Planning for Retirement: Creating YOU Version 3.0

by Josh Mudse, CFP

I recently met with a client who asked me to help him plan for an early retirement. We worked through the financial details of retiring at age 59, determining the appropriate investment portfolio and planning distributions from various accounts to maximize tax efficiency. After we worked out all the numbers and we both felt good that he could retire whenever he wanted, I got an email that said he was having cold feet. His reluctance was not a result of questioning the math or the distribution plan. In a self-reflective moment, he realized he had no idea what he would do once he was retired.

Leaving the traditional career world today means that you will likely live another full adult lifetime, 10 or 15 years longer than the retirement years lived by your parents. As people approach the arbitrary end line, determining what comes next is a real and common problem. At major life transition points like retirement, it is normal to run through some version of grief. Making the decision to retire often involves mourning our former life. We wrap so much of our identities into our work that it can be traumatic when we walk away, equivalent to the loss of a loved one.

The realities faced by someone retiring today change our role as financial planners. Instead of talking about asset allocation and buttoning-up the details of an estate plan, financial planners now help clients determine what makes their lives significant.  Significance means something different for every one of us. We often hear our clients define it as spending time with family, giving generously, pursuing a passion, or serving others.  The client above described this process as creating a new version of himself, version 3.0.

According to life and leadership coach, John Cunningham, the first step in making progress is to stop thinking in traditional terms about retirement, start thinking about the next phase of your life as a re-entry, one that you can control. He recommends having a quiet period after you leave your career. Find a way to go out in the proverbial (or actual) woods to decompress, reflect on your past, and focus on identifying what will provide inspiration and purpose for this next phase of life. 

This idea of taking a break to get refocused and re-energized was reinforced to me twice during a recent trip to California. During a conference that I was attending, one of the keynote addresses was made by Richard Swenson, M.D., author of Margin: Restoring Emotional, Physical, Financial, and Time Reserves to Overloaded Lives. Margin is the space between our load and our limits, and is directly related to our reserves and resilience. Dr. Swenson explained that his research shows that humans can maximize personal productivity by interchanging periods of working slightly above their natural limit with periods that allow for time to heal, to reflect, to recharge our batteries and focus on the things that matter most. After pressing to succeed in your career, creating margin before your re-entry will help make that next phase more productive.

Following the conference, I had the opportunity to spend time with my 90 year old grandmother. She is a marvel, still cooking her own meals, driving herself to the store and doctor appointments. Even though she has an arched back that requires her to shuffle around the house, she still accomplishes everything she wants in a day. She told me that as long as she takes a break in the afternoon, she can keep getting things done through the evening. She confessed that her one hope for all of us is that when life presents hardships, we would take time to learn from them and then keep going. That conversation was an affirmation of the principles promoted by Dr. Swenson and provides wisdom to dealing with the hardships we face at life transition points, including retirement.

It must be said that not all retirement transitions are equal. You may be facing an unexpected retirement as a result of a job loss or a health issue. Whatever the situation you find yourself as you approach the end of YOU 2.0, take some time away from your routines to determine what you value most moving forward. Determining the outcomes that you desire most will help in creating the financial plan that supports your life of significance. 

Disclosures:

• This material is intended to be educational in nature, and not as a recommendation of any particular strategy, approach, product or concept for any particular advisor or client.  These materials are not intended as any form of substitute for individualized investment advice.  The discussion is general in nature, and therefore not intended to recommend or endorse any asset class, security, or technical aspect of any security for the purpose of allowing a reader to use the approach on their own.  Before participating in any investment program or making any investment, clients as well as all other readers are encouraged to consult with their own professional advisers, including investment advisers and tax advisors.  Camelot Portfolios LLC can assist in determining a suitable investment approach for a given individual, which may or may not closely resemble the strategies outlined herein.
• John Cunningham, M.A. has been coaching and assisting individuals and organizations for over 30 years, including Camelot Portfolios. Learn more about John at encompassresources.net

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Let's Change the Conversation

Grant Sims, CFP

As January has come, many clients start the new year by revisiting their financial goals. Just as in your personal life, a little planning is likely better than none and adding details to your financial goals are better than wishful desires.

In the conversations we have with clients we want to shift the focus away from goals, and instead emphasize our clients’ desired outcomes.  It sounds like the same thing--goals and desired outcomes—yet, in our opinion, there is a subtle and significant difference. 

Outcomes typically come from a different place than goals; they are heart-level desires. Most goals can be directly purchased or achieved with money; a desired outcome typically cannot.

Rather than only asking, “What are my goals for the future?”, an additional question might be considered: “If all the things I have identified came true, what then would be true in my life?” In other words, what outcomes would the achievement of these goals bring about in your life; what would they give you the ability to do that you can’t or aren’t doing right now? 

