Sadie Goodwin July 30, 2017 No Comments

XYPN Ep #210: Taking Over the Family Business – The Career of Tara Unverzagt

Ep #210: Taking Over the Family Business – The Career of Tara Unverzagt

This episode originally aired on XYPN.

Today we have XYPN Member and South Bay Financial Partners founder Tara Unverzagt on the show! Inspired by her mother—who was one of financial planning’s early pioneers—Tara knew from an early age that she wanted to be a financial planner. She joins us in this episode to share her experience growing up in the field, the valuable lessons she learned from having an advisor as a parent, and how she put her own twist on financial planning to do things differently.

http://xyplanningnetwork.libsyn.com/ep-210-taking-over-the-family-business-the-career-of-tara-unverzagt

You can find show notes and more information by clicking here.

Sadie Goodwin July 30, 2017 No Comments

CNN – Why wealthy parents who bankroll their adult children are hurting them

Why wealthy parents who bankroll their adult children are hurting them

By Anna Bahney
Updated 11:32 AM ET, Tue July 23, 2019

This article originally appeared in CNN

 

For some wealthy parents, the pressure to extend their social and financial status to their adult children can be overwhelming.

The recent college admission scandal revealed shocking things parents were willing to do to secure spots at top schools. But those same motivations drive some parents to bankroll their kids’ lives into early adulthood, often to the detriment of the family.
“How many times have we seen in wealthy families where the breadwinner is so inundated with making a living and providing for a family, that love, intimacy and closeness are shown through financial means,” says Dr. Alex Melkumian, a psychologist and financial therapist.
Support that keeps a young person living above their means can undermine their independence and create deep insecurities.
Dr. Bradley Klontz, a psychologist and certified financial planner who researches money disorders, calls this “financial enabling.” Often arising between parents and their adult children, financial enabling involves extended financial support that not only affects the enabler’s finances, but can also cause lasting damage to the young adult.
“The delay of financial independence is associated with a lack of purpose, creativity, drive — it can be extremely crippling,” says Klontz. And that’s to say nothing of the damage caused to the family relationships. “People then have a tendency to resent the source of their money, even while they rely on it.”

Parenting without enabling

When children grow up with the expectation of a wealthy lifestyle, it becomes harder for them to maintain that lifestyle once they are on their own. And the parents feel pressure to step in and help.
“It has to do with growing up with one identity and becoming an adult and expecting to continue on that identity,” says Tara Unverzagt, a certified financial planner in Los Angeles. “You don’t have the job to support it. Your parents have the income.”
Unverzagt works with families struggling to find the line between supporting their children and offering too much help. All of it starts by talking about money, and making sure kids have realistic expectations.
Make sure you are setting your kids up for a lifestyle they can sustain. “Because if they can’t, you’ll sustain it, and it will bleed you dry and impact your own retirement.”
She says that many ultra-wealthy parents can afford carrying a child’s expenses into adulthood but others end up hurting their own finances by supporting their kids. “They feel they should be able to do these things for their kids endlessly and afford them,” she says. “But if you continue to do it, the money can run out really quickly if you’re not paying attention.”
And that’s to say nothing of the message sent to the adult child.
“You’re telling that child, she can’t do it on her own,” says Unverzagt. “Some moms and dads want her to feel that way, that she can’t live financially without that parent. You should be striving to have an independent adult.”
Unverzagt started talking about budgets with her own three children, now all recent college graduates, when they were two years old.
“I feel it is your job as a parent,” she says. “A 4-year-old’s money mistake is nothing. Have them make a bubble gum mistake instead of buying a house at 25 they can’t afford. Are you going to enable those bad financial decisions at 24 and 30?”

