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Are You Blocking Your Own Financial Success?

Are you getting in your own way? Sometimes we ourselves are the roadblock to what we want for our financial future.

Here are a few ways this happens in relation to growing your assets:

  1. Impatience. You invest and expect great gains in a short time. When that does not happen, you dump that investment and search for another.

A better approach is to keep an investment log. Here are some useful entries:

Date: Buy xyz at such and such a price

Reason: I bought it because….

Target: I expect it to do ….. by such and such date…..

Date: Sold xyz  at such and such a price

Reason: ………………….

Gain/loss: ……………………….

After a month, look at the investment, did it continue to decline or grow? _____

Your evaluation of your buy and sell decisions ______________

This sort of investment log helps you look clearly at your choices and gives you data to help you make further decisions. The log can help you see if you are the problem. Did your emotions get in the way? Did you get spooked by the action of the investment and sell when you should have been patient and held on? Did you forget to do more research to back up your decision?

  1. Fear of the unfamiliar. It’s likely that you are familiar with some investments. When someone brings to your attention an investment that is unfamiliar, what do you say? “No, thanks.” Maybe that quick response is triggered by a vague recollection that your aunt had a bad time with that sort of investment. Do you automatically push away whatever is not in your comfort zone?

A better approach is to learn. It does not mean you must invest, but it does mean you are open to knowing what else is available to you that could be a benefit to you. You ask questions and learn about the investment’s capabilities, limitations, and risks. Then, you make a reasoned decision.

  1. Inaction. There are abundant reasons for not investing- the market is volatile; I don’t know enough about investing; I missed the lowest prices; I don’t have enough spare cash; I don’t want to tie up my money, and many more reasons.

A better approach is to start with some dollar amount and add it to savings if there is no investment that you are comfortable with. Be consistent with a dollar amount, just as you would be with a rent or mortgage payment. You can build up the account. In the meantime, learn about an investment that interests you; whatever it is, study it. When you feel confident, invest what you have saved. If no investment seems worthwhile, keep building up your savings.

  1. Very risk averse. You can be afraid of risk and just invest in bank instruments if you are willing to save more and maybe live below your take home pay. The reason is that you have to set aside more dollars if your investment earns 1% rather than 8%. Here are some hypothetical examples to explain living below your means as a very risk averse investor.

Hypothetical example one: Suppose you invested $1,000 then $200 every month for five years and the hypothetical interest rate was 1%. You might have at the end of five years about $13,293. You would have contributed $13,000.

https://www.Investor.gov/financial-tools-calculators/calculators/compound-interest-calculator.

Hypothetical example two: same investing but the interest rate is 8%. Your future value might be $15,549 and your total contributions $13,000.

Hypothetical example three: to achieve roughly the same target of $15,549 at one percent, you would invest the initial $1,000 and then $236.85 monthly for five years. The total contribution is $15,211.

Notice in example two, you invested only $13,000 not $15,211 to reach the target of $15,549.

These are modest numbers but if we scale them up to contributions needed for retirement you would see a much greater difference in the amount you need to contribute each month to get to the same goal.

Hypothetical for Retirement

Suppose you have an IRA and you contributed $6,000 which is currently the maximum contribution for those over 50. Then every month you contributed $500 for 25 years at 1%. You might have $177,153 and you contributed $156,000.

If you invested in the same pattern but the hypothetical investment earned 8% you might have $479,726 and you contributed only $156,000

To achieve the same hypothetical $479,726 at 1%, you would have to save

about $1,300 monthly not $500 monthly. To do that you might have to cut back on your other spending for daily life.

If you want to avoid the risk of the markets and their volatility, consider how much more you should set aside to reach your goals. You may be blocking the growth in your portfolio by investing too few dollars or by investing at low interest rates.

