in retrospect wish we had done things differently. We, like many, got swept up with “I Wantitis” as we raised our family, both our children as well as ourselves. For a variety of reasons we have started to pay much closer attention to our spending.

And guess what? The experience has been great! We are spending dramatically less, get much less stuff, and the stuff we get we really appreciate or need. We feel much more empowered and in control of our money.

Holiday time (Christmas for us) is a real test for our family and our approach to spending. More is not always better. Here are some thoughts on ways to be more intentional and conscious about your shopping and spending:

Step #1. Set a Dollar Limit for Spending

You may be saying to yourself, duh! However this is a REALLY important step most of us don’t take, particularly during the holiday season. Retailers are really really (really) good at convincing you to buy their stuff.

For example, how many ads do you think you see in a given day? Digital marketing experts estimate that most Americans are exposed to around 4,000 to 10,000 advertisements each day! It is likely even more during the holiday season.

If you don’t set a strict upper limit, most of us are likely to spend more than we want to or should.

WHEN SHOULD YOU SET THAT LIMIT?

  1. Decide at the beginning of the year how much you’re going to spend during the
    end-of-year holidays.
  2. Set up a separate “Holidays” bank account.
  3. Save to it incrementally from each paycheck throughout the year.

If you wait until holiday time to figure out how much you want to spend on the holidays,
there are going to be all sorts of external pressures to spend more. But think about how easy it’d be in January, when you’re not all amped up for the holidays, to think rationally and responsibly about spending during the next holiday season?

HOW DO YOU CHOOSE THAT LIMIT?

Holidays are a financial goal just like many other important things: travel, saving for
retirement, saving for a down payment, paying for your kids’ private school, etc.

So we should be approaching this the way we approach saving for any kind of goal: Consciously and Intentionally.

Holiday spending is not as “mission critical” as say, the house payment, food, etc. We categorize holiday spending as discretionary spending. In other words, it follows essential Living Expenses and other higher-priority discretionary spending.

If you’re looking for some guideline, the Better Business Bureau and Clearpoint Credit Counseling Solutions offer a holiday budget calculator based upon your income. For example, if your gross annual income is $50,000, the calculator will give you a recommended holiday budget of 1.5 percent of your annual income. From there, you can allocate how much you want to spend on gifts, holiday parties, travel and more.

Step #2. Keep a List of Stuff You Want to Buy

This accomplishes many things, and they’re all positive. Some of them are:

  1. Lists build anticipation of finally getting the gifts. Anticipation is a large part of the joy you get from spending money, and even more so if you’re intentional about it.
  2. Lists give us time to think about buying/spending decisions.
  3. Lists turn the eventual gifts into a treat. Treats bring joy.

Step #3. Prioritize that list

Prioritizing benefits you in two ways:

  1. You can stay within my spending limit, because you know which items you can’t buy without sacrificing much enjoyment.
  2. You are more likely to get the Most Awesome out of every Christmas dollar you spend.

I don’t know about you, but I really hate it when I spend money on something that, disappointingly soon, isn’t that useful or enjoyable after all. I don’t like that sense of wasted money. Prioritizing and only buying the top priorities limits that disappointment and sense of waste.

Spend Your Time and Energy as Meaningfully as Your Money

Some people really get into Black Friday, running spreadsheets to find the best deals, etc. Personally that makes me turn into a cold sweat even thinking about it. We all have limited amounts of time, energy and focus for dealing with our finances. Personally I’d rather spend those resources figuring out our values, and what is most meaningful to us…in other words, be intentional!

If you are looking for hourly or project-based financial advice with no conflict of interest, we can help at Financial Freedom Planners!

Smart Choices Today – More Choices Tomorrow!

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Tax Traps to Avoid in Retirement

Since we celebrated our nation’s birthday earlier this month, it’s only fitting to quote one of our founders:

“Our new Constitution is now established, and has an appearance that promises permanency; but in this world, nothing can be said to be certain, except death and taxes.”

It’s a quote that comes down to us from Benjamin Franklin, who uttered the phrase in 1789.

Taxes–federal, state, local, sales tax, property tax, gasoline tax, payroll tax, tolls, fees, taxes on capital gains, dividends and interest, gift tax, inheritance tax, and cigarettes and alcohol. There has even been a rising chorus that is calling for a special tax on junk food. Yikes!

Yes, Ben Franklin nailed it. We can’t escape taxes.

If you have already retired, you are aware that taxes don’t end when retirement begins. For those who are nearing retirement, it is important to recognize, plan for, and minimize the tax bite that awaits.