Breaking the enabling cycle

Having unlimited options can be paralyzing to some young people.
“Having too many options can be overwhelming,” says Meghaan Lurtz, president of the Financial Therapy Association, who has a PhD in personal financial planning. “It happens to wealthy children a lot: I could have 1,000 careers, I could have any car I want. I can’t pick one. They appear to be the laziest bums on earth because they have so many options in front of them, it is paralyzing.”
She says that a strategy to aid in moving forward is to put boundaries on endless opportunities.
She advises parents to be clear about their expectations of adult children. “Tell them, you need to have a job, even if you’re a teacher and making $30,000 a year. You need to do something, and have purpose.”
Working with a financial therapist, a counselor who can help people think and feel differently about money, can be helpful to people in that paralyzed state, she says.
It’s okay to want your children to have the best, she says, and many people have the resources to do it. But the key is to give kids the tools to achieve it on their own.
“It is an important step to talk about what it is like to have money and the responsibility that comes with it,” Lurtz adds.
Sadie Goodwin July 30, 2017 No Comments

CBS NEWS – Americans still think they can make money flipping houses

Americans still think they can make money flipping houses

By Irina Ivanova
July 19, 2019 / 7:51 AM / MONEYWATCH

This article originally appeared in CBS NEWS.

 

While fewer Americans are buying homes these days, more of us than ever believe we should be. The portion of people who say real estate is the ultimate investment — better than stocks, bonds or gold — has hit a new high.

Nearly one-third of Americans believe real estate is a better way to invest money for the long term, according to a Bankrate.com survey released this week. Younger people are more likely to say so, with 37% of 23-to-28-year-olds ranking real estate above stocks, bonds, gold and savings accounts as an investment. This is the strongest sentiment for real estate in the seven years Bankrate has run the survey, said Greg McBride, the website’s chief financial analyst.

Sadly, real estate is no better an investment today than it was in the previous century—and that’s to say, mediocre at best. For people with a bit of money to put away, the stock market will almost always give the best return.

Between 2006, the peak of the previous housing bubble, and 2019, average home prices have increased just 13%, according to the S&P/Case-Shiller Home Price Index. In that same time period, the S&P 500 rose 125%. In other words, stocks did 10 times better than real estate.

Despite the stock market’s better returns, “it remains rather unloved,” said Bankrate’s McBride. “We’ve been doing this survey for seven years and we’ve been in a bull market for the entire seven years, but investors haven’t really warmed to it.” Just 1 in 5 think the stock market is the best long-term investment.

Things you can touch

A house is a much more unwieldy investment than a stock portfolio. It costs money to buy and sell and maintain a property, and it can lose value over time, like an iPhone or a car. If housing is an investment, buying a house is akin to purchasing a single share of stock—except instead of paying a quarterly dividend, the investment needs you to put some money into it periodically to keep it in good shape.

Nevertheless, familiarity breeds contentment when it comes to real estate. While less than half of Americans own any stocks, nearly two-thirds own the home they live in. Many if not most Americans are at least aware of homeownership through family, friends or neighbors. And of course a house is a physical asset in a way that financial instruments are not. “You can kick it, touch it, look at it; you know it is there. It provides a sense of comfort that is missing when we hold stocks and bonds,” said Anders Skagerberg, a financial adviser at Skag Financial in Salt Lake City, Utah.

The way most people think about home sales also leaves out many costs, artificially inflating real estate’s perceived rate of return, said Tyler Reeves, founder of Plimsoll Financial Planning in Birmingham, Alabama.

“You find out that this house was bought for $300,000 and sold five years later for $400,000 — wow, that’s a quick $100,000!” he said. “What they don’t see is during that five-year period, they had to get a new HVAC unit, and a hot water heater, and pay a mortgage for five years.”

Repairs and maintenance are an often-overlooked aspects of homeownership, especially for younger homeowners. Upkeep alone—tasks like yard work, carpet cleaning and maintaining the gutters—can run $3,000 a year, according to a recent Zillow study.

