Have You Met These Short-Term Goals?

Very rarely can significant gains be realized without first setting goals, and the first set of financial goals that serve as the base for your financial independence are your short-term goals. Short-term goals are for saving money for emergencies, and six months of income in case you lose your job.

While most people focus on their midterm and long-term goals, they may be doing themselves a disservice by not taking care of the basics. Short-term financial goals are important because life sometimes presents unexpected surprises. Having a few thousand dollars set aside and easily available for an emergency is a smart thing to do. Having some handy cash will limit the anxiety and stress many people suffer during periods of uncertainty.

Your Lifestyle Protection Plan is designed to help you preserve your current lifestyle until you reach retirement, and being prepared for setbacks like a medical emergency, the sudden need to see a dentist, or perhaps something that happens in your home like the refrigerator giving out, or flooding in the basement, or an unexpected visit to your automobile mechanic are all circumstances that are difficult to handle if you don’t have a set aside fund designed for unexpected emergencies. One of the features of your Lifestyle Protection Plan is being prepared by achieving solid short-term goals.

When a difficult situation appears, you can’t keep it on the back burner; the situation needs to be resolved right away, and having some money set aside protects you from having to use a credit card and incurring outrageous interest rates, or having to ask a friend to bail you out. You need an emergency fund for life’s stressful moments because they do happen!

The first thing to do is to figure out how much money to set aside in your emergency fund. Start by making a list of the potential costs that might suddenly appear. You probably have insurance for your car, but you might have to have money set aside to cover your deductible, so find out what that dollar amount is and calculate it into the total. You also probably have medical insurance, but there might be an annual deductible that first has to be paid; determine what that amount is and add that into the total, too. What does it cost when your child needs to see the dentist? Make a guesstimate and add that to the total. If you own your own home, think about which appliances might suddenly need to be repaired or replaced; maybe it’s the lawnmower, or an aging tree might need to be taken down; consider the cost and add that into your total as well.

You should also think about setting aside six months of income so just in case you or your spouse/partner should lose their job, or your work hours are cut back, you have the resources to get through the hard times until a new source of income can be established. If you haven’t done so already, you should create a monthly budget and write down all the expenses you typically have every month such as mortgage or rent, utilities, food, and transportation. Take a close look at what your monthly expenses are, and then consider which of them are essential and which you could cut-back if your income was reduced. Multiply this dollar amount by the six months of cushion you should build, and add it to the total.

Now that you know what your short-term savings goal should be, you should set aside money each month until your short-term goal is reached. These contingency funds should be kept in a safe and stable investment that provides you with immediate access. You can park this money in a savings account at your local bank, but you might also consider saving the money in a money market fund offered by your bank because you may earn a little higher interest than you would in just a savings account.

You can also include such things as paying off a specific debt, or saving to replace an appliance you know will soon require your attention as an emergency expense.

Short-term goals could also include something fun, like maybe a nice vacation, or a new wardrobe. Once your emergency fund is established, you can then consider other expenditures that allow you to enjoy the spice of life.

If you plan your short-term savings goals wisely and execute your plan, you will be more capable of overcoming the financial hurdles or emergencies that present themselves, and you may also be able to sleep better at night knowing you have all the immediate bases covered.

We hope this article about the short-term financial goals in your Lifestyle Protection Plan was informative. Please contact us so we can review your Lifestyle Protection Plan and help you secure and increase your personal wealth while enhancing your retirement. Thank you! 

Joseph M. Maas, CFA, CVA, ABAR, CM&AA, CFP®, ChFC, CLU®, MSFS, CCIM

Synergy Financial Management, LLC

13231 SE 36th Street, Suite 215

Bellevue, WA 98006

ph: 206.386.5455

fx: 206.386-5452

www.sfmadvisors.com

How Well Are You Protecting Your Future Lifestyle?

Thoughtful people think about the lifestyle they want when they retire, and make plans to accomplish their goal. They think about where they plan to live when they reach retirement age, how much annual and monthly income they want to have, if their retirement includes travel for fun and to visit their children, how they choose to spend their time, and the activities they value.

