Have you ever wondered what to make of the Morningstar ratings? These one-to-five star ratings are attached to nearly every retail mutual fund available, and are published on all of the major information outlets. Mutual fund managers love to highlight four- and five-star ratings in their marketing materials, so they must be worth something, right? Continue Reading…
Okay, I admit it. The photo is of Barry Bonds and the article is about Treasury Bonds. Come on, though, can’t a finance gal have a little fun on a Friday??
And now for more fun, I have exciting news! Today the ten-year Treasury Bond yield fell below 1.5% for the first time since, well for most of us, forever. Gone are the good ol’ days of the 1980s when you could put on your legwarmers and lock into a sure double digit return by lending money to Uncle Sam.
Hi! I’ll be speaking next week for the Silicon Valley National Association of Women Business Owners’ Brown Bag Lunch series. Come on down, bring a friend, and make sure you bring your own lunch!
The 5 Healthy Practices of Wealthy Women
Money is an emotional topic for women, but it’s also an area where we need to produce positive results to live the lives we want to live. Learning and implementing the right practices will give you insight and power over your current situation, and help you achieve peace of mind. Continue Reading…
Calculating Your Retirement Number
Just like counting calories to lose weight, you can’t hope to effectively achieve a retirement goal if you don’t know what it is. So many sources recommend this or that savings rate, but that can almost be a backward way to look at things. If you want to get to a destination, you’ve got to reverse engineer the goal! This article will show you how to calculate your retirement number so you can be crystal clear where to set your sights.
If you’re serious about living well and taking action to create a successful financial future, I’m talking to you.
This should really be a very customized conversation. It should include your income, your savings rate, your relevant health history, your assets, your expected income increases, and your family needs. Since I can’t do that in a blog article, my goal here is to give you enough information to formulate a rough plan.
Retirement should be planned for based on the number of years you have left to SAVE in order to build up your savings—and the smaller the number of years the more critical your actions now.
You’re the CEO of your Personal Financial Future Corporation and the mission of your entire organization is to build a portfolio that will provide enough income for you and your loved ones to live and then for you to leave the legacy you want to leave.
Some people might be able to retire with a million dollars saved, some don’t feel comfortable with $20M. What’s important is your goal, your trajectory, the consistency with which you save and your ability to make educated choices about trade-offs.
What are the keys to having a wealthy retirement?
- Make a plan—an actual plan—that is written down and has numbers and reality in it.
- Execute on the plan with the intention of meeting your goal.
- Review the plan at least annually, assess plan versus reality, make adjustments and return to #1. It’s not rocket science, but it requires the extraordinary human qualities of integrity, commitment, and intellectual honesty.
Here are some rules of thumb:
- You have longer to plan for than you probably think. Of course, there are exceptions to every rule and I don’t know your health or family history, but men should probably plan to live to 90 and women to 95 at least.
- General rule of thumb: For every $50,000 per year of today’s money you want to take in retirement, you’ll need to save $1,000,000. So, if you want $200,000 in today’s dollars in annual retirement income, you need to save $4,000,000.
- You can expect the prices to double approximately every 24 years, so if you have 24 years to save until retirement and you want income in retirement that feels like $200,000 today, you’ll need to save $8,000,000 (because to feel like $200K it will have to actually be $400k. (holy wow, right?)
- As far as investment returns go, always remember the Rule of 72. Take your annual rate of return and divide it by 72 to figure out how long it takes your portfolio to double. If you have low-cost, index-based globally diversified investments, that portfolio should produce just under 10% per year in returns for you, after fees. So, it should take about 7.2 years for a properly invested portfolio to double in size. This is true in the long-run, and yes, the last 12 years are not representative. But it’s still the best projection for the long run.
- Don’t throw the Social Security baby out with the bath water yet. It’s highly unlikely Congress will take it away altogether if you’ve paid into it, and that can mean millions of dollars of income over time. The Administration is no longer sending paper statements, so go here to their benefits calculator and include that income in your plans—meaning reduce your required savings by the appropriate amount to take it into account.
- Health care costs will likely continue to grow much faster than inflation. The health care costs item deserves not just a bullet point in this list but a public policy manifesto. I can’t do that, so let’s just say for thought exercise purposes—double, maybe triple your current monthly policy costs.
Now, armed with all of that information, here is a link to a decent retirement savings calculator on the Vanguard website. Input your current savings, income, and desired retirement income information, and at the end the calculator will show you any shortfall and tell you how much additional you need to save to make it up. And then let me know what questions you have!
In my meanderings around the ‘net these days, I’ll admit to being a little disappointed in the Facebook fervor I see. Oh, sure, if you’re a Facebook employee or relevant Investment Banker, you’re on Cloud 9 and not coming down for a while, I completely get that. But, if you’re not a Facebook insider, this probably just isn’t your party.
Yes, I understand the attraction—Facebook rocks! It’s changed the way we use the Internet. Continue Reading…
As you know, this space is usually dedicated to furthering you along the path to financial freedom. We make an effort not to burden you with the maze of regulatory issues we comply with, because our focus is on your financial well-being.
But recently, something has come up that could directly impact your financial well-being–and not in a good way.
