No, this isn’t a blog about a clever phrase to use when market volatility rears its ugly head (although it would be a good one, and you may see it again!). This is a quick post from all of us at The Asset Advisory Group to say Happy Memorial Day!
Forget about planning the perfect weekend. Forget about the ad showing a couple waking up to a freshly cooked breakfast in their staunch white bathrobes while the sun shines brightly throughout the house. Those ads leave out the hours spent grocery shopping, cooking, doing laundry, scrubbing the kitchen and cleaning the windows to get that moment just right. Few, if any can truly meet the standards imposed on us by popular media.
Instead, make it a priority over the next few days to enjoy the unofficial start to summer, take some time to remember those that have served this nation honorably and take some time for yourself. Whether that means turning off the cell phone for a few hours, putting down the remote or avoiding surfing for blogs, news and other information you probably don’t need right at this moment, take 30 minutes, find a corner of the house to rest your eyes and do something to reduce stress or invest in some “me” or “we” time.
Whatever you do, have a very Happy Memorial Day weekend! We’ll be back with our regular posts on Monday, June 7th.
The Asset Advisory Group
info@taaginc.com
http://www.taaginc.com
Friday, May 28, 2010
Friday, May 21, 2010
Our Age of Uncertainty
Over our lifespan, we baby boomers have lived through the Cuban Missile Crisis, JFK’s assassination, the Vietnam War, Richard Nixon’s resignation, the Iranian hostage crisis, the AIDs epidemic, and many other important and terrible historical events that are too numerous to mention - but they were not reported to us in real time like the news of today.
This negative information overload, discussed in Chip Workman’s blog last week, creates a constant sense of crisis and increases our anxiety level about our financial security. We’re getting older, and we realize we have less time to accumulate the savings we need to retire, or we are fearful about running out of the funds we currently live on in retirement. The 2007-2010 stock market gyrations haven’t helped. We want someone to tell us what is going to happen next.
The media capitalizes on our anxiety, and makes a living feeding our need to hear from ‘experts’ who tell us which way the market is headed and why. But seeking out predictions and acting on them is not a solution.
I can offer hundreds of examples of economic and market predictions that turned out to be horribly wrong over the last three years alone. In a September 1, 2007 Forbes article entitled, “The Fall 2007 Rally, ” Ken Fisher, a well-published money manager wrote, “This is a phony credit crunch… a few months from now we will be wondering what all the fuss was about.”
There were others that were right in their predictions, but terrible in their timing. Dr. Nouriel Roubini correctly predicted the housing bubble would cause a recession, but he made the prediction in 2004. If you took his advice and moved out of the market, you missed the 2004, 2005 and 2006 stock market returns. After three years of waiting for the fall, you probably gave up and moved back into the stock market in time for Bear Stearns and Lehman Brothers to collapse and kick off the recession.
Others are right in their timing, but wrong about what to do about it. Peter Schiff, President of Euro Pacific Capital, became a media darling in 2008 for predicting the market fall. But to protect his clients from the coming drop he moved them into commodities, international stocks, and shorted the dollar. As a result, their portfolios fell 60- 70% when they could have remained in the S&P 500 and lost 38%.
Our world is too complex for anyone to accurately predict what is going to happen and successfully reposition their portfolios to prepare. Yet the question – “What do you think is going to happen?” - is asked over and over by some people.
I have been a Certified Financial Planner since 1988, and based on my experience, the people who ask me this most often are the same people who refuse to create a financial plan. As a result, they feel uncertain about their future, anxious, and more vulnerable to panic when yet another negative news report about the Dow crosses their TV screen.
Jeannette A. Jones, CPA, CFP®
jjones@taaginc.com
http://www.taaginc.com/
This negative information overload, discussed in Chip Workman’s blog last week, creates a constant sense of crisis and increases our anxiety level about our financial security. We’re getting older, and we realize we have less time to accumulate the savings we need to retire, or we are fearful about running out of the funds we currently live on in retirement. The 2007-2010 stock market gyrations haven’t helped. We want someone to tell us what is going to happen next.