Usually people wonder if they’ll have enough money when they retire, a question that can be answered through the calculations of an experienced financial advisor. All the details of a retirement lifestyle can be monetized and a very accurate financial picture can be established that clearly articulates the amount of money that must be set aside annually in the time remaining before retirement to reasonably assure the desired lifestyle can be achieved.

The key to attaining the lifestyle of your choice depends on the amount of time available before your retirement age is reached, of course. Another key factor is the amount of savings and investments that can be developed in the time remaining so there are sufficient resources steadily building wealth toward the total amount of money needed for the desired lifestyle.

As you know, not everyone can achieve the retirement lifestyle of their dreams because of the interference of various factors that erode wealth. Divorce, illness, and poor choices are some of the detrimental factors that become obstacles to people’s hopes for their confident and comfortable financial future.

Having a retirement plan may not be essential to retiring, but it does provide the best chance for having a decent retirement. Think about the last vacation you took. One of the things you probably did on your trip was pull out a map, and maybe you consulted the Internet about some of the important details to include on your trip. Just as you would not get into your car and take a 3,000 mile road trip without a map and some idea of where you were going, neither should you assume that the money you’ll need in retirement will be available in 10, 20, or 30 years without making some plans now on how you expect to have enough.

Money is quite a magical thing. If you’re careful with your money, and save a reasonable amount of it, the time value of steadily adding to your savings and carefully investing these funds will multiply what you have many times over. Even if you won the lottery, you would still need to know how to prepare for your financial security. The news regularly relates stories of people who had fortunes and squandered them.

There are three steps that can provide you with the security of a Lifestyle Protection Plan. Your Lifestyle Protection Plan is designed to serve your current lifestyle, and help you preserve this lifestyle when you reach retirement. The three steps are:

  • Setting short-term, midterm, and long-term financial goals;

  • Understanding your financial pyramid and developing it;

  • Setting a pattern of allocating resources toward your goals that result in your financial success.

Your Lifestyle Protection Plan will be more thoroughly explained in the next several articles, and is a tool that should become an essential feature of regular interest to you throughout the year. No one but you and your family will have more than a passing interest in your retirement preparations, so it’s incredibly important that you establish your retirement plan as soon as you can, begin making allocations right away, and seek professional advice at least annually about the progress you’re making toward achieving your goals. With some forethought and determination, you can build your retirement account and live comfortably and securely during the last third of your life.

We hope this article about protecting your future financial lifestyle was informative, and if you are interested in consulting with us about your own Lifestyle Protection Plan, please contact us so we can begin a discussion about achieving your retirement goals. Thank you!

Joseph M. Maas, CFA, CVA, ABAR, CM&AA, CFP®, ChFC, CLU®, MSFS, CCIM

Synergy Financial Management, LLC

13231 SE 36th Street, Suite 215

Bellevue, WA 98006

ph: 206.386.5455

fx: 206.386-5452

www.sfmadvisors.com

Plan B: When Your Gap Is Too Big

It may happen that because of a wide range of circumstances you don’t have enough time to close the gap between the amount of wealth you have today and the amount of wealth you need to enjoy the retirement lifestyle you want.

Any number of reasons could have led to this situation, of course. Perhaps you started investing too late, or suffered heavy losses with your investments, or needed to use your funds for personal reasons such as health issues for yourself or a family member, or you were divorced…the reasons can be diverse. Nevertheless, this is the situation you find yourself in now, and you need to develop a Plan B going forward, and right away.

There are a number of things you can do now to prepare for retirement and still build a nest egg that will support you in your later years. Here are five things you can do to improve your situation.

1. First and foremost, you should make an appointment with a financial advisor who can take a close look at your circumstances and help you create a plan to make the most use of the time and resources you currently have. Remember the adage, “You don’t know what you don’t know.” There could be a number of options available you haven’t thought of which could be brought to bear and make your path easier, less stressful, more effective, and comprehensive. Perhaps looking into a reverse mortgage could provide the financial security you seek, or buying a rental property and earning monthly income is a solution that’s right for you. Meeting with a financial planner could get you back on track in ways you can’t imagine because an experienced professional often knows strategies you haven’t thought of.

2. Second, you and your financial planner can discuss the possibility of putting off retirement for a few more years. Your advisor can calculate the outcomes of different scenarios that may result in securing the future you hope to have, either by working a few more years to build your business to the point where you can retire the way you choose, or working longer as an employee so you can continue to build your 401(k) or some other retirement funding plan that can contribute to your ultimate success.