Unexpected repairs can cost much, much more. One young Tennessee homeowner spent $21,000 over six months to repair her modest 1950s ranch house, she wrote in Business Insider. While she admitted that “procrastination made some of the problems worse,” many of the repairs were the inevitable result of normal wear-and-tear: replacing the roof, fixing cracked ceilings and upgrading some electrical systems.

Even in a best-case scenario with minimal upkeep, property almost always comes with carrying costs: the mortgage, taxes, homeowners’ insurance, fees for water and services like trash pickup and even a homeowners’ or condo association. Those taxes and fees are why first-time homebuyers are often told to budget 30% on top of their monthly mortgage payment to get the “true” cost of owning their house.

Today, a would-be house flipper could buy the $300,000 house in Reeves’ example for a $70,000 outlay (down payment plus closing costs) and a monthly payment of $1,130, assuming she has excellent credit. After five years, the lucky debtor will have paid $45,000 in interest payments alone, and—under the 30% rule—about $20,000 in taxes and other costs. If she sells the house for $400,000, after accounting for the agents’ fees and the interest, taxes and maintenance she’s paid out along the way, she would have made a profit of $22,000.

In that best-case scenario, the flipper got an impressive 31% return on her initial investment. But if instead she’d­­ put $70,000 into a stock-market index fund five years ago, she would today have $34,000 in profit—and arguably for a lot less work.

“We have many more clients that have broken even or lost money in real estate than have made a killing in it,” Adam Van Wie, a financial planner in Jacksonville, Florida, told CBS MoneyWatch. “We more often than not try to talk them out of it, but many of them never listen.”

Like stock-picking made hard

Still, the ongoing housing crunch makes it unlikely the draw of making a quick profit in housing will ever fade. If anything, financial planners report an increase in the amount of people coming to them with dreams of real estate riches.

“In the last couple years, it’s come up in conversation with almost half of my clients,” said Reeves. “Seven, eight years, ago you wouldn’t have expected it.”

Reeves, like most financial planners, emphasized he wouldn’t discourage real estate investing for the right person. But it’s much more like a job than most people assume, and doing it profitably requires treating it like one.

“I know people who make money buying and selling and renting real estate, just like I make money buying and selling stocks and bonds,” said Tara Unverzagt, founder of South Bay Financial Partners in Torrance, California. “But that’s their life. They spend a lot of time learning the cycle and when to ‘buy low and sell high.’ ”

She added that in real estate, just like in stocks, “the average person tends to buy high and sell low and lose their shirt.”

Sadie Goodwin July 30, 2017 No Comments

CNN – Is $2 million enough to feel wealthy?

Is $2 million enough to feel wealthy?

By Anna Bahney CNN Business
Updated 10:14 AM ET, Fri May 31, 2019

This article originally appeared in CNN.

 

How much does a person need to feel rich?

A recent survey from Charles Schwab revealed that a net worth of $2.27 million would be enough. But can you really put a number on it?

For many people, being wealthy means being financially independent and not having to work for a living, says Bradley Nelson, of Lyon Park Advisors. He says a family with a net worth of $2.27 million could easily be wealthy.

If that family spent a conservative 3% of their assets each year, they would have $68,100 a year to live on. That’s more than the median household income in the United States of $61,000 — without even having to work.

But that wouldn’t be enough for some people. And for others, wealth isn’t a financial concept at all.
That’s why finding what makes you feel wealthy takes a strategy rather than a single specific number, says Nelson.

“I know people who make $250,000 to $500,000 and feel poor, and other people who make $70,000 and feel rich,” says Tara Unverzagt, a certified financial planner.

She points to research showing an income of about $70,000 is optimal for emotional well-being, and $95,000 is ideal to feel positive about your life, including meeting long-term goals and the inevitable comparisons with everyone you know.

“But for most people, when they get to $2.27 million, if their friends have more, they won’t feel ‘rich,'” she says. “And today with so many billionaires, many feel having mere millions is nothing — and to some degree, that’s true.”

