Retirees Face High Stock Prices and Low Bond Yields –

Conventional wisdom usually advises older investors and retirees to balance a portfolio of bonds, stocks and annuities to squeeze the most from their savings during the third stage of life.

But recent events on Wall Street and in Washington, including a booming stock market and Federal Reserve warnings about “tapering” its easy-money policy, suggest those investors may need to junk conventional wisdom and think again.

Stocks may be too expensive, while bonds are likely to fall as the Fed pulls back and interest rates rise.

via Retirees Face High Stock Prices and Low Bond Yields –

Trust as Beneficiary of IRA Is Popular –

My wife and I are both over 65 and are doing some estate planning. Can I transfer funds from a traditional IRA to a trust without immediately being taxed? What would be the tax consequences of making the trust the beneficiary of my IRA?

Ken Hartmann

Omaha, Neb.

The reader’s best bet would be the second strategy — making the trust the beneficiary of his individual retirement account, says Natalie Choate, an estate-planning lawyer at Nutter McClennan & Fish LLP in Boston.

Still, there is a caveat we will get to in a moment.

To take the questions in order: Transferring funds from an IRA to a trust would “invariably cause immediate taxation,” because the transfer would be considered an IRA distribution, Ms. Choate says.

Note: Investors might encounter a technique espoused by some estate-planning experts, which in theory would allow for a transfer without triggering taxes. But the Internal Revenue Service has never specifically “blessed” the technique, Ms. Choate says. So, “most estate-planning lawyers would say you shouldn’t try it without getting a ruling from the IRS, which would be quite expensive.”

via Trust as Beneficiary of IRA Is Popular –

Five MORE things that are more important than rate of return

The most common question I get as a financial planner is “What kind of rate of return can you get for me?”

This question implies that the most important thing to your financial future is the rate of return that you get. A good rate of return is important, but I believe that there are things that are even more important to your financial future than the rate of return you get on your investments.

In yesterday’s blog, I addressed five things that are more important to your financial future than rate of return. Today I will talk about five more things. This is based on a list originally created by Bert Whitehead.

Much is made of the rate of return we receive on our investments. But how important is the rate of return in the context of our overall financial life? Not as important as we might think. Here are my Top Ten Factors Affecting Our Financial Futures, beginning with the most important.

6 – The stability of your relationships. Studies have concluded that there is a correlation between strong interpersonal relationships and financial quality of life.

7 – Making the most of the investment in your house. For most people, their house is one of the most important “investments” they ever make. The tax benefits, the leveraged growth opportunities and the diversification a home provides should be well managed and carefully thought out.

8 – Living within your means. To me, his is one of the most important factors in your future financial success. Everyone should learn to live within their means and take on no “bad” debt. In addition to the financial health benefits of this, there are great mental health and peace-of-mind benefits.

9 – Bad habits and horrible mistakes. Bad investing habits like chasing returns and trying to time the market create poor results for those who practice them. Just remember: if it sounds too good to be true, it probably is.

10 – Protecting yourself from devastating risks. If you are doing everything else right, you can still be devastated by loss of job, significant health issues, untimely death, disabiltiy, liability or legal issues. It is important to protect yourself from these signifcant risks through good insurance programs and having the proper estate planning docuemnts in place.

Five Things More Important to your Retirement than Rate of Return

My friend, Bert Whitehead, author of Why Smart People Do Stupid Things with Money: Overcoming Financial Dysfunction , is one of the best financial planners I know. His experience and perspective help me keep myself and my clients on the things that are really important to achieving their financial goals.

Much is made of the rate of return we receive on our investments. But how important is the rate of return in the context of our overall financial life?

Not as important as we might think. Here are five of Bert’s “Top Ten Factors Affecting Our Financial Futures”, beginning with the most important. I will address the other five tomorrow.

1. How much you earn.  This the single most important factor that determines your financial future. You need to have an income that will support the current life style you want and that will allow you save the amount necessary to live the future life style you desire.