3. It might be a good choice to consider decreasing the amount of funds you wish to have in retirement, realizing you can live well with less and can enjoy the remaining years without having to sacrifice more time or your health. By reducing your retirement spending plans, you’ll need less money to cross the finish line into your new life.

4. Without question, you should review your current assets with an eye toward preserving and protecting your wealth from predators such as taxes and fees. Your financial planner can review your accounts with these costs in focus, and possibly help eliminate their drag on your wealth-building.

5. Your financial planner could recommend purchasing some form of insurance to protect and mitigate a multitude of risks that will help protect the wealth you’ve built because insurance, when applied properly, is a marvelous tool.

These are some of the ideas that could form the basis for your Plan B, and your financial advisor may be able to offer several more once he or she has had a chance to analyze your financial situation.

If you’re interested in discussing your financial plans for closing the gap and moving forward toward a relaxed and comfortable retirement, make an appointment to consult with your financial advisor today so you can develop a plan of action that brings you closer to your goal.

We hope this article about closing the gap and securing your financial future was helpful. Please contact us so we can review the possibilities for building and safeguarding your personal wealth while enhancing your retirement. Thank you! .

Joseph M. Maas, CFA, CVA, ABAR, CM&AA, CFP®, ChFC, CLU®, MSFS, CCIM

Synergy Financial Management, LLC

13231 SE 36th Street, Suite 215

Bellevue, WA 98006

ph: 206.386.5455

fx: 206.386-5452

www.sfmadvisors.com

Why Would You EVER Hire a Fee-Only Financial Planner?

There are generally only two types of financial planners…advisors who are fee-only and paid solely on the work they do for you, and the other group of advisors who receive commissions on the investments they recommend for your purchase. The difference between the two is that a fee-only advisor has no inherent bias to steer you one way or the other because they have no self-interest in the products they suggest…except to do their best for you so they retain you as a client.

This does not mean that a commission-based advisor would willfully misdirect your investments because they also have self-interest in wanting your portfolio to perform well so you’ll retain their services as well, but human nature can be subtle if only subconsciously, and selecting a fee-only advisor could be the better choice for you.

Let’s back up a square. A registered investment advisor, or RIA, is a financial advisor with a fiduciary responsibility to act in the best interests of his or her client, which means they are required to put your financial interests above their own. Not all financial advisors are fiduciaries, but all RIAs, who are regulated by the Securities and Exchange Commission (SEC), are fiduciaries and must perform their duties with undivided loyalty and the highest good faith dedicated to their clients.

There are three ways RIAs are typically paid: 1) a flat or hourly rate for work performed; 2) fees for a particular service; 3) a percentage of the funds being managed. A fee-only RIA does not earn commissions on sales or trading fees, so their compensation is not dependent on the investments they recommend for your portfolio, keeping their opinions independent of the pressure to sell you self-serving investment products. For this reason, fee-only advisors have less inherent conflicts of interest.

Recently there has been some confusion in the industry as commission-based advisors have used the term “fee based” when they charge a fee as well as ALSO receiving a commission, so investors need to be aware and clear about these terms when interviewing a financial advisor. The difference between “fee-only” and “fee based” could mean a lot to your bottom line!

The leading professional association of fee-only advisors is the National Association of Personal Financial Advisors (NAPFA), and this agency is widely and highly regarded for the expertise of its members and their forms of compensation. A portion of the fiduciary oath NAPFA members annually sign states, “The advisor does not receive a fee or other compensation from another party based on the referral of a client or the client’s business.”

By contrast, the sales commissions the non-NAPFA advisors receive come from the sale of specific investment products (mutual funds, stocks, bonds…) that may or may not be precisely suited to the investment goals of your portfolio or your needs for wealth management. If an investment product is not completely aligned with your investment goals, as stated in your Individual Investment Plan (IPA), or is not a good fit for the combination of investments you own and which work together as a single well-structured investment system, why would you purchase it? Being aware of the difference goals of the fee-only and fee-based advisors can give you a serious investment edge! Wouldn’t you rather have the money you’d pay in commissions go instead to the productivity of your portfolio?

