Your Golden Years: When Planning Becomes Reality

Your Golden Years: When Retirement Planning Becomes Reality

Bringing, as I do, a contrarian point of view to wealth management helps me encourage my clients to have a clear-eyed approach to investing. It is that kind of unbiased, honest assessment that holds the key to remaining committed, long-term, to market-driven investment strategies—which, if you see them through, can help fuel purpose-driven retirement planning.

So what is a purpose-driven retirement, anyway?

The answer will be as different as each person you ask, but among the majority of clients

I serve, three objectives underlie their retirement planning:

  • Never running out of money during their lifetimes
  • Providing for survivors after they’ve passed
  • Preserving and expanding their contributions (both monetary and physical) to philanthropic pursuits aimed at making the world a better place.

Don’t assume that only the last of those serves the “purpose” part of “purpose-driven retirement.” In fact, all three do.

After all, you must first be secure yourself in order to extend a hand to others.

Providing for your survivors, meanwhile, sets an important example: That caring for others begins at home. If you couple that example with encouragement that your beneficiaries too help others, you’ll be pursuing one of the most important indirect forms of philanthropy, passing the ethic along.

With these first two objectives satisfied, philanthropic retirees can then turn their attention directly helping those in need. I believe that the cause(s) one chooses to assist is no less important a decision than the form their help takes. No single need is more pressing than any other; the question is, what touches your heart?

I’ve opted to put my philanthropic efforts into a school for orphaned children in India, a hospital in my neighborhood, and a homeless shelter in the inner city. Does throwing your weight behind efforts to help addicts speak loudest to you? Or is it the battle against workplace bullying? Perhaps you’ll join the Peace Corps, or collect clothing to spur micro-enterprise in poor communities abroad, or start a brand-new effort addressing an issue you believe is being largely ignored at society’s peril.

Where you choose to do good is a highly personal decision. That you choose to do good, and preserving your ability to do so, I believe, is the greatest gift of our golden years, both to those who receive what we give, and of all the gifts we give ourselves.

The Power of Dispassion: Trusting the Markets’ Cycles

The Power of Dispassion: Trusting the Markets’ Cycles

Nothing is more challenging for a wealth manager who works with her clients’ best interests at heart than talking them off the ledge when the market is tanking.

        When you’ve been doing this as long as I have, you get to a point where, frankly, you’re somewhat bemused to find that investors panic at all. Does that make me sound jaded? I hope not; “experienced” has a much nicer ring!

        Still, I get it. I really do.

        Here you are, having worked for and planned for and saved for the retirement of your dreams—and now that you’re closing in on it (or already in it) it’s like every zoo in America decided its bears could use a walking (or worse, running) tour of Wall Street! What response but panic is appropriate?

        Well, education.

        Because once you understand the market’s cycles, you realize that even the darkest day on Wall Street, in the bigger scheme of things, is fleeting. So are long-term bear markets. When you combine an understanding of the market’s cycles with years of experience in managing portfolios through them, you know panic isn’t just pointless, it’s unnecessary. You’ve already planned in a way that can accommodate tough markets and can even leverage them to a client’s advantage.

        Still, when any day is especially dark, I get phone calls. Take 2011, for example.

        I was at a remote location in India where you can’t really get the internet. But when we went into the city I hit up my smartphone and saw that the equity markets were in a tailspin: A key rating agency had downgraded U.S. Treasury bonds from AAA to AA, thanks to a Congressional harangue in Washington. The news media drew up worst-case scenarios, including people going without their social security checks.

        I pictured the phones lighting up back in Boston—where, fortunately, it was the middle of the night; the trading day had not yet begun. I sent my staff this e-mail:

        “When people call, tell them not to sell their equity positions, this is craziness. Downgrade of Treasuries should affect the Treasury market, not the stock market.”

        That’s because when a bond is downgraded, the issuer must usually pay more in interest to attract buyers. In short, this “crisis” was no crisis at all. If anything, it was an opportunity to buy in to equities—not sell out of them.

        Thanks to an understanding of market cycles born out by years of actually seeing how events in one market impact other markets, I was able to abide by an axiom that is often heard but too infrequently applied: Buy low.

        That axiom’s other half, of course, is “sell high”—and sending a sell order on a bad day for the market is doing quite the opposite.

        I discuss market cycles in great detail—and share what I was up to in a remote corner of India—in my book, You’re Retired… Now What? – coming soon!. I hope you’ll read it.

Achieve a Purpose-Driven Retirement

If someone could convey in a few hundred or even a thousand words what constitutes—and then, how to plan toward—one’s vision of a purpose-driven retirement, they’ve have done it a long time ago. There is so much involved; so much to accommodate. Not least, what “purpose” means to the reader.

It may have taken me 40,000 words (more or less), but put it on your nightstand or side table for a few days, and I sincerely believe you’ll agree that “You’re Retired. Now What? comes pretty close to the mark.

As you surely know, Rule Number One of success in business is knowing who you serve best, and then catering to that market segment’s needs. I have spent over 30 years building a practice that best serves high-net-worth individuals. I apply an absolute single-mindedness of focus to the goal of protecting and growing my clients’ wealth—which, if they aim to remain high-net-worth individuals (and leave a lasting legacy behind), should be their topmost objective. Especially in the years approaching and during retirement.

It’s the subtitle of “You’re Retired. Now What?” that captures what I actually provide: “Strategic Wealth Management for Purpose-Driven Retirees.”