The media capitalizes on our anxiety, and makes a living feeding our need to hear from ‘experts’ who tell us which way the market is headed and why. But seeking out predictions and acting on them is not a solution.
I can offer hundreds of examples of economic and market predictions that turned out to be horribly wrong over the last three years alone. In a September 1, 2007 Forbes article entitled, “The Fall 2007 Rally, ” Ken Fisher, a well-published money manager wrote, “This is a phony credit crunch… a few months from now we will be wondering what all the fuss was about.”
There were others that were right in their predictions, but terrible in their timing. Dr. Nouriel Roubini correctly predicted the housing bubble would cause a recession, but he made the prediction in 2004. If you took his advice and moved out of the market, you missed the 2004, 2005 and 2006 stock market returns. After three years of waiting for the fall, you probably gave up and moved back into the stock market in time for Bear Stearns and Lehman Brothers to collapse and kick off the recession.
Others are right in their timing, but wrong about what to do about it. Peter Schiff, President of Euro Pacific Capital, became a media darling in 2008 for predicting the market fall. But to protect his clients from the coming drop he moved them into commodities, international stocks, and shorted the dollar. As a result, their portfolios fell 60- 70% when they could have remained in the S&P 500 and lost 38%.
Our world is too complex for anyone to accurately predict what is going to happen and successfully reposition their portfolios to prepare. Yet the question – “What do you think is going to happen?” - is asked over and over by some people.
I have been a Certified Financial Planner since 1988, and based on my experience, the people who ask me this most often are the same people who refuse to create a financial plan. As a result, they feel uncertain about their future, anxious, and more vulnerable to panic when yet another negative news report about the Dow crosses their TV screen.
Jeannette A. Jones, CPA, CFP®
jjones@taaginc.com
http://www.taaginc.com/
Monday, May 17, 2010
Data Smog
“When information changes from a stream to a river to Niagara Falls, how will we ever slow down to achieve knowledge?” – Gregg Easterbrook, Sonic Boom, Random House, 2009.
The term “Data Smog” was coined in a book of the same name by author David Shenk in 1997. The term was more recently discussed in a book titled Sonic Boom by Gregg Easterbrook.
Data smog suggests that the ever increasing, on-demand news and data accessible to us as a society actually decreases our ability to acquire knowledge or plan for the future as we are too weighed down by the overload of information.
Why the overload? Aside from the obvious advent of the internet, there are the changing goals of our news sources. The goal in the past, when stories came from the local paper and the evening news, was to provide basic facts surrounding the events of the day. Networks made their money, but the news was largely untouched by marketing and promotion. Today, there is so much competition for our eyes and ears and so many different delivery methods, that the goals are very different. The goals are to make readers and viewers as unsettled as possible in order to drive both the need for more information and the need for the goods and services sold by their advertisers.
Today, all news is “breaking”. Every tremor, house fire or police chase is covered by multiple helicopters and posted all over 24-hour news channels and websites across the globe. The line between news and opinion has been blurred by Nancy Grace, Bill O’Reilly, Keith Olbermann, Rachel Maddow and Glenn Beck. This doesn’t even begin to address Tiger Woods , the Octomom, TMZ and other celebrity pseudo-issues that pass as news. We attempt to grasp it all, feeling that more information makes us more intelligent and informed.
The truth is no one person can handle the constant stream of sensationalized information on a minute-by-minute basis. The end result, as Easterbrook puts it, is a “universal low-grade nervous tension from which there may be no realistic escape.” It is ultimately in the business interests of the media outlets to make sure the public continues to suffer from this affliction.
This tension impacts our feelings about our investments, our government and many of the other aspects of our lives. The bombardment of constant information, much of which conflicts, makes it extremely difficult for anyone to form any opinion that goes beyond cynicism.