The achievement of your portfolio depends upon the foresight and strength of an integrated plan that weaves the synergized strands of wealth-building, risk protection, tax strategies, fee limitations, retirement planning, insurance, alternative assets, and estate planning.

This is why meeting periodically with an experienced fee-only Registered Investment Advisor acting solely on your behalf as your fiduciary can be so significant…providing you with a portfolio that’s customized to your precise financial situation and attuned to your specific goals for security and a comfortable lifestyle.

We hope this article about the advantages of working with a fee-based RIA was informative. If you’re ready to meet with an expert who can guide your interests, please contact us and make an appointment to consult with an RIA today so we can review the possibilities available to you for building and safeguarding your personal wealth while enhancing your retirement. Thank you!

Joseph M. Maas, CFA, CVA, ABAR, CM&AA, CFP®, ChFC, CLU®, MSFS, CCIM

Synergy Financial Management, LLC

13231 SE 36th Street, Suite 215

Bellevue, WA 98006

ph: 206.386.5455

fx: 206.386-5452

www.sfmadvisors.com

The 6 Key Aspects of Your Personal Finances

There could be some measure of relief, or perhaps consternation, in knowing the exact dollar value of your net worth. For good or ill, it’s important to know the precise value of all your holdings so you can more accurately plan your financial future. When you don’t know what you have, it’s hard to know how much you need to step into the dream life you envision.

When you work with a professional financial advisor, you will be asked questions about your salary, your spouse’s salary, savings accounts, portfolio investments, real estate and the other material assets you own so an accounting can be made that determines your current financial worth.

Similarly, there will be a discussion about your liabilities, such as your mortgage, credit card balances, loans, and any other forms of indebtedness. The difference, of course, between your assets and liabilities is your net worth. Once your net worth is known, your assets can be reviewed in relation to the capacity of time to enhance your wealth, and plans can be developed to help you meet your goals.

Here is an overview of the six key areas to study when conducting an analysis of your personal financial circumstances:

1. Retirement Planning: Retirement planning is a complex and serious activity because so much is at stake and there are limited second chances. Planning for a future based on guesswork requires knowledge and experience, and is best conducted by hiring the services of a financial professional specializing in retirement planning. Just as you wouldn’t entrust an appendectomy to a carpenter or drilling an oil well to a dentist, you need a professional with the right kind of experience and training. Food and gas prices are continually increasing, health and technology advances are extending lifespans, and the social patterns of our daily lives keep changing which impacts the amount of funds needed for securing a potentially lengthy retirement.

2. Estate Planning: Most people want to leave something for their heirs, and wish to distribute as much as possible to their families, friends, and to special causes they support. A careful plan will ensure your legacy is not lost to creditors, predators, or squandered by your children. The estate tax can reduce your assets substantially, but smart planning is likely to fulfill your intentions.

3. Insurance Planning: The proper use of insurance can protect you and your loved ones from the financial risk of the unexpected, and can also provide financial security and benefits such as long-term care. There are varieties of special and standard insurances that can protect your financial well-being when you and your family need stability.

4. Tax Planning: Taxes are needed by local, state and federal governments to fund various community programs, but there are also many incentives available that can reduce your personal tax burdens. Research shows that taxes are the greatest expense to a person’s net income and knowing how to apply tax reduction incentives can serve ably to retain and build your financial strength.

5. Investment Planning: Precision investment planning can help an investor employ his or her current resources to accelerate return while guarding against risk. Each investor has their own unique circumstances, so a customized portfolio built to suit the investor’s personal financial needs should be crafted to protect the investor’s resources while identifying opportunities that can increase the investor’s wealth at a pace that reaches the goal within a calculated timeline.

6. Real Estate Planning: Real estate can be a benefit to a portfolio as an alternative asset class, either through the appreciating value of a primary residence or purchased as an opportunity for investment appreciation as well as rental income.

These are the six categories your financial planner will study to assist you with understanding the value of your personal assets and then determining the potential for augmenting their value and help you achieve your financial goals.

If you’re interested in reviewing these six key areas to help you determine your current net worth and devise a plan for building toward a comfortable and secure retirement, make an appointment to consult with your financial advisor today.