$2.27 million? ‘Not even close’

Matt Doran is a wealth manager in St. Louis with a personal net worth of “more than $5 million, but less than $20 million.” He’s not fixed on a number, though, and has no intentions of slowing down.
He works with clients who are worth more than $2 million and says, “they don’t feel wealthy and neither do I.”

For Doran, the drive to continue earning money and growing his assets builds security for his family and allows him to support the things that give his life meaning — the people, places and causes that he loves.
“And $2.27 million doesn’t get me there,” he says. “Not even close.”

Doran says he and his wife and daughter spend on things typical for families at their income level. For example, they have a lake house in Michigan, with a boat.

“Our spending is really about lifestyle. While not overly extravagant in our opinion, we do drive nice cars, travel frequently and help others regularly,” he says. “We, like many others, find ourselves spending on experiences more than things because they enrich our lives and relationships.”

In his view, the purpose of building wealth is to generate more income. And the more income you make, the more options, flexibility and opportunities you have.

“When someone has financial resources in a substantial amount, they have choices they didn’t have before,” he says. “How to work, when to work, what work to pursue, where to live. How to spend their time.”

The reluctant millionaire

Russ Ford considers himself wealthy, but it has taken him a while to say it without feeling guilty.
Ford was 21 years old when he inherited $2 million from his grandfather.

“I got $1 million free and clear I could pick up and go to Vegas with,” he said. There was another million in trusts. That’s in addition to money likely to come his way through his parents’ estates.

“I do feel wealthy,” he says, “But in today’s society, I’ve felt guilty about it. I’ve worked through it to understand the opportunity to do good with it.”

But for a young person with seven figures, that kind of money can evaporate a lot faster than people think, says Ford. “Feeling wealthy can lead to a lot of temptation. You feel wealthy when you don’t have to think about money. The minute you don’t think about it, you can get into a lot of trouble.”

After college he became a financial planner, got married and had a son. Ford says that at first, his inherited wealth caused a lot of pressure and stress.

“The pressure comes from having the money and feeling like I can’t let my grandpa down and I can’t let my son down,” he says. “I was feeling a lot of pressure from the culture around me to keep up with the Joneses and becoming a father magnified all of that. The money has definitely made me more anxious.”

He’s appreciative of what he has, but he’s not interested in accumulating more money.

“I know that chasing more isn’t going to make me more happy,” he says.

Ultimately, the money that caused his anxiety helped him and his wife out a lot when he experienced loss of income due to his health. It helps his family have more of what they value the most — time together.

“Money certainly gives us more of that,” says Ford. “It gives us security that we’ll have more of that in the future and feeling secure in that makes me feel wealthy.

Tara Unverzagt January 3, 2017 No Comments

Safety First – Preventing Identity Theft

Keeping my information safe has been on the top of my mind in the last few months. I’ve made some changes in my business to help protect personal information. Over the coming year, I’ll be providing security tips to help you keep your information safe also.

Intuit, maker of TurboTax and Quicken software, found 60% of identity theft cases come from paper in trash cans. You can protect yourself by making sure you shred any paperwork you throw away that contains social security numbers, account numbers, or any other personal information. If you don’t have a shedder, simple tear up documents into small pieces. Even better, only have paper copies of documents that you need to keep in your files and reduce what goes in your garbage.

To send confidential information to South Bay Financial Partners click here to upload to a secure portal.

The information provided above is general in nature and is not intended to be applicable to everyone. If you have questions on how this might affect your situation, contact me.

Tara Unverzagt August 7, 2016 No Comments

Think about Medicare BEFORE turning 65

While talking to a friend who recently turned 65, he asked “Do you warn your clients about all the decisions they have to make when they turn 65?” I thought he was talking about planning for Social Security and the best strategy for collecting your benefits. In fact, he was talking about Medicare. And no, I don’t normally talk to my clients about that and decided I should.