Much of this isn’t news to anyone. The information age went warp-speed well over a decade ago. There is nothing anyone can do about it and it will only get worse. What can be done, however, is achieving a deeper understanding of how this data smog impacts us on an individual level and how to handle it in our own lives.
First, choose your trusted information sources carefully and understand the difference between opinion and actual facts and data. Be especially careful to trust information which goes to any extreme for the sake of being extreme. Take time to understand the motivation or incentives behind those delivering the message.
Chip Workman, CFP®
cworkman@taaginc.com
http://www.taaginc.com/
The term “Data Smog” was coined in a book of the same name by author David Shenk in 1997. The term was more recently discussed in a book titled Sonic Boom by Gregg Easterbrook.
Data smog suggests that the ever increasing, on-demand news and data accessible to us as a society actually decreases our ability to acquire knowledge or plan for the future as we are too weighed down by the overload of information.
Why the overload? Aside from the obvious advent of the internet, there are the changing goals of our news sources. The goal in the past, when stories came from the local paper and the evening news, was to provide basic facts surrounding the events of the day. Networks made their money, but the news was largely untouched by marketing and promotion. Today, there is so much competition for our eyes and ears and so many different delivery methods, that the goals are very different. The goals are to make readers and viewers as unsettled as possible in order to drive both the need for more information and the need for the goods and services sold by their advertisers.
Today, all news is “breaking”. Every tremor, house fire or police chase is covered by multiple helicopters and posted all over 24-hour news channels and websites across the globe. The line between news and opinion has been blurred by Nancy Grace, Bill O’Reilly, Keith Olbermann, Rachel Maddow and Glenn Beck. This doesn’t even begin to address Tiger Woods , the Octomom, TMZ and other celebrity pseudo-issues that pass as news. We attempt to grasp it all, feeling that more information makes us more intelligent and informed.
The truth is no one person can handle the constant stream of sensationalized information on a minute-by-minute basis. The end result, as Easterbrook puts it, is a “universal low-grade nervous tension from which there may be no realistic escape.” It is ultimately in the business interests of the media outlets to make sure the public continues to suffer from this affliction.
This tension impacts our feelings about our investments, our government and many of the other aspects of our lives. The bombardment of constant information, much of which conflicts, makes it extremely difficult for anyone to form any opinion that goes beyond cynicism.
Much of this isn’t news to anyone. The information age went warp-speed well over a decade ago. There is nothing anyone can do about it and it will only get worse. What can be done, however, is achieving a deeper understanding of how this data smog impacts us on an individual level and how to handle it in our own lives.
First, choose your trusted information sources carefully and understand the difference between opinion and actual facts and data. Be especially careful to trust information which goes to any extreme for the sake of being extreme. Take time to understand the motivation or incentives behind those delivering the message.
Chip Workman, CFP®
cworkman@taaginc.com
http://www.taaginc.com/
Monday, May 10, 2010
The New Money Rules for Recent Graduates
(from Ron Lieber's Your Money Column, New York Times, 5/8/2010 - read the article direct from the Times here)
Graduation season is a time of oddly mixed emotions for the people finishing college and graduate school. On the one hand, there is pride in a job well done (or relief at simply getting through) and the satisfaction of having finished a long, hard slog. On the other, there is primal fear. Will anyone pay me to do something I’m good at? And will I actually have enough money to live on?
We push our graduates out into the world with little or no financial education; that much has been true for years. Meanwhile, their student loan debt has grown over time, with the median debt for bachelor’s degree recipients who did take out loans hitting $20,000 in 2007-8, according to the College Board’s 2009 Trends in Student Aid study. This year, many graduates are being greeted by an uninterested shrug from employers as they try to pay that all back.
There is some good news this graduation season, though. In four crucial areas — health insurance, banking, credit cards and student loans — there have been enormous shifts in the legislative and regulatory landscape in the last 12 months. These changes should ease some of the pain as new graduates try to establish themselves financially.