Before we jump in, let me say that this is a high-level summary. It’s designed to educate and avert surprises. Planning for tax outlays doesn’t reduce the discomfort that goes with paying Uncle Sam. But preparation can reduce the tax bite and eliminate unexpected surprises.

As I always emphasize, feel free to reach out to me with specific questions, or consult with your tax advisor.

That said, let’s get started.

1. Estimated quarterly tax payments may be required

If you have never been self-employed, you are accustomed to having federal, state (if your state has an income tax), and payroll taxes withheld from each paycheck.When you stop working, there are no more W-4s to complete and no one is withholding taxes for you. But that doesn’t absolve you of your year-end tax liability.You can make estimated payments each quarter. You can also have taxes withheld from your pension, social security, or IRA distribution.

If you have yet to file for social security, you may choose to have Social Security withhold 7%, 10%, 12% or 22% of your monthly benefit for taxes. Or you may decide not to have anything withheld.

But make sure enough is withheld or your estimated quarterly payments are sufficient. Otherwise, you may face a penalty.

Does it sound complicated? You don’t have to go it alone. Tax planning is a part of retirement income planning. If you have any concerns or questions, please reach out to me.

2. Social security may be taxed 

If you file as an individual and your combined income (adjusted gross income + nontaxable interest + half of your Social Security benefits) is between $25,000 and $34,000, you may have to pay income tax on up to 50% of your benefits.If the total is more than $34,000, up to 85% of your benefits may be taxable.

If you file a joint return and you and your spouse have a combined income that is
between $32,000 and $44,000, you may have to pay income tax on up to 50% of your benefits. If combined income is more than $44,000, up to 85% of your benefits may be taxable. (SSA.gov Benefits Planner: Income Taxes and Your Social Security Benefits).

Additionally, 13 states–Colorado, Connecticut, Kansas, Minnesota, Missouri, Montana, Nebraska, New Mexico, North Dakota, Rhode Island, Utah, Vermont and West Virginia–tax Social Security. Fortunately for most of our clients that live in Virginia, Virginia does not tax Social Security.

3. Beware of the required IRA minimum distribution

Let me put this right up front: failure to take the required distribution could subject you to a steep penalty.

Required minimum distributions (RMDs) are minimum amounts that retirement plan account owners must withdraw annually starting with the year they reach 70½ years of age or, if later, the year in which they retire.

However, if the retirement plan account is an IRA or the account owner is a 5% owner of the business sponsoring the retirement plan, RMDs must begin once the account holder is 70½, regardless of whether he or she is retired (IRS: Retirement Plan and IRA Required Minimum Distributions FAQs).

Distributions are not required from a Roth IRA.

The first payment can be delayed until April 1 of the year following the year in which you turn 70½. For all subsequent years, including the year in which you were paid the first RMD by April 1, you must take the RMD by December 31 of the year.

The RMD rules also apply to SEP IRAs and Simple IRAs, 401(k), profit-sharing, 403(b), 457(b), profit sharing plans, and other defined contribution plans.

If you expect to have large RMDs that could push you into a higher tax bracket, it may be beneficial to begin taking distributions prior to 70½. Or, you could convert some of your IRA into a Roth, which will help shelter gains and future distributions from taxes. You pay a tax upfront, but it’s one strategy that can help minimize taxes long-term.

4. The hidden cost of selling your primary residence 

Downsizing can generate cash and reduce your daily expenses. But beware that it may also trigger a tax liability.

If you’ve lived in your primary residence for at least two of the last five years prior to selling, you can exempt up to $250,000 of the profit from taxes if you are single and up to $500,000 if you are married. If you are widowed, you may still qualify for the $500,000 exemption (IRS: Publication 523 (2017), Selling Your Home).

The sale may also trigger the 3.8% tax on investment income. It’s a complex calculation that can ensnare single filers who have net investment income and modified adjusted gross income above $200,000 and $250,000 for married filers. (IRS: Questions and Answers on the Net Investment Income Tax).

The decision to sell shouldn’t be strictly governed by the tax code. However, it’s important to understand the tax ramifications. Timing income streams might be beneficial if a sale will trigger a taxable event.

There are other methods to lower your taxes, including charitable donations. How we structure retirement income, your investments, and distributions from retirement accounts can help to reduce the tax burden. If you need assistance on any of the points I’ve shared, we are happy to assist.

Please email me at croberts@financialfreedomplanners.com or call me at (804) 277-9734 and we can talk.

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Kiplinger’s Personal Finance: Finding conflict-free financial advice

Take a look at a recent article in the Richmond Times Dispatch discussing how to find conflict-free financial advice. Call us at Financial Freedom Planners and see how our approach as a CFP®, we offer objective, affordable fee-only (hourly & project-based) financial planning and investment advice. We are proud members of the Garrett Planning Network.

