Never Fear

There is no doubt that the definition of retirement has been changing for years now. Longer life expectancies, increased costs for just about everything, and shrinking retirement benefits are just a few of the variables involved in retirement’s metamorphosis. The promise of ever-increasing demands for an ever-shrinking pool of resources is a cause for fear in many.

All too often, this fear causes people to approach retirement as if they are jumping off a cliff. They aren’t certain if they have saved enough. They look at their portfolios and hope that it will provide the life they envision. Failing that, they convince themselves that they will simply fit whatever income they earn year in and year out.

This fear, fear of the unknown, fear of doing without, fear of adhering to a budget for the first time is what drives this decision to not make decisions, or worse, to fall prey to any number of the slick sales approaches that inundate your mailbox and television daily, “guaranteeing” to make it a smooth ride.

As is true with just about everything else in life, the known is better than the unknown and life doesn’t come with guarantees. Sitting down and mapping out your goals for life after retirement, determining the costs involved and how your portfolio can help you accomplish those goals is the first step. Working with an independent advisor held to a fiduciary standard, you can learn whether or not your goals are attainable and what steps you might take to increase your chances of success.

The earlier you begin to plan, the better. For example, you can test drive your retirement budget by adhering to it for a year or two before you retire. This will allow you to see any cracks in the foundation and make adjustments as needed. If you’ve put off the planning or are already retired, it’s still a good idea to make sure you’re on track. Don’t continue to procrastinate out of guilt for putting it off, just make today the day you take action.

Another term that grabbed some headlines after a study done by Vanguard in early 2007 is downshifting. This involves working with your employer to adjust your current position to part-time, or by finding other part-time work that interests you before full-fledged retirement. This was a practice growing in popularity near the market’s peak and should be considered even more seriously in 2010. It is both an attractive way to make this transition while still earning some income and a way to begin to emotionally make the dramatic shift from a bustling professional life to one more focused on your personal goals.

The bottom line is that the security provided by having a solid plan in place cannot be overstated. It is an invaluable tool to maintain solid financial footing, and your sanity, as you wake up each day without the burden or fear of the unknown. Imagine being able to turn off the constant barrage of information on the “crisis du jour” knowing that, regardless of the short term outcome, you have a plan that will allow your money to outlive you, not the other way around.

By Chip Workman, CFP®
cworkman@taaginc.com
www.taaginc.com

321 Million and Counting...

More than 300 million people have a Facebook profile. My intention with this blog is to address those of you who have made a conscious decision to stay away. Though your ranks dwindle daily, there are many of you. This is understandable – a social movement that became so popular so fast must engender skepticism.

One of the biggest fears that I hear is the concern about privacy. Facebook has many privacy settings that allow you to set up how much or how little people can see about you and your profile. You choose what information to share with others. Don’t want someone who isn’t your ‘friend’ to be able to see your photos? No problem. Don’t want your nosy neighbor to be able to see your status updates? Done.

Facebook has recently added even more privacy settings so that you have control over virtually any privacy matter you can think of. You can set it up so that your former colleagues see one version of your profile, while your family sees another. Choosing your privacy settings should be your first move after creating a Facebook profile.

Another common reason for not joining Facebook is that you don’t want people to know your business. That’s fair! You can join Facebook and use it only as a tool to see information from others. You don’t have to EVER post a status update if you don’t want to. You don’t HAVE to post photos of yourself. Heck, you don’t even HAVE to go out searching for friends. They will naturally find and request you through people that you’ve allowed to be your friends.

Some people think that by joining Facebook, they are signing up for a huge time commitment. Not so. You can log-in only once a month just to approve/reject friends if you want. Yes, it is true that over half of all Facebook users log on daily, but that’s not because it’s a requirement – it’s because it’s fun.

(By the way, it’s ok to not accept friend requests. The person is not notified that you did not accept. Don’t accept requests from people that you don’t know, and don’t think twice about removing a friend if they have made you regret your acceptance).

Think you’re too old for Facebook? That’s ridiculous! Perhaps you didn’t know that the fastest growing demographic of Facebook users is people over 50. Facebook is a wonderful resource for families who don’t all live in the same area. If your kids live in a different state, you will be able to see photos that they post and their status updates. In time, it will make it feel like you’re not so far from each other. That’s the whole point of Facebook, to make people feel more connected.

I could write a very long article about all the reasons that I feel you should be on Facebook, but that’s for another day. What I want to know is, what are your personal reasons for holding out on Facebook? I’ve tried to hit the big ones here, but it’s different for different people.
Please leave a comment, start a conversation.