So before you leave for your postgraduation road trip (or buy yourself something nice for the first time in four years to celebrate the end of tuition bills), give the points below a quick skim. So much has happened in the last year, you’ve probably missed at least some of it.
HEALTH INSURANCE First, do no harm. A bad accident or illness could be financially catastrophic for you or your family if you don’t have health insurance. Keeping or getting insurance is about to get easier, since the health care bill that President Obama signed in March requires insurance companies that already provide dependent coverage for children to allow unmarried offspring to stay insured on their parents’ plans until they turn 26.
This part of the bill doesn’t go into effect until Sept. 23, and there’s still a lot of uncertainty about exactly who will benefit before or after that date as companies and insurers wait for more clarity from regulators on how to put the new rules into place.
Many insurers, including independent Blue Cross Blue Shield providers and UnitedHealthcare, have announced efforts to allow graduating students who are currently on their parents’ plans to stay there to avoid any gap in coverage. Ask your human resources department or insurance company about this possibility if you are a parent and your graduating child is still on your health insurance plan.
That said, your company may not allow your child to remain on the plan after graduation this year even if the insurance company it works with can make it happen. And even if your employer does allow your child to stay on, it’s not yet clear how much it will cost, though paying a young adult’s premium is about as practical a graduation gift as you’ll find.
What if you’ve been on a student health insurance plan and want to switch to your parents’ plan now? Or what about people who are uninsured and 24 and want to return to their parents’ coverage as soon as possible? You may have to wait until the next open enrollment period for your parents’ plan, according to Brett Lieberman, a Blue Cross Blue Shield spokesman.
Insurance companies may offer short-term or other plans to bridge the gap during the months until then.
Stephen L. Beckley, a consultant who specializes in student health insurance, notes that most graduating college students enrolled in student plans will have coverage through the summer. Call and ask to be sure. Also, some states already have laws similar to (or tougher than) the new federal one.
BANKING AND DEBIT CARDS So you’ll need a checking account. Perhaps you already have one.
What you may have missed, however, is that starting July 1, banks will no longer allow you to spend more money at a store with your debit card (or withdraw more at the A.T.M. machine) than you have in your account unless you’ve given them permission first. The federal government made them do this, since banks were infuriating so many customers by charging them repeated overdraft fees when they overspent.
Let’s assume that you don’t want to opt in to taking your balance below zero and would rather ask the bank to cut you off if you don’t have enough money in your account. If enough people do that, banks will lose lots of fee income and may use that as an excuse to tack monthly fees onto your checking account. The lower the balance in your account (and recent graduates tend to live hand to mouth), the more likely it is that your bank may try to charge you money.
Even if this happens, I’m confident that some institutions will remain free of monthly fees. If there’s a credit union at your college that offers fee-free banking, it may let you keep your account after graduation (check to see how much you’ll pay to withdraw money from other institutions’ A.T.M.’s, though). Or you can search for a new one at findacreditunion.com. Take a look, too, at banks with no branches, like PerkStreet Financial and ING Direct.
CREDIT CARDS The credit card legislation that passed in 2009 contained so many new rules that it went into effect in phases, including a bunch of regulations that began earlier this year. There are too many to list here, though the Federal Reserve has published an excellent plain-English guide that I’ve linked to from this sentence in the online version of the column.
I’m a big fan of the rule requiring card companies to get your permission before they’ll let you spend more than your credit limit (and charge you fees for the privilege). This always struck me as particularly noxious, and in the wake of the new rules, some card companies like American Express have simply stopped charging the fee to people who go over the limit (or cuts them off if the company thinks the spending is getting out hand). This is particularly helpful to younger people who may have lower credit limits and thus breach them more often.