Onward

Of course, you should invest in a way that does not frighten you when you hear the daily market reports, but you should be aware of how your personality is determining the tradeoffs you are taking. If you are in our own way, think about how you can stop blocking yourself. Give yourself the mental space to reconsider what you are doing. If change is appropriate, make the change. A change may take effort but it’s likely better than being stingy with yourself or running out of money. Allow yourself to learn and think and find the best choices for your circumstances. Your money should help you enjoy your daily life, not squish it.

Penelope S. Tzougros, PhD, ChFC, CLU. Financial Planner, Author, National Speaker. Wealthy Choices.com. 51 Sawyer Road, Suite 340, Waltham, MA 02453. Direct to Penelope 781 577 2311.

Penelope@wealthychoices.com. Fax 781 893 3565. In all 50 states, Penelope S. Tzougros is registered with, and securities and advisory services are offered through, LPL Financial, Member FINRA/SIPC. She is affiliated with Bay Financial Associates, LLC. Financial Planning is offered through Wealthy Choices® and Bay Financial Advisors, Inc. Both are registered investment advisors. Neither is a broker-dealer nor affiliated with LPL Financial.

All investing involves risk including loss of principal. No strategy assures success or protects against loss. This is a hypothetical example and is not representative of any specific situation. Your results will vary. The hypothetical rates of return used do not reflect the deduction of fees and charges inherent to investing.

Budgets and Diets Can Be Detrimental

They are saying, “No.”

In my experience, kids don’t like to hear “No,” and neither do many adults. There are lots of examples of adults getting angry when they’re told, “No, you can’t do that,” or when they are corrected or told they are wrong.

So, do we abandon all hope of improvements? Do we say there are no standards?

Is carrying a lot of extra weight good for your body? Is carrying a lot of debt good for your finances? No. However, we are people with desires. Numbers are orderly and obey without dispute the signs for addition, subtraction, and multiplication. But when we look at numbers, we drown them in emotions and aspirations.

One person earns $40,000, another earns $400,000 and those numbers inevitably lead to discussions of values, economics and much more. However, for each of us, our budgets and diets are lived on a daily basis and are mostly in our control. By which I mean that if we are fortunate to have income at this time, we pay taxes and we decide how much is contributed to retirement. The rest of our money is guided by our daily decisions, and desires.

How we spend our money and what we eat are both related to our value system. What do we value? If we value good health, our food choices will support good health. If we value cash flow stability, we will not overspend even if we are tempted by the latest “I gotta have that” impulse.

These values are internal, unlike budgets and diets which by their nature set up an incipient rebellion in many people. We are referencing our values when we pass up willingly the greasy, salty yummy food or the sweet, gooey delicious food. We are living in our values when we save money to buy something instead of adding more debt to have instant satisfaction.

These are all hard things to do unless we have a vision of what we really want in our lives and we can keep that vision in front of us. One way to help stay on track is to pull away from the demands and noise around us. Write down what matters to you. What is it that you value?  It can be a simple list in two columns: I want this in my life, I don’t want that in my life. Under each item, state one thing you can do to make that a reality.

If the list has just a few things, that’s fine. It’s a place to begin to encourage yourself to be yourself, to live in harmony with your values and not be pushed and pulled by forces outside you.

There are a number of other exercises that can help, and I am happy to share them with you if you want to continue this line of thought. These work if you’re just starting out or well into retirement. Many people I have worked with have been star examples of living through their values. One woman started working with me when she was 72 and is doing well at 88. Another is retiring early at 60 and her finances look good to age 100. A man who was so risk averse that his money was only invested in bank instruments, retired a millionaire because like the others, his choices and spending were aligned with what really mattered to him. None of them earned high salaries, but they are debt free, and doing well.

Living from your values can lessen stress and increase your smile quotient. Aren’t both worthwhile and more meaningful than living with restrictions imposed on you? Claim your life and enjoy good food and a sound financial situation.

All investing involves risk including loss of principal. No strategy assures success or protects against loss. This is a hypothetical example and is not representative of any specific situation. Your results will vary. The hypothetical rates of return used do not reflect the deduction of fees and charges inherent to investing.