Successful people succeed for a reason: They always have a purpose to fulfill.

If you think retirement will be endless days of golf or fishing or travel or all those other things you love doing so much on the weekends and while on vacation, let me disabuse you of that notion quickly. Without a purpose, you’ll be bored in a year, max. A couple of my clients have gone maybe 18 months. But the old pangs for actually getting something meaningful done inevitably return. “You’re Retired, Now What?” can help you find and fulfill your true purpose for retirement.

I have worked hard to make “You’re Retired, Now What?” a valuable, down-to-earth resource for purpose-driven people who want to leave something meaningful in their wake. 

Retirement Plan

Are you prepared for retirement speed bumps?

Retirement is an era associated with relaxing, spending time with family, and doing what you enjoy. However, it’s not always smooth sailing. Retirees often face a variety of challenges and speed bumps. Some of the big ones including emergency events, market volatility, and longevity. Start preparing now for these challenges so your retirement can be as stress-free and enjoyable as possible.

Emergency events. Life continues to happen when you are retired, and emergencies can arise. A spouse can pass way or become very ill. A child can have a medical emergency. A natural disaster can damage your home. As unpleasant as it is to think about some of the events, it’s important to plan for these events before they happen—heaven forbid. It’s easier to have the hard conversations now.

One of the best ways you can prepare is by creating emergency funds. Saving for emergencies is hopefully a habit you’ve already developed before retirement. It’s still important now.

Ensure that you have an estate plan and your beneficiaries know about it. Have plans for unexpected deaths, illnesses, or disabilities. As the years go by, update your financial plans as needed. Being proactive makes it much easier to deal with emergencies when they arise.

Market Volatility. I’m sure most retirees—and perhaps most people in general—would love to have a crystal ball to predict how the market will change in the coming years. Of course, we want it to continue to grow. However, we know that the market is volatile. Financial challenges in the economy can cause shifts as well as events we can’t predict—like natural disasters.

Prepare now for potential downturns so you can continue living a comfortable retirement regardless of dramatic shifts in the markets. A financial planner can give you advice on how to best protect your portfolio and assets.

Longevity. This likely comes as no surprise—Americans’ life expectancy is very high. While this can be great, there are also challenges. For example, as we age, medical problems (and expenses) can increase.

Additionally, some retirees may worry they could outlive their retirement savings. Even if you have a robust nest egg, this is still something important to consider. After retirement, some people continue to spend the same as they did when they were working. When you aren’t making the same income, this can deplete your resources faster than you may expect. It’s great to spend money on trips or large purchases that you have planned for, but keep in mind how long you will need your wealth to last. Spend wisely. A financial planner will guide you to make educated decisions.

Your retirement years can be some of the best ones of your life. But beware of potential speed bumps. Prepare now and you can have the relaxing retirement you’ve been preparing for.

Tax

Five Tax Advantages of Retirement

Careful tax planning can provide retirees with significant opportunities for keeping more of their money. Here are five examples. (Consult a tax advisor to determine your best options.)

#1: Retirement Plan Contributions

People over 50 enjoy higher contribution limits for traditional and Roth IRAs, and 401(k)s. If you’re married, own an IRA, and your spouse is still working, he or she can contribute to your plan, in addition to their own.

#2: Business Expenses

Whether you consult for your old company in retirement or start a new one, remember: businesses, both full- and part-time, are great sources of tax deductions. You can reduce your business’s income by the reasonable expenses that come with running it, including business travel, equipment (like computers), and office space. If your venture loses money, you can often deduct the loss from other sources of income.

#3: Use RMDs for Tax Payments

Assuming your post-career business is profitable, you’ll have to pay tax on that income.

Instead of calculating and sending estimated tax payments to the IRS during the year—a requirement for the vast majority of the self-employed—people who are taking required minimum distributions (RMDs) from traditional IRAs can wait until December to take the distribution and ask their IRA administrator to hold back extra funds for taxes.

Tax money withheld from IRA distributions is considered “paid tax” throughout the year, even if done at year-end. This allows you to dodge the requirement (punishable with penalties if broken) to make estimated tax payments on self-employment income throughout the year—provided your RMD covers your total tax liability.

Of course, be sure you won’t need the RMD to meet living expenses during the year!

#4: A Vacation Home

If you sold recently your empty nest and moved to a vacation home, you might qualify for two windfalls within a few short years.

If you lived in the old homestead for at least two of the last five years you owned it, your profits on its sale were tax-free (up to some generous limits).

When you move into a vacation home you’ve owned for 25 years or more, and designate it your principal residence for at least two years, you can keep some of the profit on its sale as well, under IRS rules. (Consult your tax advisor to see if you qualify.)

#5: Give It Away

Many retirees use the gift tax exemption to help keep their tax hit as low as possible, especially those likely to owe estate taxes when they die. The gift tax exemption allows you to give up to $15,000 per year (at this writing) to as many individuals as you like—up to a lifetime total of $11.4 million. Married couples can give twice that amount.

Don’t let your generosity end with family and friends. By gifting items to a qualified charity—a car, boat, or plane, for example (cash donations are treated differently)—you can deduct the gross proceeds realized by the charity upon its sale of the item (provided you valued it at $500 or more when signing over the title). Note that such contributions are only deductible (under IRS rules) when you itemize. Remember, grouping contributions within a calendar year might help you reach the itemization threshold.