Joseph M. Maas, CFA, CVA, ABAR, CM&AA, CFP®, ChFC, CLU®, MSFS, CCIM

Synergy Financial Management, LLC

13231 SE 36th Street, Suite 215

Bellevue, WA 98006

ph: 206.386.5455

fx: 206.386-5452

www.sfmadvisors.com

Looking into the Crystal Ball of your Financial Future!

Wouldn’t it be great if a crystal ball could tell you today what you need for a financially secure tomorrow? Maybe you remember that Twilight Zone episode when a man goes back in time and knows exactly what to buy to build his fortune. And then there was the TV show called Early Edition when a man receives a newspaper with tomorrow’s news. We all wish we had an inside edge that could make investing easier, but nothing about the future is guaranteed.

Food and fuel prices can be volatile and unrestrained. A bag of regular groceries in the good old days would cost about $10 but now that same bag will cost about $30+. A gallon of gasoline was $1.43 in 2004, rose to about $3.50 in 2013, and is still about $3.00 in 2018, double its price 14 years later. It’s evident that your retirement funds need to exceed the pace of inflation. Remember, too, that people are generally living longer than ever before and therefore will need their retirement funds to last longer.

Clearly, you need to know what you’re doing when investing for the future, and because there is so much to know, your best decision may be to hire the services of a fee-based financial advisor. A financial advisor is a licensed professional trained to take advantage of and protect against the complexities of investing, possessing years of experience studying the markets and recommending investments that are individually appropriate for each client.

Your financial advisor, serving as your retirement analyst, will inquire about a variety of factors that define your current circumstances and your desired retirement lifestyle. Expect to be asked the following, and more:

1. Your current age and planned age of retirement: This information indicates the range of time available for investments to build.

2. Your current and projected income: An accounting of the funds you are receiving today today, such as salary, dividends, or annuities, will be considered along with your anticipated income from pensions, inheritances, and Social Security benefits.

3. Your current and projected expenditures: A review of your monthly and annual spending will determine if the money could be spent more wisely, resulting in savings that can be applied now to your investments instead. As you remember, simply saving the expenditure for a cup of fancy coffee could save $2,000 a year, money that could augment your future lifestyle instead.

4. Your current and future income tax rate: Depending on your income today, your tax rate might be high but it is likely to be less in the future. Your advisor can help you structure your investments to benefit from reduced taxes.

5. Your rate of return: Your investments need to be closely analyzed to assure they are earning the rate of return you need so you can achieve your retirement goals without endangering your portfolio with excessive risk. Portfolio construction is a science and an art, and you need to find a financial advisor who can customize your portfolio to precisely match your needs.

6. Projected inflation: Inflation has measured 4% annually in the last 50 years or so, but this is an average. As you get closer to your retirement, a higher inflation rate might prevail, so you need to guard against this by making appropriate investments today.

7. Your health history, and the health history of your spouse: This is important because it suggests how long you may live … thus bearing on the amount of financial resources you may need. This is a good occasion to diagnose the need for long-term care insurance or some other accommodation should you become infirm.

Obviously there are no guarantees your funds will be sufficient when you retire, but by planning now the odds are in your favor that the funds you need will be available on time. You and your financial advisor should review your portfolio closely every quarter to make sure you’re receiving your annual required rate of return.

The fees you’ll pay for the services of your financial advisor will be offset by the secure knowledge that a seasoned professional investment expert is closely watching and safeguarding your future, and increasing your wealth at the prescribed pace. Just as you would go to a doctor or dentist for regular checkups, you should regularly check on the financial health of your portfolio’s investments.

Looking into your crystal ball with the help of your financial advisor will help you part the mists of uncertainty so as the years go by, your treasure, which is your secure and comfortable retirement lifestyle, materializes more and more firmly the closer you get.

If you’re interested in discussing what’s in your financial crystal ball, make an appointment to consult with your financial advisor today.

We hope this article about securing your financial future was informative. Please contact us so we can review the possibilities for building and safeguarding your personal wealth while enhancing your retirement. Thank you!