Penelope S. Tzougros, PhD, ChFC, CLU. Financial Planner, Author, National Speaker. Wealthy Choices.com. 51 Sawyer Road, Suite 340, Waltham, MA 02453. Direct to Penelope 781 577 2311.

Penelope@wealthychoices.com. Fax 781 893 3565. In all 50 states, Penelope S. Tzougros is registered with, and securities and advisory services are offered through, LPL Financial, Member FINRA/SIPC. She is affiliated with Bay Financial Associates, LLC. Financial Planning is offered through Wealthy Choices® and Bay Financial Advisors, Inc. Both are registered investment advisors. Neither is a broker-dealer nor affiliated with LPL Financial.

What Covid-19 Is Helping Us Learn About Our Lives and Money

It does not matter to the Covid-19 Pandemic if you’re careful with money or a spendthrift. Its virulent impact reminds us of things we know and forget and relearn. What are some things we are discovering or relearning about ourselves, our lives and our money?

Enjoying your own company. People who live alone may have an advantage here. A friend I spoke with today described with delight the tiny leaves and blossoming of the tree that takes up most of the view out of her window. The rest of the view is the parking lot. She’s physically on lock down in her small apartment in assisted living, but her spirit is open and free to take in the awesome start of spring. Encourage the dialogue in your head to talk about wonders.

Talking with loved ones. How much of what you say to your loved ones is about the tasks, logistics, and scheduling of the day? In which conversations do you explore all the non-practical stuff that knits our personalities together? What might you learn about the person you love if you asked questions like: tell me about people who made a big difference in your life? What matters to you so much that you would give your life for it? What is it about that movie you watched ten times that makes it such a favorite?

You get my drift and no doubt you have better questions than these. How I wish I had been aware enough to ask my beloved parents more questions so that my view of them was not boxed as a child’s view. I wish I had asked them what tough decisions they faced; what they feared; what gave them strength; what got them through the Depression and the WWII years? How little we really know about the people we love.

Spending time and money. We do say “spend” in relation to time and money because they are limited, and we must calculate their use. We can kill time, and waste money or we can be purposeful in using both. Because of the pandemic, many of us have been told to stay at home and not go to work. Money is tight and time is loosened from orderly schedules. Free time is nice, but it doesn’t feel like a vacation when you’re afraid you will run out of money and get sick. What to do?

Ask this question: is this the highest and best use of my time and my money? To stretch your money, be sure that what you are buying is a need, not a luxury. Medicine and food are needs but redecorating the living room is probably a luxury. Spending time with people you care about by phone or Skype or Facetime is a need. Another best use of time is to declutter and organize your home, and your financial records. What you do with time or money especially now should improve your relationships, and skills, or discover and express the values that make you you.

Ignoring your portfolio. Many investment accounts have paper losses. They are not actual losses until you sell an investment at that low price. It takes historical perspective to be patient and not panicky about market declines. Market recoveries are a bit like the full recovery from knee replacement surgery. They take daily working at it. Ignore your portfolio unless you think this is the time to buy into the market at bargain prices. If you see an opportunity, spend your time researching, and asking questions, then make your investment.

Each of the suggestions has the merit helping you feel more in control of the intimate part of your life, the part that matters to you and those you love. At the same time, we acknowledge what is beyond our control as we mourn the loss of those taken by the pandemic. Our tribute to them is to learn from this heart wrenching time and to live more fully, more consciously, more attuned to the best in us for their sake.

What to do?

Enjoy your own company- find what is special in your life and celebrate it.

Talk with love ones- pull closer to those you love and know them more deeply.

Spend your time and money purposefully – what will make your life better when you are on the other side of this pandemic?

Ignore your portfolio- keep an historical perspective and learn more.

Our county and the world are full of people of good will, intelligence, creativity, courage and determination. Together we will get to the other side of this.