As you approach 65, you have a few months to decide what kind of Medicare you want. Perhaps you didn’t know there was more than one flavor of Medicare, which is where problems can start. Unfortunately, you could be faced with late enrollment penalties if you aren’t ready to make the decisions. While signing up on time is important, you have the opportunity to change your Medicare choices annually.

If you receive Social Security, you will automatically be signed up for Medicare on the first day of the month that you turn 65. My birthday is June 23, so Medicare can start on June 1st for me. If you are on Social Security because you are disabled, you will also automatically be signed up for Medicare, even if you are not 65.

It’s common, and often a good idea, to delay taking Social Security until you are 70. If you decide to wait to take Social Security, you will have to take action to enroll in Medicare at 65.

Being “automatically signed up for Medicare”, is actually an over simplification because there are four parts to Medicare, Part A, B, C, and D. When you are automatically signed up, you are signed up for “Original Medicare” Part A and B. That may not be what you want to do, though.

Part A covers things like hospitals, hospice care, home health care, and skilled nursing facility care. Part B covers doctors and other health care providers, outpatient care, home health care, some medical equipment, and other health care needs outside a facility.

You have a choice between Original Medicare and Part C, Medicare Advantage Plans. If you choose Original Medicare, you choose the doctors and facilities you want to go to for health care needs.

Most people pay Medicare taxes as part of their payroll taxes when they are working. If you do, Part A is free and Part B typically costs $104.90 per month. High income individuals and couples may pay more. You may also end up paying a late enrollment penalty if you don’t sign up during your initial eligibility period.

With the Part A and B Original Medicare plan, you typically pay a deductible before Medicare starts to pay. You also pay a copayment (for example 20% of fees charged or possibly a flat fee such as $10 or $20 per visit) for service from your doctor or facility. There are no out of pocket limits with Original Medicare.

With Medicare Part C, Advantage Plans, you are limited to a select group of doctors and facilities, similar to an HMO or PPO. As a matter of fact, you might be able to continue your current plan. For example, if you are currently using Kaiser Permanente in Southern California, you can continue to use them with the Medicare Advantage Plans (some services and fees may be different on Medicare). Medicare Advantage Plans have all the same coverage that Medicare Part A and B have and your specific plan may have extra coverage like vision, hearing, and/or dental.

If you choose to enroll in a Medicare Advantage Plan, you are still part of and pay for Part A and B, the same as on the Original Medicare, but you may also have to pay an additional Part C premium payment. Often you don’t have a deductible, such as with HMOs, but you may have co-payments. If your Advantage Plan is a PPO (preferred provider organization), you may have reduced deductibles and co-payment verses Original Medicare.

You may want to choose Medicare Advantage to stay with your current doctors and facilities at a lower rate. If you’d like to have more choices, you may want to choose Original Medicare. Don’t wait until you turn 65 to look into and consider your options or you may end up paying more. Starting a year or two before, will give you plenty of time to consider all the options.

In the future, we’ll look at Medicare Part D, Prescription Drug Coverage and supplemental insurance. It’s not easy growing older and it’s worth planning for a successful transition.

You can find out more about Medicare at Medicare & You 2016.

Contact me, if you’d like to know about this or other financial planning, investment, or tax topics. If you found this article useful, subscribe to have all articles emails to you.

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Tara Unverzagt July 18, 2016 No Comments

Index funds are safe, right?

My last article showed how you could work towards a carefree retirement like my grandfather had by looking at your spending and saving choices today. Your spending and saving decisions are the number one behavior that affects your financial life. Once you have that under control, you hopefully have money to invest. What do you do now?

What Now?

Let’s look back to what happened before 1980. That’s more realistic going forward than to expect a return of the high flying 1980s. For those who survived the 1980-2010 roller coaster with savings intact, interest rates could go up long term, but “normal” pre-1980 interest rates were just a few percentage higher than current interest rates and the stock market is a bit high, but about where it should be.