Beth Kobliner, the author of “Get a Financial Life: Personal Finance in Your Twenties and Thirties,” is partial to the new rule requiring better information on the card statement. Now, it must state how long it will take to pay off your balance if you make only the minimum payment that the card company requires. It also must let you know what your monthly payment would be if you want to pay the balance off in three years. “It’s eye-opening for everyone, but particularly for young people who never realized how expensive putting something on the card and paying only the minimum can be,” Ms. Kobliner said.
One word of caution here. There’s another new rule that will make it much more difficult for card companies to put new plastic in the hands of people under the age of 21. As a result, card issuers may chase newly minted graduates that much harder with offers that sound too good to be true. Read your junk mail with caution and skepticism.
STUDENT LOANS Last July, a new program went into effect that can lower monthly payments on federal student loans for people who don’t earn a lot of money. It’s called income-based repayment, and it’s a bit complicated. Essentially, if your income is low enough (depending on your family size), it’s possible that your lender will limit the size of your monthly payments. And after 25 years of payments, the lender may even forgive your remaining loans.
To see if you qualify, use the calculator at ibrinfo.org, a site that a nonprofit organization, the Project on Student Debt, created. The site also has a lot more information about how the program works — and additional information about a program that could forgive federal loan debts after 10 years of repayment for people working in public service jobs.
Still confused? Try checking in with a financial aid officer at your school, even if you’ve already left. “They’re the thankless heroes in this, who really want to help,” said Ramit Sethi, author of “I Will Teach You to Be Rich,” another excellent book for young people trying to learn more about money.
FORWARDING ADDRESS This one’s not new, but it trips enough people that it bears repeating. Your physical address may change in the next few months, perhaps more than once. Or you may start using a new e-mail address or begin getting bills from companies that you haven’t worked with before, both of which can lead to important messages getting caught in a spam folder.
You see where this is heading, right? You can’t pay bills that you don’t see. So let people know where to find you. Mark due dates in your calendar. And make sure you have the ability to pay your credit card and student loan bills online from any computer, wherever it is you may go on your victory tour in the next couple of months. That way, you won’t return to find the kind of damage to your credit history that can set you far back on the path to financial health.
Graduation season is a time of oddly mixed emotions for the people finishing college and graduate school. On the one hand, there is pride in a job well done (or relief at simply getting through) and the satisfaction of having finished a long, hard slog. On the other, there is primal fear. Will anyone pay me to do something I’m good at? And will I actually have enough money to live on?
We push our graduates out into the world with little or no financial education; that much has been true for years. Meanwhile, their student loan debt has grown over time, with the median debt for bachelor’s degree recipients who did take out loans hitting $20,000 in 2007-8, according to the College Board’s 2009 Trends in Student Aid study. This year, many graduates are being greeted by an uninterested shrug from employers as they try to pay that all back.
There is some good news this graduation season, though. In four crucial areas — health insurance, banking, credit cards and student loans — there have been enormous shifts in the legislative and regulatory landscape in the last 12 months. These changes should ease some of the pain as new graduates try to establish themselves financially.
So before you leave for your postgraduation road trip (or buy yourself something nice for the first time in four years to celebrate the end of tuition bills), give the points below a quick skim. So much has happened in the last year, you’ve probably missed at least some of it.
HEALTH INSURANCE First, do no harm. A bad accident or illness could be financially catastrophic for you or your family if you don’t have health insurance. Keeping or getting insurance is about to get easier, since the health care bill that President Obama signed in March requires insurance companies that already provide dependent coverage for children to allow unmarried offspring to stay insured on their parents’ plans until they turn 26.
This part of the bill doesn’t go into effect until Sept. 23, and there’s still a lot of uncertainty about exactly who will benefit before or after that date as companies and insurers wait for more clarity from regulators on how to put the new rules into place.
Many insurers, including independent Blue Cross Blue Shield providers and UnitedHealthcare, have announced efforts to allow graduating students who are currently on their parents’ plans to stay there to avoid any gap in coverage. Ask your human resources department or insurance company about this possibility if you are a parent and your graduating child is still on your health insurance plan.
