Living a “Just In Case” Retirement

Living a “Just In Case” Retirement

Very recently a couple of us from the office attended a retirement income planning seminar. The seminar was titled, “Don’t Live a Just in Case Retirement.” The presenter was Tom Hegna, an internationally renowned expert on retirement planning.

The seminar concepts were helpful and timely. Many points were reminders, but a couple of points struck a chord with me and are worth discussing.

One key point was this: “The success of your retirement is really not about assets.” Well, that’s controversial. Isn’t retirement about having a certain number? (i.e. How much do you have in your retirement nest egg?) Assets are lost, stolen, divorced, etc.

His argument was that the success of your retirement really depends upon how much guaranteed, lifetime retirement income you have. His argument is not just based on emotion, but research.

I have to agree. Our most joyful, content clients are the ones that know each month a set, guaranteed direct deposit is coming that doesn’t depend upon market performance. It’s backed by a pension guaranty, Federal government or an insurance company. This deposit is what used to be called the “mailbox check.”

But what’s the problem? There are fewer and fewer companies offering the pensions of one to two generations ago. It’s too costly and risky for employers. Therefore, we see defined contribution plans more today, such as 401ks, 403bs, and deferred compensation.

The risk has been transferred from the employers to the employees. The employees are in charge and responsible for saving enough for retirement. Problem is, how much is enough? Is it a certain number? We’ve dispelled that myth before. There’s no magic number that works for every person. Each person and financial plan are unique.

What’s the good news? We firmly believe a joyful, content retirement is possible, but it must come with a plan.

The second and last point that struck home with me was this: “How will you avoid risks detrimental to your plan?” Great question. Ignoring current and future risks is not wise. They need to be addressed. What are some of those risks?

  • Not maximizing your social security benefit
  • Inflation
  • Long-term care expenses
  • Sequence of returns risk (How the market performs in the early years of your retirement is a critical factor to be addressed.)
  • Longevity risk (outliving your assets)

The purpose of this writing is not to invoke panic and hysteria. Really, it’s not. I do, however, hope the items discussed moves you to taking action. “Any plan is better than no plan!”, said Tom.

And let’s not forget to address this topic from a spiritual standpoint. Are the items addressed above important? Yes. Are they ultimate? Absolutely not. For those who’ve trusted in our loving, heavenly Father, we know that our ultimate care is in His hands. So much so that he cares for us in this way:

Look at the birds of the air: they neither sow nor reap nor gather into barns, and yet your heavenly Father feeds them. Are you not of more value than they? 27 And which of you by being anxious can add a single hour to his span of life?[a] 28 And why are you anxious about clothing? Consider the lilies of the field, how they grow: they neither toil nor spin,29 yet I tell you, even Solomon in all his glory was not arrayed like one of these. 30 But if God so clothes the grass of the field, which today is alive and tomorrow is thrown into the oven, will he not much more clothe you, O you of little faith? 31 Therefore do not be anxious, saying, ‘What shall we eat?’ or ‘What shall we drink?’ or ‘What shall we wear?’ 32 For the Gentiles seek after all these things, and your heavenly Father knows that you need them all. 33 But seek first the kingdom of God and his righteousness, and all these things will be added to you.

34 “Therefore do not be anxious about tomorrow, for tomorrow will be anxious for itself. Sufficient for the day is its own trouble.” – Matthew 6:26-34 (ESV)

Living in the “already but not yet” is not easy. We know the ultimate battle has been won. We also know that on this side of eternity, the struggle and fight is real. Brokenness, hurt, loss and pain do exist. So how are we to respond? We trust. We follow. We love. We ask for help and forgiveness. And, we don’t give up.

Ask us for help. We’d love to walk alongside you through this journey of life. It’s not just about money for us. It’s a much bigger conversation.

Investment Lessons from “The Tortoise and the Hare”

Investment Lessons from “The Tortoise and the Hare”

“A Hare was making fun of the Tortoise one day for being slow.