Penelope@wealthychoices.com. In all 50 states, Penelope S. Tzougros is registered with, and securities and advisory services are offered through, LPL Financial, Member FINRA/SIPCShe is affiliated with Bay Financial Associates, LLC. Financial Planning is offered through Wealthy Choices® and Bay Financial Advisors, Inc. Both are registered investment advisors. Neither is a broker-dealer nor affiliated with LPL Financial.

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results. The economic forecasts set forth in this material may not develop as predicted and there can be no guarantee that strategies promoted will be successful

Five Things You Didn’t Know About Social Security

The 85th anniversary of Social Security takes place on August 14, 2020. In my article “Five Things You Didn’t Know About Social Security,” at Senior Planet you’ll get a bit of history, learn some interesting facts and get the answer to the question of…Will Social Security run out of money?

https://seniorplanet.org/five-things-about-social-security/

Is a Reverse Mortgage Right for You?

When you retire, how will you cover rising expenses?  If you think that a reverse mortgage is a worthwhile option to close the gap between income and expenses, please be cautious.

Click the link below to read “Is Reverse Mortgage Right for You?” to learn more about the important factors you need to be aware of in your decision.

May 4, 2020 – Is a Reverse Mortgage Right for You? – https://seniorplanet.org/reverse-mortgage/

Is It Time to Move?

While your home may be lovely, packed with memories and a haven you say you may never want to leave, it may also be a hazard in retirement. Sound surprising? Click the link below to read “Is It Time to Move?” to see the key questions you need in determining if your home will continue to be a haven or hazard for your retirement.

March 6, 2020 – Is It Time to Move? – https://seniorplanet.org/is-it-time-to-move/

Before You Retire, Ask These Thorny Questions

Most of the focus for retirement planning is about how much money you need.

Yes, that is important, but if you haven’t asked the right questions about how you live in retirement, all you have is a target number from a calculator.

There are many retirement calculators on the internet and there are even more used by a variety of financial advisors.

You assume that you have an answer to “how much money do I need to retire?” because the process and technology gave you a specific number, or range of numbers. That is logical, and the calculator may have provided a reasonable assessment. But, the quality of your retirement rests on more than dollars.

Did the inputs to the calculator ask you the questions that follow? No, of course not. Its job is the numbers from investment statements, Social Security or a pension.

Okay then, have you answered the questions about the quality of your days? If not, give yourself time to consider these questions now before you retire so you can protect your retirement and make it what you hope it will be.

These Are the Thorny Questions to Ask Yourself

Why should you assess these questions for yourself? Because they prick your awareness and force you to be more conscious of your decisions.

Answer them well and then secure the fragrant, beautiful rose of retirement.

  • Describe what you would be doing on a day that you said that was a good day? How many days could you spend this way?
  • What would block your having such good days?
  • How often have you missed a meal because you were too busy doing something you enjoyed? What were you doing?
  • Will you fill your days by doing things just to pass the time, or do you have things you want to do that are satisfying and purposeful? What are those things?
  • If you were sick, not sick enough to be hospitalized but you were bed ridden for a month or more, who are the people who you could count on to prepare food, get groceries, do laundry, walk the dog, feed the cat, water the plants, bring in the mail, pick up medicine, pay your bills, etc.?
  • How often would these people be able to help you given their other commitments?
  • Would you have to pay for helpers? Is that in your budget?
  • How would you pay for an extended incident of long-term care?
  • If you’ve made friends at work, have you made a plan for how to stay in touch, or are they just friends at work?
  • Who are the people you will want to spend time with, and when are they available?
  • What gets you out and about every day?
  • Can you regularly share a meal, a drink, coffee, or tea with friends in the neighborhood, or have many of your friends moved away?
  • While you were working and getting raises, increasing maintenance costs for your house and the increasing real estate taxes were manageable. When you retire, will you be able to cover those added costs?
  • Once you pay all your expenses and bills, how much do you have left to cover unexpected or rising costs?
  • Over the next five to seven years, will keeping your house in good shape eat up most of your “extra” money that you would rather spend on leisure or other things?
  • What does it cost to run your house? Did you include even things that are not annual like repointing the bricks, cleaning the chimney, painting the exterior etc.?
  • What does it cost to run your lifestyle? Did you include items like the annual fees on your credit cards, the excise tax on the car, gifts, club memberships, internet subscriptions, etc.?
  • Given the expenses for your house and the cost of running your lifestyle, will you run out of money? How did you arrive at that answer?
  • Can your portfolio produce more income? How much more?
  • What are your top two concerns as you enter retirement?