That said, your company may not allow your child to remain on the plan after graduation this year even if the insurance company it works with can make it happen. And even if your employer does allow your child to stay on, it’s not yet clear how much it will cost, though paying a young adult’s premium is about as practical a graduation gift as you’ll find.
What if you’ve been on a student health insurance plan and want to switch to your parents’ plan now? Or what about people who are uninsured and 24 and want to return to their parents’ coverage as soon as possible? You may have to wait until the next open enrollment period for your parents’ plan, according to Brett Lieberman, a Blue Cross Blue Shield spokesman.
Insurance companies may offer short-term or other plans to bridge the gap during the months until then.
Stephen L. Beckley, a consultant who specializes in student health insurance, notes that most graduating college students enrolled in student plans will have coverage through the summer. Call and ask to be sure. Also, some states already have laws similar to (or tougher than) the new federal one.
BANKING AND DEBIT CARDS So you’ll need a checking account. Perhaps you already have one.
What you may have missed, however, is that starting July 1, banks will no longer allow you to spend more money at a store with your debit card (or withdraw more at the A.T.M. machine) than you have in your account unless you’ve given them permission first. The federal government made them do this, since banks were infuriating so many customers by charging them repeated overdraft fees when they overspent.
Let’s assume that you don’t want to opt in to taking your balance below zero and would rather ask the bank to cut you off if you don’t have enough money in your account. If enough people do that, banks will lose lots of fee income and may use that as an excuse to tack monthly fees onto your checking account. The lower the balance in your account (and recent graduates tend to live hand to mouth), the more likely it is that your bank may try to charge you money.
Even if this happens, I’m confident that some institutions will remain free of monthly fees. If there’s a credit union at your college that offers fee-free banking, it may let you keep your account after graduation (check to see how much you’ll pay to withdraw money from other institutions’ A.T.M.’s, though). Or you can search for a new one at findacreditunion.com. Take a look, too, at banks with no branches, like PerkStreet Financial and ING Direct.
CREDIT CARDS The credit card legislation that passed in 2009 contained so many new rules that it went into effect in phases, including a bunch of regulations that began earlier this year. There are too many to list here, though the Federal Reserve has published an excellent plain-English guide that I’ve linked to from this sentence in the online version of the column.
I’m a big fan of the rule requiring card companies to get your permission before they’ll let you spend more than your credit limit (and charge you fees for the privilege). This always struck me as particularly noxious, and in the wake of the new rules, some card companies like American Express have simply stopped charging the fee to people who go over the limit (or cuts them off if the company thinks the spending is getting out hand). This is particularly helpful to younger people who may have lower credit limits and thus breach them more often.
Beth Kobliner, the author of “Get a Financial Life: Personal Finance in Your Twenties and Thirties,” is partial to the new rule requiring better information on the card statement. Now, it must state how long it will take to pay off your balance if you make only the minimum payment that the card company requires. It also must let you know what your monthly payment would be if you want to pay the balance off in three years. “It’s eye-opening for everyone, but particularly for young people who never realized how expensive putting something on the card and paying only the minimum can be,” Ms. Kobliner said.
One word of caution here. There’s another new rule that will make it much more difficult for card companies to put new plastic in the hands of people under the age of 21. As a result, card issuers may chase newly minted graduates that much harder with offers that sound too good to be true. Read your junk mail with caution and skepticism.
STUDENT LOANS Last July, a new program went into effect that can lower monthly payments on federal student loans for people who don’t earn a lot of money. It’s called income-based repayment, and it’s a bit complicated. Essentially, if your income is low enough (depending on your family size), it’s possible that your lender will limit the size of your monthly payments. And after 25 years of payments, the lender may even forgive your remaining loans.