Kiplinger’s Personal Finance: Finding conflict-free financial advice

financial planner with young couple
Young couple with financial planner

If you’re looking for a financial professional to give you conflict-free advice, consider a certified financial planner.

 

CFPs must put your interests first. They may charge by the hour or base fees on a percentage of your assets.

 

In the past, these planners were often unaffordable for people who didn’t have a lot of money to invest, but that’s changing.

 

 For example, advisers with the Garrett Planning Network (www.garrettplanningnetwork.com) typically charge $180 to $300 an hour. Some regions of the country have no Garrett planners, but interest among advisers is growing.

 

“We’re seeing a huge escalation in new members this year,” said Sheryl Garrett, founder of the network. “The public is pushing the industry in the right way.”

 

Similarly, XY Planning Network (www.xyplanningnetwork.com), founded by fellow CFPs Michael Kitces and Alan Moore, focuses on providing fee-only advice to Generation X and Y clients. There are no minimums; clients have the option of paying a monthly fee, ranging from about $75 to $200.

 

Other planners are looking for new ways to structure their fees.

 

Jonathan McQuade, a fee-only CFP in Austin, Texas, charges separately for financial planning and investment management. For planning, he charges a fixed monthly fee that ranges from $150 to $500. For investment management, he charges 0.75 percent of assets. McQuade says his system emphasizes the value of overall financial planning, which he says is often treated as an afterthought to portfolio management.

 

Some fee-only advisers base their fees on clients’ net worth rather than the amount of money they have invested.

 

Justin Harvey, a CFP and president of Quantifi Planning in Philadelphia, charges an annual fee of 1 percent of his clients’ income and 0.5 percent of their net worth, which covers both investment management and financial planning.

 

He says the model allows him to work with clients — many of whom are physicians — who have high earnings but not a lot of savings. “I can get fairly compensated, and they can get the nuanced, detail-oriented planning help that they need,” he said. Look for a fee-only planner at the website of the National Association of Personal Financial Advisors, www.napfa.org.

Send questions to moneypower@kiplinger.com. Visit Kiplinger.com for more on this and similar money topics.

Financial Freedom Planners

(804) 277-9734

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Is Market Volatility the New Normal?

Last year, stocks marched higher with only minor pullbacks. When the year ended, the largest peak to trough decline for the S&P 500 Index was just under 3% (St. Louis Federal Reserve data on the S&P 500). It was a year that lacked turbulence and one that rewarded diversified investors.

Since the beginning of February, volatility has returned. It’s a reminder that periods of relative tranquility don’t last forever.

In my opinion, it’s something that the long-term investor should look past, though I recognize it can create uneasiness among some investors.

If we were facing serious economic problems, something that might be signaling a recession, it would be a cause for concern. Right now, I don’t believe we are.

The Case for Stocks

Let’s review two underlying supports for the equity markets.

Thanks in part to the tax cut, corporate profits are forecast to rise nearly 20% this year (Thomson Reuters).

Weekly first-time claims for unemployment insurance recently touched a level not seen since the late 1960s (St. Louis Federal Reserve). It’s a concrete sign that companies don’t want to lose employees. If business conditions were deteriorating, the opposite would be true.

The Conference Board’s Leading Economic Index (designed to detect emerging trends in the economy), just hit a new high. I know we are facing some challenges (we always will), but the economic fundamentals are solid right now.

Coupled with interest rates that remain at historically low levels, the fundamentals have cushioned the downside, in my view, and remain supportive of stocks.

Shorter term, however, headline risk continues to whipsaw sentiment.

Causes of Volatility in Stocks

Two issues have surfaced that have stirred up volatility, in my view.

  1. Last month President Trump announced he will impose steep tariffs on steel and aluminum imports, fueling concerns over protectionism and the potential impact on the economy. His apparent goal: Pry open foreign markets to U.S. exports.Before I go on, let me say that it is not my role as your financial advisor to offer up opinions on political issues. However, it is incumbent upon me to analyze and share my thoughts on headlines that are influencing shares. It’s not a political statement. It is a commentary on events viewed through the narrow prism of the market.

    Investors viewed the corporate tax cut and the paring back of regulations favorably. Trade tensions, however, have created uncertainty.

    Most economists support free trade. It’s a net benefit to the U.S. and global economy. But “net benefit” means there are both winners and losers.