If you have not retired yet, or even if you are early in retirement, you have time to work on these questions and make adjustments. The value of really digging into these questions is strengthening your retirement and making it a time to savor and appreciate much that you had to rush past when you were working.

What are the secrets of happy retirees (you will likely to be among them)?

  • When you are engaged and productive.
  • When you maintain close social connections.
  • When you manage money so that you are spending less than is available and there is money left over after expenses.
  • When your age is for you a number and not a limit.
  • When you feel that you are continuing to grow into the fullness of who you really are. Alternatively, the question would be “When did you stop growing?”

IF as you developed your answers to these questions, you realized that you would benefit from talking with someone who has coached hundreds of retirees as they navigate the transition to retirement, then call me, Dr. Penelope Tzougros, at 781 577 2311 or email me at penelope@wealthychoices.com.

I can help and I’m eager to see you succeed.

 

 

Penelope S. Tzougros, PhD, ChFC, CLU. Financial Planner, Author, National Speaker. Wealthy Choices.com. In all 50 states, Penelope S. Tzougros is registered with, and securities and advisory services are offered through, LPL Financial, Member FINRA/SIPC. She is affiliated with Bay Financial Associates, LLC. Financial Planning is offered through Wealthy Choices® and Bay Financial Advisors, Inc. Both are registered investment advisors. Neither is a broker-dealer nor affiliated with LPL Financial.

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. The opinions expressed in this material do not necessarily reflect the views of LPL Financial. To determine which investment(s) may be appropriate for you, consult me prior to investing. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and cannot be invested into directly.

Does Your Retirement Portfolio Have Fat Cows?

Let’s define the terms. “Portfolio” is all your assets that can grow and produce income. I’m looking for fat cows. I apologize to farmers and ask their indulgence as this city person talks metaphorically about cows.

By fat cows I mean a cow that gives milk which is the dividend or income and a cow that is not losing weight which means your assets are holding their value or growing.

Identify each of your retirement investments. They can only have a space in your portfolio if they are growing your money or producing income. You want both functions because you want to keep up with rising costs during retirement.

“Strong” is subjective but it suggests the cow is healthy and is strong enough for your purposes. What are your retirement purposes?

  1. You want to pay all your bills and expenses.
  2. You want to have something extra for those things that make you smile and expand your horizons (i.e. travel, family reunions, class reunions, a new hobby or business, etc.).
  3. You want the ability to withdraw up to $25,000 for an emergency without reducing the income you need for normal living expenses.
  4. You have created a strategy for covering the cost of long-term care that will not make the cow very, very skinny. Bringing care into your home might cost $25 an hour on average [Genworth Cost of Care Survey 2018]. If you needed twenty-four-hour care for six months, that might run about $109,000. Can your portfolio pay that? When you recover, will your portfolio recover too? Will that expense permanently reduce the portfolio? Are you aware of the other ways to pay for long-term care?
  5. When you review your assets at the end of each year, have your assets either grown or have not declined.

If your portfolio is a fat cow that can stay fat, then your portfolio is strong enough for your purposes.

It is easy to get caught up in analysis and forget the big picture. Fat cows are not the usual metric that financial planners use to discuss portfolios, but a vivid image can do a lot to keep us focused.

If you want help with working towards keeping your retirement portfolio strong, meaning keeping the cow fat and giving milk, give me a call. Dear Farmers, these are metaphoric cows. Much as I admire what you do, I can’t help with real cows. Sorry.

 

1 The payment of dividends is not guaranteed. Companies may reduce or eliminate the payment of dividends at any given time.