House Finance Committee Chairman Spencer Bachus, who has been under ethics investigation for insider trading, and Rep. Carolyn McCarthy have sponsored a piece of legislation called The Investment Oversight Act of 2012. It is being described as a way to protect consumers. In fact, it is designed to put all independent Registered Investment Advisors, like us, who fee-only financial advisors and are required to put the interests of our clients first when we give financial advice and are currently governed by the Securities and Exchange Commission, under a regulatory authority led by the investment brokerage industry.To understand the difference between what we do and what brokers do, click here. Investment professionals in the brokerage industry do not hold themselves to the same fiduciary standard with their clients, and because they are not independent like us, they represent immense financial interests in Washington.
This, of course, is the same regulatory organization–the Financial Industry Regulatory Authority (FINRA)–that failed to prevent Wall Street from selling toxic mortgage pools and derivatives into the financial system, leading up to the near-collapse of the economy in 2008. Bernie Madoff was regulated by FINRA from the day he opened his Ponzi scheme for business. Mr. Madoff actually served on the board of governors of this organization back when it was called the National Association of Securities Dealers. We knew something was very wrong back in 2007 when the National Association of Securities Dealers, which was a voluntary brokerage industry group, changed its name to the Financial Industry Regulatory Authority when it was nothing of the sort. We felt at that time that FINRA was readying itself for this kind of power grab.
The innocent-looking piece of legislation would actually give us a world where companies like ours would have a hard time existing. It would be a world where all financial advice would be given by brokers, or people forced to act like brokers.
Under normal circumstances, we might have confidence that our Congressional representatives will see through this ruse and do the right thing for their constituents. Unfortunately, a lot of lobbying money is being spent to brokerize the financial world. Among the top ten contributors to the lead sponsor of the bill–Rep. Bachus–are commercial banks (a total of $213,650 in 2011-12), insurance companies ($191,010), securities and investment firms ($184,277), finance/credit companies ($90,438) and “miscellaneous finance” companies ($89,250).
In the 2011-2012 election cycle, Rep. Bachus was the number one fundraiser from commercial banks, from finance/credit companies and from mortgage bankers and brokers. It is incredibly clear that his best efforts are not directed at protecting American investors (you) from the people who are paying for his re-election.
Please view this article as a heads-up that the entire structure of our financial system may be about to change–we believe for the worse. If you are anywhere near as concerned (and angry) as we are about this naked effort to brokerize our financial system, then you might want to contact your elected officials, as we have.
Our message is very simple, and I have included it here to make it easier for you to cut and paste and add your own thoughts. Below are links to help you find your elected officials:
I want to express my strong opposition to the recently proposed Bachus-McCarthy bill, also known as the Investment Oversight Act of 2012.
This piece of legislation has the potential to do significant harm to your small business constituents by subjecting them to yet another layer of bureaucratic regulation. Worse, it would hand off regulation to an entity–FINRA–that has proven to be extremely ineffective at protecting consumers. FINRA is the organization that regulates Wall Street, which failed to prevent the 2008 scandals, including the sale of toxic investment products. Bernie Madoff was under FINRA regulatory jurisdiction for his entire career.
Please, if and when you have an opportunity to vote on this measure, vigorously oppose this effort to build yet another bloated regulatory bureaucracy in Washington. There are far better alternatives to enhancing consumer protection than allowing Wall Street’s regulator to expand its authority over the many small businesses that provide fair and transparent advice to consumers.
For California residents:
Barbara Boxer: www.boxer.senate.gov/en/contact/
Dianne Feinstein: www.feinstein.senate.gov/public/index.cfm/e-mail-me
And for all Americans:
Here is a link to figure out who is your representative in the House: http://www.house.gov/ (upper right-hand corner)
You are important to us, as is your financial well-being. Whenever we see it threatened, we feel the need to take action, and please know that we are monitoring this situation with the full attention that it deserves.
By Bob Veres and edited by Hilary Martin, MBA, CFP®
If you interested in supporting women to be successful in starting and running companies, or if you ARE a female entrepreneur, and you haven’t heard of Women 2.0, you should check them out! Straight from their website:
Women 2.0 is a global network and social platform for influencers that drive trends and decisions — as startup founders and as consumers. Continue Reading…
by Hilary Martin, MBA, CFP®
It’s a legitimate question, and it’s one every conscientious investor should be asking. I’m always surprised when people talk with me about how much they like their current portfolio, but don’t seem to know the returns they are earning. So, this is a good piece of advice: You should always know the returns you’re getting! A common and effective way to measure portfolio returns is annually. Continue Reading…
This video is a great follow up to last week’s The Elephant and The Rider post, also on the subject of changing habits.
There was a time in my life I wanted to feel rich, and to me, feeling rich meant spending money. And spend, I did! So the trigger was wanting to feel rich, and the habit was spending on stuff I didn’t really want or need. I felt a little silly when I realized what was going on: I was resentful that I hadn’t been born rich, which explained all the wanting to feel rich. Continue Reading…
Today I am recommending that you read a beautifully written article thatwas originally posted on one of my favorite blogs—Metabolic Effect. The Healthy Wealthy Families blog–yes, the one you’re reading now–is about putting healthy practices in place to achieve your financial goals, and Metabolic Effect is about putting healthy practices in your diet and workout regimen