‘Do you ever get anywhere?’ he asked with a mocking laugh.

‘Yes,’ replied the Tortoise, ‘and I get there sooner than you think. I’ll run you a race and prove it.’”

So the story of “The Hare and the Tortoise” begins…

We’ve all heard it. We’ve all read it (hopefully). What the heck does it have to do with investing? Well, quite a lot, I’d argue.

How did you feel during the time period of October through December last year (2018) as it relates to your investments? Confident? Opportunistic? Concerned? Scared? Fearful?

I would say for most of you, particularly those in or close to the retirement years, that the last three words better describe how you felt. And if so, I don’t blame you. When media networks exclaim that “the sky is falling” and “to take cover,” it’s hard to ignore these statements. We’re human. Our left-side logic part of the brain doesn’t usually rule in these scenarios. The right-side emotional part of the brain often rules; and if acted upon, the effects can be devastating.

If you decided to cash-in at the end of 2018, you would have most likely locked-in investment losses for the year depending on your investment allocations. The Hare certainly would have advised that you cash-in.

Fast forward to February 22, 2019. Below are year-to-date investment returns for a several indices:

S&P 500: +11.3%

Dow Jones Industrial: +11.6%

MSCI ACWI: +10.1%

MSCI EAFE: +8.6%

Not too bad of returns for just 1 ½ months of the year. Of course, we may not finish the year within these return ranges, but the point is made: Had you let fear reign in October through December of last year, you would have missed the upside we’ve received so far this year.

The Tortoise would have capitalized on these investment returns, because “slow and steady wins the race.” The Hare? Perhaps he cashed-in last December, took a nap, and is still waiting for the “right time” to invest again (i.e. buy-in when the price is much higher).

We often say to clients in our office that we sure wish investment returns were these pretty little stairsteps that only went up and never down. Unfortunately, that’s not how long-term investing works. You have to take the good years, and the not so good years. Research continually shows this type of investing to give you the highest probability of achieving your investment goals.

We are sympathetic to our clients when the market volatility occurs. We won’t shame you for feeling the way you do. We will listen. And we will revisit your financial plan that we prepared together and see where we are. This strategy brings us back to the long view. This strategy has proven to be helpful.

The story ends here: “The Tortoise meanwhile kept going slowly but steadily, and, after a time, passed the place where the Hare was sleeping. But the Hare slept on very peacefully; and when at last he did wake up, the Tortoise was near the goal. The Hare now ran his swiftest, but he could not overtake the Tortoise in time.”

As shared by a billionaire investor to my old boss Dave Ramsey: “Every time I read this story to my grandkids, the Tortoise wins the race.”

We are here to run (or walk) the race alongside you.

For financial planning clients of Rivertree Financial Planning: Please contact us as soon as possible if you have had any changes in circumstances, objectives, goals or risk tolerance.

Diets and Money – Quite the Pair

Diets and Money – Quite the Pair

You may have noticed (or not) that we took a two-month sabbatical from the Rivertree blog. We take advantage of the holiday season to plan, regroup and recharge for the new year. We are excited about 2019 and hope you are as well.

On a personal note, I am doing something I have never done before – a restricted diet. What exactly is a “restricted” diet? Well, prior to January 1st of this year I couldn’t have told you. But as of this writing, I’m now on day 29 of 30 and have learned quite a few things about food I never knew.

In the simplest terms, a restrictive diet is saying “no” to food groups that could potentially be harmful to your body. After the 30 days, you slowly re-introduce excluded food groups and see how it makes you feel. Sound like the Whole30 elimination diet? Well, it is.

My motivation for this diet was not to lose weight but to see how food was impacting my overall health. To say this diet has been enlightening would be an understatement. All my aches and ailments haven’t been cured, but I have certainly seen the benefits in eating healthier, wholesome foods.

So, what does dieting have to do with money? Well, quite a bit, I’d argue.