Penelope S. Tzougros, PhD, ChFC, CLU. Financial Planner, Author, National Speaker. Wealthy Choices.com. 2019 Eric Hoffer Award Honoree, Your Home Sweet Home: How to Decide Whether You Should Stay or Move in Retirement. 2014-2020 Five Star Wealth Manager (Award based on 10 objective criteria associated with providing quality services to clients such as credential, experience, and assets under management among other factors. Wealth managers do not pay a fee to be considered or placed on the final list of 2014-2020 Five Star Wealth Managers.)

130 Turner Street, Bldg. 3, Suite 230, Waltham, MA 02453. Direct to Penelope 781 577 2311.

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly. This information is not intended to be a substitute for specific individualized tax or legal advice. We suggest that you discuss your specific situation with a qualified tax or legal advisor. Passionate World Talk Radio and Wealthy Choices are separate entities and are not affiliated with LPL Financial.

 

 

Risks That Can Batter Your Retirement Assets

Your retirement assets may have to respond to many different risks. Which of these worry you and which do you have a strategy for?

Risk to principal. You buy a stock at $30 a share and it drops to $15 a share. Ouch! What are your choices? Wait for the price to rise? Take the loss and move on.

What you do will depend on why you bought the stock, your target for selling, and what caused the price decline. Does it signal something had fundamentally gone wrong?

Market risk. The market goes down, not just your stock.  Don’t be startled. Let me share what I hope is a calming perspective about the S&P 500 composite index. You may know that it is an index that you cannot invest in directly. Past results are no guarantee of future results.

Let’s consider research from 1949 to 2019. Knowing the historic patterns may remove some fear and prevent you for jumping out of the market when it would be better to stay in. [American Funds, “Investor Resource: A Guide to Market Fluctuations Keys to Prevailing Through Stock Market Declines” 2019]

In that 70-year period:

5% declines happened 3 times a year

10% once a year

15% every four years

20% about once every seven years

In addition, history shows that for the worse declines those of 20% or more, in the next five years, the investment doubles from their lows.

So, patience and holding on are likely to be a good strategy. IF you are holding quality investments that have been resilient at other times, then you have a reason to stay invested. The analogy is a healthy person gets the flu and is knocked down for a while but is likely to recover and be fine.

Inflation risk. Inflation is like a silent thief. Today you have $1000 and if inflation averaged 2% for ten years, your account may say $1,000 but that money can only purchase $818 of goods.

You can look at these in two ways; your money can buy less, or you need more money to buy the same thing. So, forty years ago a gallon of gas for a car cost on average 86 cents. The average now is $2.77 which is three times more. [AAA national average 7/7/19]

So where will you get the money for the increase in goods and services? If you are working, hopefully you will have raises. If you are retired, then what?

Recall that the rate of inflation in the 1970’s was 7.25% and in the 1980’s it was 5.82%.

[Average Annual Inflation Rates by Decade FEBRUARY 22, 2019.tby   Tim Mcmahon  https://inflationdata.com/Inflation/Inflation/DecadeInflation.asp]

Do you know if and when those levels of inflation might return?

There would be a significant impact on mortgage rates, credit card interest, and car loans. If those increased what would you do?

The risk of being too conservative. You may not like the first two risks (risk to principal and market risk) and therefore you don’t want to take risks.

An NYU professor tracked the returns for 90 years from 1928 to the end of 2018 on 3-month Treasury Bills and the S&P 500 index. He showed that $100 invested conservatively in the 3-month Treasury became $2,063.40 and the $100 in the S&P 500 became $382,850. [You can get the excel spreadsheet that contains all of this data and more here: http://www.stern.nyu.edu/~adamodar/pc/datasets/histretSP.xls]

How conservative can you afford to be?

Has someone shown you how you can be conservative and also grow your money? If not, you may want to access my free white paper to help you begin to understand this concept of growth for someone who is risk averse.

Risk of Under reporting expenses. For instance, those expenses for your house and your lifestyle. Know the total cost of running your house and your lifestyle expenses.