Consider the following illustration. A small business owner was approaching retirement with his wife. They had worked hard to grow the business and save as much as they could. They had a goal of retiring with significant retirement assets and the proceeds from the sale of the business.  Unfortunately his business transition plan with his top manager fell through and the manager left to start his own company, taking half the former clients.

The couple were crushed as they realized even if a new buyer was found, the business would be worth less than half the previous value. They were depending on the full value of their assets and business to achieve their ideal retirement, which included: purchasing a vacation home on the lake, volunteering with some of their favorite non-profit organizations, and traveling through Europe. With the loss of business value, they felt they would either need to postpone retirement by several years, or significantly alter their lifestyle plans.

But when they met with an advisor, a simple question began to change their perspective: “What do you want to do at the house on the lake?” They responded that they would like to spend their summers at the lake visiting with kids and grandkids, fishing and writing.

Then the advisor asked, “Do you need to own the home?” Their answer of “no” revealed that while their goal had been to buy a lake house, their desired outcome was spending time with family and pursuing specific hobbies for a few months a year, which did not require the large amount of assets needed to purchase a property.

Consequently, with the change in their financial circumstance, while their goal was now unachievable, their desired outcome was still viable by renting a home in the summers.

The advisor helped them focus on the outcome and experiences they wanted, rather than having the assets they thought they needed to achieve their goals. Once their true desired outcome was identified, alternative options provided funding for everything they wanted in retirement without having to build the business back up or push off retirement. 

 As I have heard multiple wise advisors say, “money is NEVER the final product or end result, it is simply the tool to achieve what you truly desire.” As we plan for retirement, let’s change the conversation from hopeful goals to designing a plan to keep you on track to achieve your most important desired outcomes. 

Disclosures:

•      This material is intended to be educational in nature, and not as a recommendation of any particular strategy, approach, product or concept for any particular advisor or client.  These materials are not intended as any form of substitute for individualized investment advice.  The discussion is general in nature, and therefore not intended to recommend or endorse any asset class, security, or technical aspect of any security for the purpose of allowing a reader to use the approach on their own.  Before participating in any investment program or making any investment, clients as well as all other readers are encouraged to consult with their own professional advisers, including investment advisers and tax advisors. Munn Wealth Management can assist in determining a suitable investment approach for a given individual, which may or may not closely resemble the strategies outlined herein.

•      These materials contain references to hypothetical case studies.  These are presented for the purpose of demonstrating a concept or idea, and not intended to be interpreted as representing any specific person.  Such representations are not intended to substitute for individual investment advice, even if the case study appears to have similar characteristics.  1323DGJ

The Gifts of Time, Experiences and Life Lessons

Laura Noble, JD

Legacy Wealth Advisor

As we begin a New Year and reflect back upon the holiday season, we may still be relishing in the joy of our favorite gift!  Maybe it is a beautiful piece of jewelry, a new golf club, the latest smartphone, a clothing item, or a gift card we look forward to using.  Yet, it probably won’t be long before the nostalgia of that new, favorite gift wears off or is even completely forgotten.  Doesn’t that happen?  How many gifts can you recall receiving over the years? 

As a family, we recently talked about our gift-giving and the fact that we can seldom remember year to year the specific gifts we received, unless of course, it was particularly unique or personal to us from the gift giver.  This past Christmas, some of us admitted the stress that comes with running around to stores or even shopping online to find that perfect gift can sometimes take the joy out of giving gifts and the true meaning of the Christmas season.  However, we found that we were able to reminisce in great detail, with laughter and joy, sometimes even tears, experiences we had shared together and reflect upon how much more those experiences positively impacted us individually and as a family. We agreed that store-bought gifts did not mean as much to us as those experiences, and we decided to give more gifts of time, experiences and life lessons to each other in the years to come.

As an estate planner, I often share with clients and their families the statistic that 90% of families fail to keep their family and their wealth together for more than three (3) generations.[i]  This statistic is not necessarily the result of inadequate traditional financial and estate planning, but more likely the failure to emotionally prepare the family for the wealth they inherit.  One way to possibly overcome this is to provide the family with pre-inheritance experiences where the family can work together, make decisions together and have fun together!  A recent study re-confirmed that families are more comfortable in discussing legacy than they are inheritance because legacy captures family traditions, stories, life lessons and values.[ii]

This year consider giving the gifts of time, experiences and life lessons to celebrate birthdays, anniversaries, and special holidays.  Rent a cabin or lake house for the weekend and gather the family together.  Take a cooking, art or dance class together, play more board and card games, go bowling or ice skating together.  If there is an activity that you enjoy, invite your children, grandchildren, parents, siblings, nieces, nephews to participate with you.  Encourage family members, including young children, teenage children and adult children to participate in planning.  If generosity and stewardship is important to you, you should encourage and teach family members to volunteer time and resources to charity.  Each year employees in our office and clients gather their own families and friends for an afternoon or evening to participate in packing meals for the charity “Feed My Starving Children.”  Another colleague and  close friend of mine encourages her family members who receive monetary gifts from her to give away at least 10% of their gift to a charity or someone in need; her 8 year-old granddaughter recently gave her money to a family where the mother was battling leukemia.  Another friend’s five daughters recently contacted the local charity that he and his wife had been supporting with both their time and financial resources to ask the charity’s greatest current needs and rather than buying material gifts for their parents, the five daughters went together and bought the items needed for the charity. 