When I ran into Books-a-Million on January 1st, guess which books greeted me immediately at the door? You got it – money and dieting. Dave Ramsey, Suze Orman, Tony Robbins, Keto, Paleo, Plant Paradox, and Whole30 all shared a nice, wooden table that you couldn’t miss upon entry. I had settled on Whole30 prior to arriving, but I couldn’t help but thumb through each book on the table.

Then it hit me: What do we often say to our clients and seminar attendees as we discuss budgeting/cash flow planning? Give the system we teach a try. If it doesn’t work, you can always go back to your old system!

I was dreading saying “no” for the first time to many foods I love. But knowing that I could go back to my “old system” in just 30 days gave me what I needed, expecting that I wouldn’t want to go back completely.

Consider this quote about change:

““We change our behavior when the pain of staying the same becomes greater than the pain of changing. Consequences give us the pain that motivates us to change.

― Dr. Henry Cloud & Dr. John Townsend

Does this quote resonate with you? What are consequences of poor money habits or diets that might motivate you to change? Often, it’s a serious health diagnosis, high-balance credit card statement, overspending in retirement, or even bankruptcy.

Don’t let it come to these consequences. Start the process of change now. Dr. Cloud also says that change comes this way: Grace + Truth + Time = Change.

We hope 2019 is a great year of healthy change for you. If you need help or counsel to begin this journey, please don’t hesitate to contact us. We’d love to help.

 

For financial planning clients of Rivertree Financial Planning: Please contact us as soon as possible if you have had any changes in circumstances, objectives, goals or risk tolerance.

Balancing Contentment, Gratitude and Responsibility

Balancing Contentment, Gratitude and Responsibility

I’m doubting the title of this blog already. Is it correct to even say, “Balancing contentment, gratitude and responsibility”? I honestly don’t know, but hopefully by the end you’ll get what I’m saying.

There’s a story about one of the richest men to ever live. He was asked, “How much is enough?” He replied, “Just a little bit more.” Isn’t it true for many of us? Just a little bit more…more time, more house, more car, more money, just more (fill in the blank).

Contentment

From the earliest of years, we’ve strived to “get ours.” Let’s call it self-protection. We are wired to feel safe and secure. Is striving for these things inherently bad? Well, no, unless we are looking for safety and security in the wrong places.

Perhaps the Apostle Paul was closest to mastering the idea of contentment:

I rejoiced in the Lord greatly that now at length you have revived your concern for me. You were indeed concerned for me, but you had no opportunity. Not that I am speaking of being in need, for I have learned in whatever situation I am to be content. I know how to be brought low, and I know how to abound. In any and every circumstance, I have learned the secret of facing plenty and hunger, abundance and need. I can do all things through him who strengthens me.” -Philippians 4:10-13

Wow. These words are coming from an imprisoned man! How can that be? Answer: His Source of contentment. The last verse in the passage tells us “the secret” to his contentment – Christ strengthens him.

Responsibility

We do have responsibility in the midst of knowing we are not fully in control. What is that responsibility? To steward our bodies, our minds and our talents. We are called to run the race while at the same time resting in the fact that we aren’t fully in control. We can do all the right things, yet suffer an injury or a loss, whether that’s physical, emotional or financial.

A saying I heard years ago and quote often is this: “Paddle the boat and pray for wind.” Paddling the boat is referencing human responsibility. And the wind? Our great Creator. We can have the best paddles, boat and crew. Yet, they have little power over massive waves. In the end, the waves win…God wins. He is all-powerful.

Think of the apostle Paul. Once imprisoned, I’d be tempted to give up. “Well, there goes the work.” However, Paul was inspired by God to write the most powerful words ever written! He did not give up. He kept paddling.

Regardless of our circumstances, we are called to keep paddling; keep moving; keep showing up. It’s certainly not easy. But thankfully, we were never asked to paddle alone. Maybe that’s what you have been missing – paddle mates. If this is you, I encourage you to courageously seek out some teammates.