2. Wise shopping and spending. Making good decisions about how much you spend allows you to need less in the future and to save more. These decisions include decisions about what type of car you drive, how frequently you buy a new car, the type of house you live in, where and how often you dine out, etc.

3. How much you save in permanent savings not “in and out” savings. The amount of money you are able to put away for retirement each month will determine if you are able to retire when you want to.

4. Your tax burden. There are things that you can do to reduce your overall tax load. Good tax management can usually save you significant money – that will allow you a better life and a higher savings rate.

5. The diversity of your investment portfolio across asset classes. Proper diversification of you investment portfolio allows you the appropriate return for minimal risk for your investments.


The Long-Term Care Family Fire Drill « Life & Health Advisor Life & Health Advisor

As individuals are growing older and living longer, many are realizing they may need some type of assistance in later years to live with independence and dignity, preferably in their own home. For individuals that have taken action by purchasing long-term care insurance, they have placed a great deal of control into their own hands. Long-term care needs in later years becomes a family issue – physically, financially and emotionally – not to mention complex.

We know that long-term care insurance can help relieve the burden on family members and give clients options in their care, but the subject overall is a difficult conversation that many family members chose not to address with each other. Starting to prepare today by talking with members of the family allows for proper planning, expectations of roles and intentions, and positive decisions to take place. Even if you never need this type of care in later years, you can at least have the comfort of knowing that you took action if a claims situation were to ever arise.

via The Long-Term Care Family Fire Drill « Life & Health Advisor Life & Health Advisor.

5 Questions To Ask A Potential Financial Advisor

When you are searching for a financial advisor, what you are looking for is a Chief Financial Officer to help you run your family’s financial affairs. You’ll want to interview several potential candidates, and make sure you find the right person for the job.

You can ask about credentials and experience, but since you are hiring someone that has expertise that you don’t have, it can be difficult to determine if they are just a good talker, or if they truly have the right qualities for the job.

To help you see through the “sales talk”, I’ve compiled a list of five practical interview questions. The questions are designed so that you can use the answers to determine qualities like integrity and communication skills; qualities every good financial advisor should have.

Below are the five questions I think people should ask every prospective financial advisor.

via 5 Questions To Ask A Potential Financial Advisor.

Five Questions To Start a Retirement Planning Discussion

by John Grogan

Absent guidance from financial professionals who can focus on the bigger picture, many well-intentioned people get caught up in the treadmill of daily living and put off any serious long-term financial planning until it is too late. A recent study by my company shows that half of Americans don’t have a financial plan in place and 63 percent say their financial planning needs improvement. The lack of a financial safety net is worrisome, but it is also an opportunity for advisors to make a real difference.

How can advisors help? Our 2013 Planning & Progress Study found that Americans largely recognize that time is eating away at their money, and half admit to being less financially secure than they’d hoped at this point in their lives. Only 43 percent feel financially secure. Advisors need to initiate a dialogue with their clients about planning for long-term goals, and it has to focus equally on growth and protection.

We believe there are six key retirement risks to address – unplanned market losses, living longer than you planned, inflation and taxes, healthcare costs, long-term care risks and leaving a legacy. Each of these have to be factored into a long-term plan, alongside one’s financial goals, risk appetite and time horizons.

To initiate the dialogue, here are five good questions to discuss with clients:

1.  What are your biggest concerns about retirement and longevity? What excites you about retirement?

They may seem like obvious questions, but too few financial advisors take the time to really listen for the answers. The best way to help clients is to actually listen to them. By listening, you’ll determine whether your clients have thought much about retirement, if their expectations are in line with their assets, and if they have financial worries keeping them up at night. For couples, you’ll learn whether they share the same retirement vision, or if they’ve talked to each other about retirement at all. In most cases, the constant juggle of day-to-day demands has sidetracked them from any serious discussion, and the questions will be a welcome opportunity to focus.