Buying low and selling high is still the way to make your money work for you. Unfortunately, the way we’re wired, we love to buy high, when investments are exciting. Then we want to throw in the towel when prices are low. This is a formula for failure.

Stocks are often the investment to emphasize but sometimes more in bonds are called for. Sometimes cash is king, when interest rates are super low and the stock market is valued high (sound familiar?) Most people think this ratio depends on your age, but that’s not the only parameter to look at when deciding your “asset allocation,” or how much you invest in bonds vs stocks vs cash vs any other investment choice.

A huge portion of money today is being invested in basic, low fee investments, like index funds and ETFs (Exchange-Traded Funds). You won’t “beat the market” but you’ll do as well as the market, right? Maybe, maybe not. Not all index funds and ETFs are created equally. You still need to do your homework on the fees and what they invest in. And know that when you buy an index fund to “match the market”, you’re choosing to buy the big losers as well as the high flyers.

Sears was in the Dow until 1999 when it went from a high of over $60 in 1998 and tanked to below $40 in in 1999. If you were invested in the “index” you would have held Sears to the bottom before being rid of it. Individual stock holders could sell long before it hit bottom. Sears wasn’t removed from the S&P 500 until 2012 when its value was below the required threshold to be in the S&P 500.

The index funds have helped investors that buy individual stocks because the index funds have distorted the price of some stocks and created market inefficiencies. When a bunch of money goes into an index fund raising a particular stock price higher than it should be, it’s a great time for someone who owns that stock to sell and take a profit. The person with the index fund will just hold on to it while the price peaks and then sinks. On the other hand, if a stock is undervalued, the index doesn’t take advantage of the bargain and buy more shares. And, as in the case of Sears, the index may hold on to a tanking stock that should be sold.

In addition, asset allocation at any given point has been shown to be far more important to wealth accumulation than what particular stock or bond you buy. If you always keep the same asset allocation, you will sometimes be over invested in stocks and under invested in bonds (see below for a time when investing heavily in bonds made sense) or vice versa. While no one has a crystal ball telling them the highs and lows of a market, there are usually pretty good signs that an asset class is in the range of the bottom or the range of the top. Right now both stocks and bonds, overall, are overvalued. What will you do?

The answer to that question is not simple or straightforward. It depends on your individual situation. The internet will give you great generic advice, but I’ve never met a generic person. Talking to a professional can help you sort through your priorities and risk tolerances. For example, someone that has a million dollar income will deal with risk tolerances differently than someone who is living pay check to pay check. If you are planning for just retirement, you will plan differently than if you have to pay for your kids’ college before retirement.

What Happened?

Investing was far easier for my grandfather then for you or me. Interest rates were pretty steady, between 2% and 5% most of his life. In retirement, interest rates went soaring to a peak of 15% in 1980, the highest interest rates of all time. Having reliable, steady, high interest rates in retirement is so sweet!

The stock market was a roller coaster during his lifetime, as it has always been and always will be. The Dow Jones Index went from around 1350 to as high as 7000 before returning to below 3000 before he died in the early 1980s. If you were invested in stocks back then, utilities were where you found the best growth. The Dow Jones Utility Index went from just over 10 in the early 1940s to as high as 160 by the 1980s, or about a 7% annual return.

Life changed in the 1970s when I was a kid and my parents were saving for the future. Interest rates went crazy, as did inflation. From the “bumping along” 2%-5% rates, interest rates shot up in the late 1970s to early 1980s. This turned all investing heavy into bonds and the stock market was flat 1965 to 1972. Life was uncertain and scary for most of us. Buying a house with a mortgage interest rate as high as 20% was daunting to many, prohibitive to most. Grandpa’s generation was happily retired invested in bonds at those high rates with a steady retirement income as a result.

Investing has always been complicated, but probably more so today than ever before. We think 1980-2010 was “normal”, but it’s no longer relevant. Our journey through our working and retirement life is nothing like Grandpa’s journey. So while he taught me a lot, I have to figure out this one myself.