You can run out of money because you are under-reporting what you are spending. You may think it doesn’t matter. But, focus in detail at least once a year. Get accurate and comprehensive numbers for the house and your lifestyle otherwise you may lead yourself into a downward spiral and wind up running out of money.

You do not want to outlive your money!

Risk of poor financial planning and poor portfolio construction. Have you, or has a someone else provided a financial plan that included health care costs and an assessment of the strengths and vulnerabilities of your portfolio?

With a clear view of what your portfolio is doing for you, you can make improvements now if needed. Don’t wait for a crisis to find out your portfolio never considered your being sick. Optimism is fine but poor planning isn’t.

Risk of relying too much on one asset. Examples of this are the house, the stock of the company you work for, your art collection, investment real estate.

Diversify the money streams. Different asset classes each have their highs and lows and respond to the larger forces of the economy (there is no guarantee that a diversified portfolio will enhance overall returns or outperform a non-diversified portfolio. Diversification does not protect against market risk).

IF you know that you will need to sell a specific asset, find out the trends that make a sale advantageous for you.

A wonderful asset may lose its value not intrinsically but because of timing. Risk is about timing not only fundamentals.

Risk of not saving enough for each investment goal. Most people have five pockets for investing:

  1. Rainy day or emergency.
  2. One-year goals.
  3. Two to five-year goals.
  4. Five to ten-year goals.

It’s valuable to adequately fund each goal otherwise you may be forced to borrow from retirement to pay a rainy-day incident. That’s not a good outcome.

Risk of not knowing when to begin to fund retirement and when to end funding retirement. When you have steady work (meaning income) that you expect to continue for six months or more, SAVE SOMETHING. Even if it is a dollar. The function of this deposit into a savings account is to create in your mind a pattern that will serve you well. You don’t live life only aware of today. You plan other things you will do this week and next. In the same way, money is not all for today.

When do you stop saving for retirement? You don’t unless you are exceedingly wealthy.

You are saving something in retirement for the same reason you saved when you started out. There are unexpected good things and bad ones and having the “extra” money makes a big difference to your sense of calm.

Small sums matter:

  • $5 a week if it could earn 5% on average in 5 years might become $1,473.
  • $50 a week might become $14,734 in 5 yrs.

This is a hypothetical example and is not representative of any specific situation. Your results will vary. The hypothetical rates of return do not reflect the deduction of fees and charge inherent to investing.

Do you have a family? The risk of forgetting you are a family and that you can pull together. When an elder parent or relative needs care, there is often an unspoken assumption that a particular person will take on the role of caregiver.

Let’s say everyone assumes Alice will take it on. Maybe because Alice lives closest or has fewer family responsibilities or a more flexible work schedule. However, Alice does not want to take on the role and is not assuming she will.

If you have an elder who is in their late sixties, or in his or her seventies, that person may not qualify for long-term care insurance. IF the person is healthy enough to qualify, but cannot afford the premium, what if all of you contributed to paying the premium? Then there would be professional care for your loved one and you could be supportive, visit and help without just one person like Alice taking on the full-time duties of a care giver.

According to the Altzheimer’s.org fact sheet, every 65 seconds someone in the United States develops the disease. It is the sixth leading cause of death in U.S.

The national median cost for a year in a nursing home is $100,375 and over five years it has increased by 3.64% according to the Genworth Cost of Care Survey 2018.

US Department of Health and Human Services says that people who reach age 65 will likely have a 40% chance of entering a nursing home.

But 70% of those over 65 will need some type of long-term care services.

So, who are you going to take care of? Who is going to take care of you?

The government does not pay for custodial care unless your assets as a single person are under $2000. For a couple the numbers are low but not that low.

Can your portfolio pay out over $100,000 for a nursing home or do you have a devoted circle of friends and family who will take care of you 24 hours a day?

As a family, you could chip in to pay for a long-term care policy for your mom or dad (guarantees are based on the claims paying ability of the issuing company).