Whatever the initial response, advisors shouldn’t rush into problem-solving or quick fixes. Instead, advisors should continue asking probing questions to better understand the clients’ end game first, and then offer needs-based, long-term solutions that can weather the zigs and zags of market cycles.

via Five Questions To Start a Retirement Planning Discussion « Life & Health Advisor Life & Health Advisor.

Why Everyone Should Aspire to Early Retirement

David Ning makes some great points here about the positive benefits of planning to retire early!

Take this advice to heart!



“Plan to retire early” is the basic advice I give to anyone who’s interested in financial well being. While there is more specific advice that could help you to better save for the future, saving early and often can set almost anyone on a better path to financial security. The goal of early retirement can help motivate you to make smarter financial decisions. Here are a few benefits of trying to retire early, even if you are planning to work longer:

You’ll get a plan together relatively early. Most aspiring early retirees have an investment plan, because they need to know how many years they have to work until they can be financially independent. Fortunately for them, plans written when the markets are calm will also help them weather the inevitable turbulence that risky assets go through from time to time. Some people end up short changing themselves by acting emotionally whenever volatility hits the markets. It’s a better idea to come up with an investment plan you can stick with through thick and thin.

It keeps you focused on what’s important. Many people believe there’s some magic to amassing enough wealth to retire, but the key to building a substantial nest egg is to control how much you save and spend. Because early retirees often try to quit the rat race as early as possible, they inevitably try to save more by spending less. Even if you don’t want to go to extremes, practicing frugal living will speed you along your path toward a comfortable retirement.

via Why Everyone Should Aspire to Early Retirement – On Retirement (

6 Options for Boosting Your Yield in Retirement

By Robert Berger

Though it looks like the market is beginning to turn around somewhat, we’re still living in an incredibly low-yield environment. When you’re buying your first home, this is great. When you’re trying to make your retirement savings last, it’s challenging.

Many of today’s retirees are having trouble maintaining their savings in this low-yield environment. Times like these call for creativity and extra planning, as traditional retirement investments simply aren’t cutting it. If you need to increase your yield to further stretch your retirement funds, here are six options for doing it:

1. Online banks and credit unions. While you’re not going to make a lot of money on any savings account these days, increasing your savings yield by moving your liquid savings can be helpful. Credit unions and online banks both tend to offer better savings and checking account yields than traditional larger banks. Taking advantage of special savings and checking account offers can really increase your liquid savings yield. Watch for offers from credit unions and high-yield, low-fee online savings accounts.

2. I bonds. I bonds can be an excellent low-risk investment that protects your money from inflation. They earn interest based on a fixed rate combined with a variable rate indexed for inflation.

Even though I bonds get very little by way of interest – 1.18 percent between May and October, 2013 – the fact that they’re indexed for inflation keeps you from losing money every year. Sure, other investments may earn more like 2 or 3 percent, but without that extra inflation rate, you’ll actually lose money over time. There are some restrictions in terms of getting access to your money in the first year, and you’ll pay a small penalty if you withdraw your money in the first five years, so be sure you understand how I bonds work before making the investment.

via 6 Options for Boosting Your Yield in Retirement – On Retirement (

Ethical Lapses on Wall Street

If you want a planner who has agreed to provide you with the highest ethical service, look for a NAPFA-registered, Fee-Only Planner.



The second annual survey of Wall Street ethics (or the lack thereof) from the law firm Labaton Sucharow generated much interest but few surprises for me. Did you really believe Wall Street changed for the better since 2010 when the Dodd-Frank Act was passed by Congress?

If anything, the data is not as disturbing as I thought. The fact that only about half of the respondents felt their competitors engaged in illegal conduct, or that almost a quarter believed their own companies acted illegally, was less than I would have projected. The online survey of 250 people who work in the financial services industry including traders, portfolio managers, investment bankers, hedge fund professionals, financial analysts, investment advisers, asset managers and stock brokers found that almost a quarter (23 percent) of those responding have observed illegal conduct or had first-hand knowledge of wrongdoing in the workplace.

via Ethical Lapses on Wall Street – On Retirement (