The information given here is general in nature. If you would like to know how it pertains to your particular situation click “contact” above. If you found this or any of the other articles interesting, please subscribe at the bottom of this page.

photo by https://www.flickr.com/photos/ecotravols/

 

Tara Unverzagt July 5, 2016 No Comments

I Want a Carefree Retirement

Knee deep in debt, Bob and Carol were trying to decide if they should raid their retirement account to pay for the rest of the kids’ college education or if they should take on more student loan debt. Both choices made them sick to their stomach to think about. Either way, they couldn’t see a comfortable retirement in their future. It’s a situation that’s all too common today.

Life was different during our grandparents’ era. My grandfather, for example, went to college and paid for it himself. He became a civil engineer. My grandmother owned a beauty salon and together they raised three children. All three kids went to college, paid for with cash from my grandpa’s job and savings and their children paid for part of the expenses with summer job money. All three kids went on to live very nice middle class lives. Grandpa retired to a life of leisure full of golf. Grandma’s retirement revolved around church, singing in the choir, helping her friends, and taking care of the house. They liked to travel, especially to Florida for the winter.

It would be lovely if that was how our lives went, but it isn’t, we’re more likely to be in Bob and Carol’s situation. In Grandpa’s days, having debt would have been an embarrassment as well as scary. Coming out of the Great Depression, you might buy something on lay away, where you paid a little every week until you fully paid for the item and took it home. Otherwise, owing someone money was frowned upon.

Somewhere along the way, the finance companies talked us into thinking it was ok to use debt to pay for everything. You could buy anything on a credit card and make low monthly payments. Nowadays, many don’t even own their car. You carry the debt for the car that’s owned by the dealer. [Debt can be helpful see Use Debt to Your Advantage]

Grandpa had it right by not using debt to pay for goods. Using debt to buy consumables like a car or everyday items will make you poor. Once you take on debt, your expenses go up with debt payments. A $25,000 car turns into a $450 per month payment for five years or over $28,000 total. If you saved that $450 per month BEFORE you bought your car and invested it, you would only need to put aside $22,500 and you could do it in just over four years. That’s almost a $6,000 difference. What could you do with $6,000?

For many of us, our retirement years will be very different than our grandparents’ retirement. My grandpa had a pension, plenty of savings, Social Security at 65, he didn’t have to deal with high health care costs, and was debt free his whole life. I don’t have a pension, won’t be eligible for full Social Security benefits until 67, will have to pay for more of my health care costs, and cope with a home mortgage. And many will be dealing with their kids’ college debt as they try to retire. We will have to work a lot harder to get that comfortable, carefree life, plus we will live much longer lives than previous generations. How will we fill all those extra years and how will we pay for them?

Some people don’t want to retire at 65, they love what they do. My advice to these people is keep working. There’s a good chance you can work until 70 or even 80 and still have plenty of years to relax in retirement. The extra money will help finance those extra years. If you’re to the point where you need a change, consider a completely different job using the expertise you’ve gained. For example, you could teach math instead of working as an engineer. You could also consider a more relaxed job involving a hobby. One of my clients loved playing tennis and ran the club house at his tennis club when he retired. He was able to see his friends, make a little money, and play tennis for free. Or if you’ve saved enough to last a long retirement, you could consider volunteering at a charity that inspires you. You won’t make money, but will have purpose in life which research has shown is a key component to successful aging.

So why do we need to work longer these days than in Grandpa’s time? A lot of factors come into play. The only retirement plan most of us have today are the ones we fund. Companies decided they didn’t want to take on the risk of investment markets not doing well, so they pushed the risk on their employees. Healthcare costs have gone up and companies push more of the cost to the employees. More people are self-employed where you pay for everything and everything is going up in price.

Life has become much more complicated to manage. Today, we expect to have choices. Some people want to be able to pay more for insurance to go the doctor of our choice while others want to save money on their insurance and don’t care which doctor they go to. While choices are good it can be hard to know which choice is right for you.