    Losers–those whose jobs disappear amid a flood of cheaper imports. Winners–consumers who pay less for various goods, and those who work in export-oriented industries. In 2017, U.S. exports totaled $2.3 trillion (U.S. Bureau of Economic Analysis). Yes, that’s trillion with a “T.”

    Free trade versus fair trade–it’s a highly debated topic.

    U.S. manufacturers are consumers of steel and aluminum, including farm and construction equipment, aerospace, and pipelines and drilling equipment in the energy industry.

     

    At the margin, it may modestly boost inflation and could force some U.S. manufacturers to put projects back on the shelf or move production offshore.

     

    Additionally, U.S. tariffs may invite retaliation, pressuring exporters, jobs and profits in globally competitive sectors. It could also spark a tit-for-tat trade war that hurts everyone.

     

    As the month came to a close, Trump announced he is set to raise tariffs on Chinese imports. In return, China announced new barriers to some U.S. goods, though the response was measured.

     

    While the odds of a major trade war remain low, all this has injected uncertainty into market sentiment.

     

  2. Troubles popping up in the tech sector have added to volatility. For example, Facebook is embroiled in a controversy over privacy and data sharing. More recently, Trump has set his sights on Amazon, expressing his displeasure in several tweets.Yes, they are only two stocks, but both have performed admirably, leading the tech sector higher. And, they have a combined market capitalization of $1.1 trillion (WSJ as/of 4.3.18).

Perspective

 

I provided an explanation for the recent volatility because I believe one is in order, but let me caution you not to get lost in the weeds. Day traders care about minute-by-minute swings in stocks prices. Long-term investors sidestep such concerns.

So, let’s step back and gather some perspective by reviewing the data.

According to LPL Research—

  • The average intra-year pullback (peak to trough) for the S&P 500 Index since 1980 has been 13.7%.
  • Half of all years had a correction of at least 10%.
  • Thirteen of the 19 years that experienced an official correction (10% or more) finished higher on the year.
  • The average total return for the S&P 500 during a year with a correction was 7.2%.

These bullet points are an evidenced-based way of saying turbulence surfaces from time to time. Patient investors who don’t react emotionally have historically been rewarded.

I understand that some degree of risk is inevitable. But our recommendations are designed to minimize risk, and they are designed with your long-term goals in mind.

If you have any questions or concerns, let’s talk. I’m simply an email (croberts@financialfreedomplanners.com) or phone call (804-277-9734) away.

 

Table 1: Key Index Returns

MTD % YTD % 3-year* %
Dow Jones Industrial Average -3.7 -2.5 10.8
NASDAQ Composite -2.9 2.3 13.0
S&P 500 Index -2.7 -1.2 8.6
Russell 2000 Index 1.1 -0.4 7.2
MSCI World ex-USA** -2.2 -2.7 2.5
MSCI Emerging Markets** -2.0 1.1 6.3
Bloomberg Barclays US Aggregate Bond TR 0.6 -1.5 1.2
Source: Wall Street Journal, MSCI.com, MarketWatch, Morningstar
MTD returns: Feb. 28, 2018-Mar. 29, 2018
YTD returns: Dec. 29, 2017-Mar. 29, 2018
MSCI returns run through Mar. 30, 2018
*Annualized
**in US dollars

 

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Busting 5 Big Retirement Myths

Urban legends, urban myths, and the latest that’s on everyone’s lips–fake news. Whatever you call it, in our age of information, claims of spurious repute can go viral in minutes. Anyone with a PC can start a blog and offer up opinions on just about any subject, whether he or she is an authority or not. Sources? Who needs sources?

OK, there’s a bit of sarcasm in that last comment, but I think you know where I’m going.

When it comes to retirement, there are plenty of misleading thoughts, opinions and fake news floating around out there. This month, I’d like to clear up some misconceptions that surround the retirement years. With that in mind, let’s jump in.

  1. I’ll never see a penny of the money I put into Social Security. If I had a nickel every time I heard someone utter that phrase. Sadly, if a 40-something says he is confident he will receive monthly checks, he sets himself up for ridicule among his contemporaries.

    I wouldn’t disagree with the hypothesis that young people getting started in the workforce will receive a low return on contributions into Social Security, but that’s a completely different argument.

    Back to the matter at hand, Social Security is not on the verge of bankruptcy, and I fully believe even those who are many years from retirement will be collecting monthly benefits when it’s their turn. Let me explain.

    According to the 2017 annual report from the Social Security and Medicare Board of Trustees, Social Security “has collected roughly $19.9 trillion and paid out $17.1 trillion,” in its storied 82-year history, “leaving asset reserves of more than $2.8 trillion at the end of 2016 in its two trust funds.”