My father has always said, “…the greatest gift we can gift is the gift of time…”  Our time is precious to us and often limited with the demands of life, it is something we can never get back or get more of.  When we give of our time, we truly give of ourselves, and we can create lasting memories.

Sources:

[i] Perry Cochell and Rod Zeeb, Beating the Midas Curse, Second Edition 2013, Page 13

[ii] Allianz American Legacies Pulse Survey, 2016

Disclosures:

•       This material is intended to be educational in nature, and not as a recommendation of any particular strategy, approach, product or concept for any particular advisor or client.  These materials are not intended as any form of substitute for individualized investment advice.  The discussion is general in nature, and therefore not intended to recommend or endorse any asset class, security, or technical aspect of any security for the purpose of allowing a reader to use the approach on their own.  Before participating in any investment program or making any investment, clients as well as all other readers are encouraged to consult with their own professional advisers, including investment advisers and tax advisors.  Munn Wealth Management can assist in determining a suitable investment approach for a given individual, which may or may not closely resemble the strategies outlined herein. 1323DGG

Time to Sell?

David Munn, CFP

If you’re reading this, it means you survived the year 2016.  Congratulations.  Fidel Castro was said to have survived more than 600 assassination attempts, but even he could not accomplish what you and I have done. 

Perhaps the stock market was attempting to warn us last January and February that 2016 would be volatile and unpredictable in many ways, but no one could have predicted all that transpired. For their part, US stocks rebounded from what was at one point the worst 10 day start to a calendar year in modern history (Source: MarketWatch), to post moderate gains--taking only a week to digest the surprising Brexit vote--capped off by a furious post-election rally.

Given all that’s happened, I wanted to use this space to address some of the common questions we have been hearing, providing my personal responses:

●     Does the market’s recent run mean I should sell stocks?  No

●     Does the market’s recent run mean I should buy stocks? No

●     Does the market’s recent run mean I should get more aggressive? No

●     Does the market’s recent run mean I should get more conservative? No

●     Does the market’s recent run mean the government is going to make the economy great again? No

Please allow me to explain.  We know that stocks go up and down over short-term periods of time.  But over long-term periods of time, stocks generally go higher and set new “highs” over and over again.  There are fundamental reasons this is mostly true that this space does not allow for. 

Sometimes the track of stock growth looks like a rocket blasting into orbit (think stocks during the 1980s and 1990s).

Sometimes the track looks like a roller coaster (think stocks since 2000):

When stocks reach new highs, it is no more an indication they will continue rising than it is they will fall.  That’s why you always see that disclosure in our industry, “past performance is not an indicator of future results”.

The market’s response to the election of Donald Trump seems partially based on expectations that his promises of less regulation and lower tax rates for business will lead to higher profits.  These expectations could go unmet or they could be exceeded, dependent on an infinite number of variables over the coming months and years.

So how should an investor respond in these circumstances?

First, re-evaluate your risk tolerance assuming a significant market rally or pullback are equally likely over the coming year.  While the odds may not be exactly equal, they are both possible, so you should be pro-actively prepared for the possibility of both. 

Second, if you plan to add or withdraw money from stocks in 2017, dollar cost averaging is beneficial.  Rather than waiting for an opportune time to buy or sell--which may never come--do a little bit every month. It’s a way of hedging risk and likely ensuring you don’t buy or sell at the worst time of the year. 

Third, if you have not rebalanced accounts recently, this is a good time.  While some parts of the stock market have performed well, other areas--primarily international--have continued to struggle.  Consequently, accounts outside our management, such as employer 401(k) plans may have strayed significantly from their original allocation.

We know some investors decided to exit the stock market prior to the election, fearing what a surprise Trump win might do.  For about 10 hours on election night, that seemed like a very smart move. But the aftermath just goes to demonstrate how unpredictable, irrational and difficult/impossible to time the stock market can be. Expect more of the same in the future. 

Sources:

MarketWatch

Disclosures:

•       Past performance may not be indicative of future results. Therefore, no current or prospective client should assume that the future performance of any specific investment, investment strategy (including the investments and/or investment strategies recommended by the adviser), will be profitable or equal to past performance levels.