To see if you qualify, use the calculator at ibrinfo.org, a site that a nonprofit organization, the Project on Student Debt, created. The site also has a lot more information about how the program works — and additional information about a program that could forgive federal loan debts after 10 years of repayment for people working in public service jobs.
Still confused? Try checking in with a financial aid officer at your school, even if you’ve already left. “They’re the thankless heroes in this, who really want to help,” said Ramit Sethi, author of “I Will Teach You to Be Rich,” another excellent book for young people trying to learn more about money.
FORWARDING ADDRESS This one’s not new, but it trips enough people that it bears repeating. Your physical address may change in the next few months, perhaps more than once. Or you may start using a new e-mail address or begin getting bills from companies that you haven’t worked with before, both of which can lead to important messages getting caught in a spam folder.
You see where this is heading, right? You can’t pay bills that you don’t see. So let people know where to find you. Mark due dates in your calendar. And make sure you have the ability to pay your credit card and student loan bills online from any computer, wherever it is you may go on your victory tour in the next couple of months. That way, you won’t return to find the kind of damage to your credit history that can set you far back on the path to financial health.
Monday, May 3, 2010
Will I Outlive My Assets?
A question I am frequently asked is “How much money do I need to retire?” Most calculators you can find on the internet provide an oversimplified answer and do not take into account each individual’s unique situation. For some people $2 million is more than they could ever spend and for others, it is not nearly enough.
Over the past twenty years, I have had the opportunity to observe many people’s spending habits after they quit working. Those who are the most flexible with their expenditures have the best chance of achieving a financially successful retirement. Your retirement income goal should include your needs, wants and wishes. We prepare a spending plan at the outset of retirement and continually monitor it based on changing market conditions and changes in our clients’ lives.
Retirees who had the flexibility to scale back their spending when we experienced the unprecedented market downturn in 2007 and 2008 were able to ride out the recession with a lot less angst. Deciding to postpone a planned vacation or car purchase was easier than deciding which bill to pay.
An area of spending I see many clients struggle with is the support of their adult children. Long after they have graduated college, kids are now relying more on their parents to supplement their income. The recession has only exacerbated the situation. If you plan to provide financial assistance to your kids, make sure that you account for this in your retirement budget and that it will not derail your plans.
An article by Carrie Schwab Pomerantz, Chief Strategist, Consumer Education, Charles Schwab & Co, “How to Help Young Adults Financially” provides some great examples of how parents can support their children and encourage them to become financially independent. By creating a plan for not only your needs, but the potential needs of your family, you will all have a better chance that your money will outlast your life.
Chris Carleton, CFP®
clcarleton@taaginc.com
http://www.taaginc.com/
Over the past twenty years, I have had the opportunity to observe many people’s spending habits after they quit working. Those who are the most flexible with their expenditures have the best chance of achieving a financially successful retirement. Your retirement income goal should include your needs, wants and wishes. We prepare a spending plan at the outset of retirement and continually monitor it based on changing market conditions and changes in our clients’ lives.
Retirees who had the flexibility to scale back their spending when we experienced the unprecedented market downturn in 2007 and 2008 were able to ride out the recession with a lot less angst. Deciding to postpone a planned vacation or car purchase was easier than deciding which bill to pay.
An area of spending I see many clients struggle with is the support of their adult children. Long after they have graduated college, kids are now relying more on their parents to supplement their income. The recession has only exacerbated the situation. If you plan to provide financial assistance to your kids, make sure that you account for this in your retirement budget and that it will not derail your plans.
An article by Carrie Schwab Pomerantz, Chief Strategist, Consumer Education, Charles Schwab & Co, “How to Help Young Adults Financially” provides some great examples of how parents can support their children and encourage them to become financially independent. By creating a plan for not only your needs, but the potential needs of your family, you will all have a better chance that your money will outlast your life.
Chris Carleton, CFP®
clcarleton@taaginc.com
http://www.taaginc.com/
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