Joseph M. Maas, CFA, CVA, ABAR, CM&AA, CFP®, ChFC, CLU®, MSFS, CCIM

Synergy Financial Management, LLC

13231 SE 36thStreet, Suite 215

Bellevue, WA 98006

ph: 206.386.5455

fx: 206.386-5452

www.sfmadvisors.com

Deciding What You Want in Retirement

The day will come when you’re going to walk through an invisible golden portal with a golden portfolio to match, and you’ll begin to live the life of your dreams. Imagine having your condo on the beach in Waikiki and every day is a combination of tropical fruits, coconut sunblock lotion, paradisal music, and sunset barbecues. No? Oh, okay, so maybe instead of a tropical paradise you prefer a snow lodge on a small ranch in Colorado where you can ski for miles and entertain your grandchildren with toboggans and horse-drawn sleighs, a warm fire in your livingroom’s wood-stove and summers filled with blue skies and big-horned elk. No?

So what exactly do you want? If you don’t know, the chances of your having it diminish. Yes, of course you can always build a gigantic retirement fund and hope you have enough for what you’ll eventually decide you want to have. However, think about how much more empowering it is to set your goals on precisely what you do want to have, and then work toward achieving a dream life come true.

The key reason it’s important to identify your retirement goals is not only because it’s so empowering to achieve them, but also because you can stop driving yourself into deep neurosis wondering if you have enough cash for whatever ambiguous cloud of retirement images are rooted in your cerebral cortex. Wouldn’t it be so much easier to know exactly what you want, determine its exact cost, and then build your portfolio to help you achieve precisely what you want to have and enjoy in retirement?

A lack of goals can drive you crazy because you’ll never be certain you have enough. Many people choose not to plan because they are either frightened of the future, or don’t really know what they want, or have too many choices buzzing around in their head and don’t know which one to pick, are simply too busy to project the future they want, or they don’t understand how to create, set, and follow financial plans.

If planning for your future is too much to grasp, start out simply by making a list of all the things you can think of that might bring you security and pleasure. Like you, most people have good imaginations and can think of a number of ways to spend their time beside going to work every day. Think about who will be with you in the decades to come…a spouse, children, grandchildren? Think about spending your elder years in a warm climate or cold climate; which do you prefer? If you have a family, do you want to live closer to them? Where are they likely to live when you’re in your 70s or 80s? Do you like to travel, or do you have any hobbies you’d like to enjoy more thoroughly? How will you be able to make your retirement funds last the length of your life? Is there some way you can increase your income when you’re in retirement?

Once you have your master list, spend some quiet time thinking about the choices you’ve listed and begin to filter them by whatever priority feels most right for you. Eventually you’re going to wind up with a core list of choices you feel really good about and which now helps define your path. Yes, things can change. Things change all the time! But as much as things change, they can also remain the same, and it’s better to pick a star to follow than stare at all the stars and never choose one.

The good news is that once you’ve identified some of your core goals, you can meet with a financial planner who will help you monetize the value of each of the goals you’ve chosen. The cost of that condo in Hawaii or the horse ranch in Colorado can be defined monetarily. The cost of an annual trip to Europe or Asia can be calculated. Even the cost of your future bills can be monetized and everything you want in the future will convert into a number…your investment target. Once that happens, you can begin to invest sensibly with your target in mind. You’re likely to get there a whole lot faster and with much less mental stress than shooting your rocket into the sky and hoping you hit something!

Make your list today. It’s easy to do! Then make an appointment to speak with your investment advisor about how you can monetize your financial goals and make your dreams come true.

Joseph M. Maas, CFA, CVA, ABAR, CM&AA, CFP®, ChFC, CLU®, MSFS, CCIM

Synergy Financial Management, LLC

701 Fifth Avenue Suite 3520

Seattle, Washington   98104

ph: 206.386.5455

fx: 206.386-5452

www.sfmadvisors.com

5 More Rules for Your Retirement

Last month’s focus was on the first five of 10 rules for achieving a comfortable retirement lifestyle. The recommendations included shifting into your projected retirement lifestyle a few years before retirement to get used to living on a different budget and down-sizing your behavior to make the eventual shift more familiar; developing new sources of income to compensate for Social Security’s inability to provide all your financial needs; developing an estate plan to care for your loved ones in case of your demise or disability; considering relocation to warmer climes or to be more proximate with your family; and being mindful of communications from the entities managing your wealth.