Gratitude

So, this last one could be the hardest. As I’ve aged, I’ve become more aware of the brokenness in this world. I can quickly become discouraged in the midst of political wars and injustices. If I’m not careful, I can live as though God is not working in the midst of this turmoil.

However, I’m then reminded that we’ve been at war with one another since the beginning of time. A basic history book will prove this point. So how are we to respond? Start with reflection. Here’s the Apostle Paul in the opening chapter of Philippians:

I thank my God in all my remembrance of you, always in every prayer of mine for you all making my prayer with joy, because of your partnership in the gospel from the first day until now. And I am sure of this, that he who began a good work in you will bring it to completion at the day of Jesus Christ.” -Philippians 1:3-6

Listen to Paul’s confidence in God’s completion of a good work that He began. The Lord hasn’t forgotten. We can rest in this promise and be grateful.

Gratitude must be practiced. It’s like a muscle that must be exercised. Left to itself, it’s going to eventually get flabby and weak.

Conclusion

I personally do not believe contentment, responsibility and gratitude can be mastered. By mastered, I mean that you don’t have to regularly practice it. We may hear that someone has mastered an art or a sport. But don’t they still practice or else become weak? I’d say so.

This Thanksgiving, I hope and pray we can appropriately evaluate where we are in regards to each of these areas and start paddling where needed. The results will be worth it.

The Gap in Financial Planning

The Gap in Financial Planning

Have you ever assembled a piece of equipment, or perhaps a toy for a child, stepped back and admired your great handiwork, only to find a part (or two) leftover which should have been used? On the outside, your masterpiece looks flawless. On the inside, however, you’re wondering just how important those pieces are. That “gap” could be the most important pieces.

When it comes to financial planning, there is an area we most often see as the “gap” after 35+ years of us working with clients.

The “gap” is this: What happens to you and your family in the event of an unexpected death or disability? We can plan for your investments, savings, insurances, budget and retirement. And all of that is good. But what happens to your minor children in the event you pass away prematurely? I know…not a fun read for today. But, it happens, and we all need to have a plan in place for what we desire to occur when, not if, we pass away. What I am talking about here is an estate plan.

Let me address a few myths when it comes to estate planning:

1) Estate plans are only for rich people. False. Estate plans are for ALL people. We ALL have an estate (https://www.estateplanning.com/What-is-Estate-Planning/)

2) My family will just cordially work out who cares for our minor children. False. More often than not, a judge listening to both sides of the family makes the best decision that he or she can. Whew! How much easier this would have been with simple wills declaring his or her wishes for who should care for the children.

3) The courts will just work out what is fair for everyone involved. False. What is considered “fair” is relative to those involved. Did you know that in many states, Mississippi being one, a spouse receives the same percentage share of an asset as a child would should the deceased die without a will and the asset had no named beneficiary?

These are just a few myths that come to mind. Over the years, we have seen the heartache involved when a person’s estate is not planned well, or at all. They may have sufficient assets to care for loved ones. However, without a properly designed estate plan, disaster can occur, causing stress for loved ones.

We often get asked: “Should I pay an attorney to help, or could I write my own will?” Well, “yes and yes.” You should pay an attorney, and you can write your own will. However, we believe it is much wiser to get professional help, especially should a problem arise down the road. You can attempt to diagnose that continual headache, rash or stomach pain all day long using webmd.com. Or, you can pay a doctor who does this type of work on a daily basis.

So, what are essential parts of an estate plan? Our industry has called it the “Three-legged stool”:

1) Last Will and Testament
2) Durable Power of Attorney for Finances
3) Advanced Healthcare Directive

That stool could have a fourth leg for situations needing a Revocable Living Trust. We won’t go into detail on any of these today, but it’s worth bringing up each of these items to the attorney you choose.

I have observed that the hardest step is the first step – not just in estate planning, but in many important areas of life: Making that first phone call and asking for help.

I am a big believer in professional help. That includes the work we do as financial planners. All your ducks may be in a row, but it’s worthwhile to have a second set of eyes to make sure. We think you’ll be glad you did.