By Amanda Bashore, CFP®
arbashore@taaginc.com
www.taaginc.com

Eliminating Financial Clutter

As we draw closer to the deadline for institutions to furnish your annual tax statements, you may be wondering how long you need to keep tax and other financial documentation. Gathering your income tax data is a good time to clean out your filing cabinets and shred your utility bills from 1982 and brokerage statements from 1997.

Tax returns and related documents should be kept for seven years. If the return details a potentially taxable investment, keep it as long as you own the asset plus seven years. I recommend clients use the black binder we give you when you become a client of TAAG to organize your monthly brokerage statements, trade confirmations, and other investment related documentation.

You can shred buy and sell confirmations after you have compared them to your monthly statement. Keep your monthly statements until December and put your December statement in the file with your tax return for that year. If you ever need an historical brokerage statement, we can provide it to you. Most financial institutions are required to keep your statements for seven years. TAAG will track the cost basis for any investment we make in the taxable accounts we manage. Each January we will provide you with the realized gain and loss information you will need for taxes.

You can also use this process with your ATM receipts, deposit slips, and credit card receipts not needed for taxes or a warranty – shred them after comparing to your monthly statement. Canceled checks can be disposed of after a year if not used for a tax related purchase or deduction and your monthly bank statements, after seven years.

Bills can be tossed after six months and monthly credit card statements after a year if not being used for tax purposes.

Records to retain for the longer term include the paperwork from your home purchase – mortgage application, appraisal, deed and your sales contract. You should keep these at least as long as you own your home, longer if you prefer. For tax purposes, make sure you keep records and receipts from any improvements you have made that may reduce your tax bill when the house is sold.

If you have updated your estate planning documents in the past year, make sure to dispose of the outdated versions of wills, powers of attorney or health care directives. If you have recently made changes, please let us know if any of the documents we have in your file have been replaced or accounts should be re-titled.

There are a few documents you need to keep for life, including birth and death certificates, marriage licenses, adoption papers, and divorce decrees. It is best to keep these in a safe deposit box or fireproof safe in your home.

If you set up a system to purge unnecessary records on a regular basis, assembling the needed documentation at tax time will not feel like a chore.

By Chris Carleton, CFP
clcarleton@taaginc.com
www.taaginc.com

Enough

At a party given by a billionaire hedge fund manager, Kurt Vonnegut informed his friend, Joseph Heller, that their host made more money in a single day then Heller had earned from his popular novel, Catch-22, over his entire lifetime. Heller responded, “Yes, but I have something he will never have………enough.”

This story opens the introduction to the book, Enough, by John Bogel, the founder and former CEO of the Vanguard Mutual Fund Group. It’s my favorite part of the book, because it perfectly summarizes what I have observed as a financial advisor over my entire career.

When we were first married, and very poor, my husband would tease me when he could tell I was getting stressed over our finances with his quip, “Let’s go buy something to cheer ourselves up!” The sad thing is, many people use acquiring things as a way make themselves happy, and then are disappointed when the good feeling quickly wears off. Years go by and they are never quite able to accumulate what they need to stop working. Our consumer society has helped fuel the growth of manufacturing countries like China, increased the trade deficit, and caused storage facilities to pop up all over the suburbs to help alleviate the overcrowding in our homes.

If there is anything good to come from the Great Recession we have experienced over the last two years, I hope it encourages people to stop and give real thought to what ‘enough’ means to them.

I have been fortunate to observe and learn from the collective experiences of our clients over the past 21 years. People who are conscious spenders, those who know what they are acquiring and why, have been much more successful and able to handle the financial ups and downs that life has handed them. This doesn’t mean they live as paupers, they simply decide early on what is important to them and what isn’t, and then prioritize their spending to enhance the areas of their lives that have meaning to them, versus blindly upgrading and expanding their possessions. This accomplishes two things. The money they spend truly does enhance their lives and adds to their long-term happiness versus giving them a temporary boost, and they have funds left over to save so they don’t have to work until they die.

I realize I may sound like a critical parent lecturing on spending, but it’s much more than that. I’m suggesting that we, as a society, do a lot of mindless acquiring that is damaging to our financial security, and at the risk of sounding dramatic, to our souls. Unlike the bumper sticker, I do not believe that “He who dies with the most toys, wins.”

Jeannette A. Jones, CPA, CFP ®
jjones@taaginc.com
www.taaginc.com