If you are 50 you should consider some sort of long-term care strategy. As a family you can help each other and care for a parent by sharing the financial commitment.

Life and investing expose us to many risks. By being aware of some of them, we can plan and create alternatives or safety-nets. A spirit of resilience and optimism helps.

 

Penelope S. Tzougros, PhD, ChFC, CLU. Financial Planner, Author, National Speaker. Wealthy Choices.com. Penelope@wealthychoices.com. In all 50 states, Penelope S. Tzougros is registered with, and securities and advisory services are offered through, LPL Financial, a registered investment advisor. Member FINRA/SIPC.

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results. The economic forecasts set forth in this material may not develop as predicted and there can be no guarantee that strategies promoted will be successful.

 

Uncertainty: The Market is Not Alone

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It’s often said that the market doesn’t like uncertainty. How about you and friends, do you like uncertainty? This period of the Great Dislocation has yanked us from what anchors our active lives. For millions of Americans, gone are the regular schedules for work, school, entertainment, shopping for groceries, going to the gym, seeing friends and family. Savings are being spent because income has stopped.

What is certain is:

  1. Americans are dying of Covid-19
  2. The stock and bond markets have declined and are gyrating
  3. People continue to love their families and friends
  4. People are brave, kind and devoted to caring for others

Some people are right out of Arthur Miller’s play All My Sons, in which the lead character lies and protects the profits of his business and sends out faulty airplane parts which cause the deaths of American soldiers.

No doubt, you and I have other certainties we can list.

For those of us under “stay at home” orders, we ask…

  • When will the restrictions be lifted?
  • Will there be work to go to?
  • When will we be free of the corona virus?

We don’t know answers to those questions. It’s all up in the air- that very air that can carry the virus. But then, wasn’t uncertainty the daily state of mind for people living through WWII? Did they know when the war would end, or who would win? In your family, did someone have a biopsy or a critical medical test? What did waiting for the results feel like?

In these early months of 2020, we keep saying to each other that these health and financial circumstances are unprecedented. Which course of action is best? We’re uneasy, frightened and anxious because we are aware that wrong choices can lead to people dying, small businesses failing and economies collapsing.

However, consider this: underneath our plans, appointments and to do lists is more uncertainty than we want to acknowledge. It’s as if every day we get up and go through our day walking on a tightrope. When we get back home, without a fall, we don’t think about the safety net beneath the tightrope. We didn’t need it because we didn’t fall. That’s how it’s supposed to be. That’s the order and certainty we expect. We walk that tightrope with courage, flexibility, optimism, doubts and the best life skills we have.

This Great Dislocation has made us aware that many of us can fall at the same time and we need a strong community safety-net. That protective safety-net is made of compassionate, active, creative, intelligent people. It should be reinforced by government systems and funding. We’ve found that the safety-net has tears and needs repair. We can repair it if we stay focused.

We can also strengthen our own safety-net by committing ourselves to our values, the causes that matter to us, the people we love and protect, and the good we can do for others. We have the power to do good. Exercising that power can give us a sense of purpose and control. It can anchor us and allow us to face what we intuitively know: uncertainty is normal. Let us take heart from the fact that we have walked that tightrope thousands of times successfully. We can keep doing that. Although we, like the markets, might not like uncertainty, we both have a history of resilience and managing uncertainty.

 

[/et_pb_text][et_pb_text _builder_version=”4.4.6″ text_font_size=”14px”]Penelope S. Tzougros, PhD, ChFC, CLU. Financial Planner, Author, National Speaker. Wealthy Choices.com. Penelope@wealthychoices.com. In all 50 states, Penelope S. Tzougros is registered with, and securities and advisory services are offered through, LPL Financial, a registered investment advisor. Member FINRA/SIPC.

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results. The economic forecasts set forth in this material may not develop as predicted and there can be no guarantee that strategies promoted will be successful.[/et_pb_text][/et_pb_column][/et_pb_row][/et_pb_section]