The truth is, your retirement success is not affected as much by the outside world, as by your spending and saving habits. Just like always, spending less than you make leads to financial success. If you lose a job, you have to cut back. If college is too expensive, you can to consider a less expensive college, try two years at a community college (no one asks where you completed your Freshmen and Sophomore year), or have your child participate in a work/study program to help pay the cost of college. A much bigger part of your paycheck goes to healthcare which means you have to cut back somewhere else. Your car? Your home? Your hobbies? You have to choose insurance and retirement programs to meet your needs. That takes education and planning.

Take a moment to visualize your future self. What do you want your life to be like? Feel how comfortable life would be if you could choose to work, play golf, or travel. Then look at what could get in the way of getting to that retirement. What can you do now, in the next year that is totally achievable to help make sure you achieve that retirement? Is your comfortable retirement worth enough to make a commitment to your one year plan? When you’re tempted to spend money on those lower priority items, think about your future self and consider “paying” him/her by putting that money in your savings account instead.

Control your spending and save for your future. Think about working a little longer since you’re going to live a little longer. You too can have that comfortable retirement that my grandparents lived.

Contact me if you’d like a carefree retirement.

To find out ways to invest for retirement, check out Part 2: Index funds are safe, right?

Photo by Extra Zebra; https://www.flickr.com/photos/23438569@N02/

 

Tara Unverzagt June 30, 2016 No Comments

Transparency

Transparency is all the rage these days. People want complete information, no secrets held back. This is true in the finance industry as much as anywhere. The SEC is requiring the finance industry to be more transparent, such as recent changes to advisors who help manage your retirement plans. In the past, it wasn’t unusual for advisors/brokers to find creative ways to get paid without you knowing. ETFs are thought of as low cost, but know that some have fees higher than some mutual funds.

Originally there were upfront fees on mutual funds. Once people started saying “Hey, how come I’m paying so much just to give you money?” The front end fees started going down.

Then the “maintenance” fees paid every year were used to pay the money managers. You can now find out where the manager of your retirement account, mutual funds, or ETFs are getting paid. Beware “free” investments. Know that the advisor is getting paid somehow. No one, especially in the finance business, works for free. Often the more “free” someone is, the more they are actually getting paid, somewhere.

Do your homework. Ask your advisor all the ways they get paid: fees, commissions, incentives, bonuses, etc. If you’re investing in a mutual fund or ETF, read the material they provide. Everything now has to be disclosed, but it’s up to you to read it.

If you’d like help reviewing your investments, knowing what to ask or what to look for in a fund’s material, contact me at tara@southbayfinancialpartners.com

 

photo by https://www.flickr.com/photos/fdecomite/

Tara Unverzagt June 22, 2016 No Comments

What About RoboAdvisors?

RoboAdvisors have become popular recently. They provide a way for you to input what your goals are and the RoboAdvisor will come up with a plan just for you (and a million other people just like you). They are popular because they’re pretty easy to get started and their fees are very cheap, far cheaper than personal advisor. And they do a good job for what they do. I had a conversation with my hair stylist yesterday about why you might want a “person” to be your advisor.

In the middle of the conversation, another stylist came over to get advice on what color to use on her client. She said her client wanted highlights, but thought her ends (her last highlight color) were too light, she wanted darker highlights this time. The stylist was confused because the ends were the color that she would have picked for the client also.

My stylist said that perhaps the ends were the right color, but there was too much of that color. He pointed out that sometimes when clients say a color is too light, it’s really just that they want less of that color, not a darker color. My stylist pointed out a way to help the client get more information so she could make the right decision. The other stylist walked away to review the choices with her client.

After the other stylist left, I said “And THAT is why a RoboAdvisor isn’t the best solution for everyone. Sometimes, a client misunderstands what the issues are. A robot can’t have that discussion with you.”

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