    As an ever-larger number of baby boomers continue to retire and collect benefits, the trustees expect the trust funds to be depleted by 2034.

    Thereafter, expected-tax-income receipts are projected to be sufficient to pay about three-quarters of scheduled benefits. Put another way, recipients of Social Security would receive about a 25% cut in benefits, if no changes are made to the current structure.

    Of course, these are simply projections and much will depend on economic growth, job creation, and wages. Yet, it’s a far cry from, “I won’t see a penny of Social Security.”

    I suspect that politicians will eventually settle on some type of compromise that will extend the life of the current system.

    That said, I recognize that timing and strategies that can be implemented for Social Security may be complex. If you have questions, please give me a call or shoot me an email. I would be happy to discuss your options with you.

  2. The stock market is too risky. There’s no question about it, the bear markets that followed the dot.com bubble and the 2008 financial crisis were unprecedented, in that we saw two steep declines in less than 10 years.

    Made fearful by what they see as too much risk, millennials have shied away from stocks, according to a Bankrate survey. What seems like a complete disconnect: Millennials seem to be far more interested in Bitcoin! The word speculative doesn’t even begin to describe Bitcoin. But let me get back on topic.

    There has always been a degree of risk in stocks, even with a fully diversified portfolio. Yet, a well-diversified portfolio is akin to a stake in the U.S. and global economy. Moreover, the U.S. and global economy has been expanding for many decades. It may not be larger next year, but history tells us it will be bigger in 10 or 20 years.

    When it comes to investing in stocks, I typically experience some resistance from folks who haven’t seriously entertained the idea before. I listen to their concerns, and answer with an array of factual data that’s not designed to win an argument, but simply to educate. When you have all the facts, then you can make an educated decision about what’s best for you.

  3. Medicare will handle all my health care needs in retirement. If only Medicare did cover everything. But then, the cost to finance it would be much higher.

    Medicare doesn’t cover the full cost of skilled nursing or rehabilitative care, according to AARP. Yes, the first 20 days of a stay in a nursing home is covered, but you’ll pay over $160 per day for days 21 through 100. And Medicare doesn’t cover stays past 100 days.

    You may be paying out of pocket for personal care assistance, too. The same holds true for miscellaneous hospital costs, routine eye exams, hearing, foot and dental care.

  4. Why save today when you can start tomorrow—there’s plenty of time. This section is designed for millennials and those who are just beginning their journey in the workforce. There’s no better day to begin saving than today! I can’t stress this enough.

    Let me give you a simple but telling example.

    Susan invests $5,000 annually between the age of 25 and 35 and earns 7% annually. She puts away a total of $50,000.

    Bill invests $5,000 annually between the age of 35 and 65 and earns 7% annually. He saves a total of $150,000.

    When Susan reaches 65, she will have amassed $602,070, while Bill will have $540,741.

    Source: JP Morgan Asset Management

    Lesson learned–the sooner you begin, the better off you will be as you approach retirement.

    Take full advantage of your company’s retirement program. If your company doesn’t have a savings plan, there are many simple ways that you can get started. Feel free to reach out to me and I can assist you.

  5. Retirement is easy. Many look forward to the day when they will no longer prepare for Monday mornings at the office. For those who face the work challenges that crop up daily, retirement may seem like a welcome oasis in the distance.

    But that oasis sometimes turns out to be a mirage. Often, the transition from decades of working to retirement isn’t so simple.

    For a better retirement, set goals, and not simply financial ones. Can you transition to part-time in your job? Consider part-time employment or consulting. It will ease the transition, keep you busy, and extend your savings.

    Volunteer with your local church or local community organizations. Are you familiar with Meetup.com? Look for groups with similar interests. You’ll not only derive an enormous amount of satisfaction from helping others, but you’ll meet like-minded folks and make new friends.

    Try something new. Take up piano or another musical instrument. You may enjoy it and be good at it. A friend of mine took up poetry to keep his mind sharp.

    Please, keep up any exercise routines—and it’s never too late to start a new one. Check with your doctor, who will be happy to prescribe a fitness plan that’s suited to you.

    Have you ever considered taking a class? How about writing a book? Expanding your knowledge or sharing your ideas can be quite fulfilling. Though well into his 70s and still happily working, one individual I know is writing a book to his kids. Now there’s a legacy!

    The most important thing you can do to make retirement enjoyable is to stay active and keep your mind and body sharp.

Concerned about retirement readiness, when to take Social Security, pension questions? Give us a call at (804) 277-9734 or email us at croberts@financialfreedomplanners.com; we can help!

www.financialfreedomplanners.com

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