•       This material is intended to be educational in nature, and not as a recommendation of any particular strategy, approach, product or concept for any particular advisor or client.  These materials are not intended as any form of substitute for individualized investment advice.  The discussion is general in nature, and therefore not intended to recommend or endorse any asset class, security, or technical aspect of any security for the purpose of allowing a reader to use the approach on their own.  Before participating in any investment program or making any investment, clients as well as all other readers are encouraged to consult with their own professional advisers, including investment advisers and tax advisors.  Munn Wealth Management can assist in determining a suitable investment approach for a given individual, which may or may not closely resemble the strategies outlined herein. 1323DG

Fourth Quarter Market Commentary - Election Aftermath

by Darren Munn, CFA

Aren’t you glad that’s over!  This election season was brutal.  For several months, there was no escaping it.  It dominated the headlines, both in the mainstream media and on social media.  The same was largely true in the financial markets, which were closely watching the election.  The ultimate outcome, a Trump victory and Republican sweep of congress, was considered a huge surprise and sent the markets into a tailspin…for all of about 10 hours.  In the evening of the election, stock futures dropped 5% before being shut down for the night as it became apparent Trump would win.  But by the time the markets opened the next day, stock futures had completely recovered and stocks ended the day 1% higher!1 

The small gains we anticipated when a clear winner emerged turned into fairly large gains, as the S&P 500 surged about 6% after Election Day through the end of the year.1 Why? In a nutshell, we believe the market is expecting a stronger economy with Trump as president.  This will largely be driven by lower corporate tax rates, which directly translate into higher profits, which means higher stock prices.  Of course, this is all before Trump is even in office or any legislation has been passed – so it appears to us the market is pretty confident about the likelihood of these developments. 

We agree with the markets that a Trump presidency is more favorable for the economy…BUT.  That is a big “but”.  There are certain factors in play over which Trump will have no control, so how much impact he will have remains up for debate.  The Federal Reserve raised interest rates again in December and indicated they expect several more increases in 2017.  Sound familiar?  We believe this and the strong dollar will be headwinds, in addition to some other concerns we have been watching.  The reality is, we may be headed for a recession in the next year or two regardless of what Trump does.  If so, we believe it will be a shallower recession than it otherwise would have been. 

The fourth quarter was again positive for stocks and easily the worst for bonds – which gave up much of their gains for the year as rising interest rates drove down bond prices.  Most of the positive move for stocks and negative move for bonds came after the election.  (Morningstar)

Positives

·         Employment continued to be steady with the unemployment rate at 4.7% in December.  (U.S. DOL)

·         Low oil & gas prices continue to save money for consumers, but the savings have been shrinking.

·         We believe energy markets have stabilized and are near equilibrium.  We expect oil to stay in the $40-$60 range in 2017.

·         Housing has continued moderate--but choppy--growth.  Low interest rates have helped keep prices affordable.  (Barron’s)

·         Economic growth picked up in the third quarter to 3.5%2 - but we do not expect this rate to continue.

Challenges & Risks

·         Economic growth will likely trend in the 2% range in our opinion.

·         Oil price declines are still working through the system and we are seeing the expected defaults from many energy companies. 

·         Interest rates – the Federal Reserve raised interest rates in December and expects 3-4 increases next year.  We believe this is more than the economy can handle and expect only 1-2 increases next year.

·         Government regulation is a potential huge drag.  Health care costs are continuing to rise significantly & government interference in several areas (finance, education, energy) continue to limit economic growth.  Will this improve in 2017? 

·         China, Europe, North Korea – we expect these three to capture significant headlines in the coming year.

Despite a rocky start, we believe 2016 turned out to be a pretty decent year in the markets.  Unfortunately, investors who panicked during the rocky period of January and February seemingly missed out on some very substantial returns.  We have been working to “lock in” some of our gains and move capital to investments we believe offer greater upside potential over the next few years. 

We are excited about what 2017 has in store and are honored to serve you!

Sources:

1)      Bloomberg

2)      Barron’s

Disclosures:

Past performance may not be indicative of future results. Therefore, no current or prospective client should assume that the future performance of any specific investment, investment strategy (including the investments and/or investment strategies recommended by the adviser), will be profitable or equal to past performance levels.  This material is intended to be educational in nature, and not as a recommendation of any particular strategy, approach, product or concept for any particular advisor or client.  These materials are not intended as any form of substitute for individualized investment advice.  The discussion is general in nature, and therefore not intended to recommend or endorse any asset class, security, or technical aspect of any security for the purpose of allowing a reader to use the approach on their own.  Before participating in any investment program or making any investment, clients as well as all other readers are encouraged to consult with their own professional advisers, including investment advisers and tax advisors.  Camelot Portfolios LLC can assist in determining a suitable investment approach for a given individual, which may or may not closely resemble the strategies outlined herein. A337