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What does it mean to “Live Well”

I have three children, and my oldest recently got her driver’s permit. The roads are more dangerous than I realized…I am a worse driver than I realized! My middle child came home with a heartbreaking story of a child in her class dealing with a major “social” issue, and how terribly the situation was handled by the teacher. My youngest plays in a basketball league (I help coach his team), and at one of our games recently, the behavior of some of the parents in the stands was shocking. Their comments were embarrassing…and I don’t embarrass easily.

What’s my point?

These situations, along with the fact that I turned 40 this year and my wife and I will celebrate our 20th wedding anniversary next May, have really gotten me thinking about what’s important.

Our time here on Earth is short. Even if you live to be 100…it’s short.

At some point we must graduate from thinking solely about building our own lives and realize that we need to be giving our lives away. This can sound cliché, but it has become more clear to me than ever.

What does it really mean to “live well?” I’d argue that if we aren’t pouring into the next generation and helping shape their future for the better in some way, we’ll never find out.

I then started thinking about my business and the clients we serve. I came to an amazing realization: one of the common characteristics of the clients that I admire and really enjoy meeting with the most is that they have this figured out. They are pouring into the next generation…and their lives are so much richer for it!


“Real” Market Returns Versus “Average” Market Returns

Have you ever heard the saying “losing money hurts more than making money helps”? 
You’ve probably already understood that as you approach retirement you should begin
to take less risk with your money, but why? The reason is a math concept called
geometric mean that we will explore quickly (and painlessly). Before we get to
geometric mean, let’s start with something easy, average return.
If 8 years of your portfolio returns looks like this (-10%, +10%, -10%, +10%, -10%,
+10%, -10%, +10%) your average return is 0%. Like I promised, painless.
However, as soon as we add money to the equation and experience the same returns,
things change. If we start with a $2,000,000 investment portfolio and run the same set
of returns things change drastically. Your 2 million turns into less than $1,922,000 at the
end of the 8 year cycle.

How can that be?!

You just received an average return of 0% yet your real rate of return
over those 8 years was -3.9%. -3.9% is your geometric mean. Losing money hurts more
than making money helps.
You should know that bigger losses make those numbers worse!
Our same $2,000,000 portfolio down 40% year 1 and then up 40% year 2. Your average
return is again 0%, but that portfolio over those two years shrunk to $1,680,000. A
geometric mean of -16%.
If losing money really does hurt more than making money helps, having some of your
money protected from market losses should be a major priority as you approach


Why are you saving and investing your money?

The question probably seems too simplistic, but the answer to this question is crucial if you are hoping for a positive outcome. If your goal is to grow your portfolio by a certain amount each year, recent market events could have you scrambling. If your current portfolio is built around achieving a certain return or outperforming a benchmark (the S&P 500 for example), market volatility can create anxiety. The good news is that it doesn’t have to be that way.

A prudent approach is not centered around outperforming the markets (it takes a lot of risk to attempt this). It also doesn’t make sense to try to only “pick winners” (give me a second while I peer into my crystal ball).

Having a custom portfolio that is specifically tailored to your goals, your timeline, your needs, and wants is crucial. Rebalancing that portfolio regularly prevents it from drifting out of your tailored design. If you can design an investment plan that provides for your needs, wants and wishes, why would you try to outperform the S&P if you don’t have to?

Our aim is to help you meet specific financial goals, so we adopt and encourage all of our clients to have a long-term outlook. We specifically build in market setbacks into your plan.

Yes, you heard that right!

We build-in market volatility. Why? Because the stock market doesn’t care about your plans!

Peace of mind is almost impossible if your plan is based on outperforming the market, or getting a specific rate of return each year…or picking individual stocks/funds and hoping they are all winners. 

It is so easy to sleep well at night and live with confidence when your financial plan and portfolio are aligned to your specific goals AND you know that losses are already built into the plan.

Maybe you don’t have a plan, or maybe you have a sinking suspicion that your current plan is not specifically tailored to you and your goals. If that’s you, we would love to help bring peace of mind.


Let’s Talk About…. The 401k

The 401(k) began as a company profit-sharing plan. Companies had been funding
pensions for years, but as their annual profits and stock prices experienced volatility,
they looked for ways to share that burden with employees. Through profit sharing,
workers made money when the company did and made less during down years. This
allowed employees to defer salary contributions into a retirement account before
deducting taxes and established rules to ensure the plan was available to all
employees, not just executives.
Once the 401(k) was established, it could be used to invest in more than just company
stock. It was a way to put investment control into workers’ hands without limiting their
retirement income prospects based on their company’s performance.
The shift to personal savings and investment management hasn’t always led to high
levels of reliable income as pensions typically did. After all, your average worker doesn’t
have in-depth investment knowledge or the time to follow the markets closely. And,
unless they were willing to pay an advisor for advice, they wouldn’t get much help in this
This is one reason to work with a financial advisor who is willing to help you manage
your entire financial picture. You should consider all of your investments when
establishing an asset allocation to help you meet your financial goals. We’re happy to
evaluate your portfolio, including your 401(k) investment options.


How Taxes Impact Investment Planning

Too often, we think of taxes from a very specific perspective: looking backwards. For example,
during the first quarter of each year, we all start to receive our various tax documents in order
so that we can look back and begin the process of filing our taxes based on the previous year.
It’s a typical routine. The year is done, and we are now subject to respond to whatever
happened that year (how much taxable income vs. deductions, etc.).

This way of viewing taxes doesn’t translate well to investment and/or retirement planning.

A complete financial plan needs to address the effect of taxes looking forward. How will
current events (i.e. government stimulus packages, pandemic relief, increasing national debt,
social security funding shortfalls, etc.) influence tax rates ten or twenty years from now? Will
tax rates be the same? Higher? Often, even when attempting to look forward and plan, many
assume that they’ll be in a lower tax bracket when they are retired because they won’t have
their current income. Is that a safe assumption?

The good news is, there are several strategies that can be used to take these risks into
consideration now and plan accordingly.

  • Can you prevent your Security benefit from being taxed?
  • Does a ROTH conversion make sense?
  • Should your investment portfolio be managed with taxes in mind?
  • What other strategies might make sense for you?

Remember, it’s not just what you earn/save that’s important, it’s what you keep.

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