Here are the second five suggestions for achieving an anxiety-free retirement lifestyle which we hope will stir your interest and inspire you to take the necessary steps for the best wealth management for your circumstances.

Rule #6: Make funding your retirement goals your first priority. Your retirement years could be as many as 25…30…even 35 years. With medical improvements occurring yearly, it’s possible that many Americans will live into the first decade of their 100s. This should be a blessing, not a curse! If you and your spouse or partner will be living longer, you’ll need more financial resources to live independently and not under the authority of the government or through the generosity of your family. Currently life expectations are around 90 years; 10 extra years are likely to be costly, especially with inflation 25 – 35 years from now. This is why you should make funding your retirement your single most important priority, not an expensive vacation or a second home, unless it’s a good investment and treated as such.

Rule #7: Increase your savings regimen. For now, save and invest as much as possible while your ally, time, is still on your side. With sufficient time, you and your financial advisor can increase your wealth sufficiently to meet your projected needs two or three decades from now. Saving as much as you can now is the wise choice. If you find you’ve been over-saving in years to come, you can always lay off the throttle, but until your financial future is more clearly defined, save now so you won’t be throttled later by insincere planning. Use the gift of time and the wisdom espoused by every financial planner!

Rule #8: Prepare your wealth building for increased tax responsibilities. Indications are that we may now be at the low point for taxation. Given the federal economy and the state of the global financial situation, taxes may soon begin increasing to pay for the magnified liabilities of Social Security and government pension plans. With so much of our government’s resources being applied to debt service, additional taxes may be the necessary solution to maintaining our nation’s stability. Investment in tax-advantaged vehicles, like Roth IRAs for example, could be a good strategy.

Rule #9: Be sure to budget for health care. Because of the improvements in medical care, you’ll need to plan for healthcare expenses as you grow older. Counting on Medicare and supplemental insurance may be helpful, but they may not be sufficient. Remember that these forms of insurance will be costing you and your spouse or partner monthly premiums, and the costs are likely to grow each year. Another big expense could be the cost of prescription drugs which can often be expensive. Long-term care insurance could be one answer, but you should definitely consider a variety of ways to provide for your health care during retirement. Your financial advisor can assist you with understanding your options.

Rule #10: Invest your funds so you’ll be rewarded with a steady income stream when you’re retired. Most people think they must save their money so when the retirement years arrive, they can then spend down their savings. It’s a much better plan to maintain and safeguard the amount of money you’ve set aside over your four decades of work by using those funds to generate continuing income streams. Something you might want to talk to your financial planner about is owning property that provides rental income, or diversifying your portfolio so you receive a steady flow of dividends. It’s very important to remember that your financial advisor can be a great resource with helping you work through the obstacles that arise as you begin to plan and take action for the retirement life of your dreams.

Financial planning should be #1 on your To Do List. We invite you to make a consultative appointment with us today so we can discuss ways to set your path to retirement success. Thank you!

Joseph M. Maas, CFA, CVA, ABAR, CM&AA, CFP®, ChFC, CLU®, MSFS, CCIM

Synergy Financial Management, LLC

701 Fifth Avenue Suite 3520

Seattle, Washington 98104

ph: 206.386.5455

fx: 206.386-5452

www.sfmadvisors.com

5 Rules for Your Retirement

This week’s focus is on the first 5 of 10 rules for a comfortable retirement lifestyle. Most people want to enjoy a good life through the length of their adult years while building a retirement nest egg to sustain them into their 90s, and also leave a legacy for their families. Achieving this goal isn’t horribly difficult if you follow some basic rules and “keep your wits about you” as Filch advises Harry Potter.

Here are the first five suggestions for achieving an anxiety-free retirement lifestyle.
Rule #1: Many people like to live the life they can afford before they retire, and then also expect to enjoy a similar lifestyle afterward, though in many cases retirees must live more conservatively. Therefore, there is wisdom in moving your pre-retirement lifestyle to a level that’s similar to the lifestyle you’ll live in retirement, making the segue easy by preparing yourself emotionally and financially for your new post-work life.
Rule #2: Your Social Security benefits are intended to provide approximately 40% of the income you’ll need during retirement, so it’s up to you to secure the remaining income you’ll need. Remember also that this 40% number is based on a lower income model for average Americans, meaning that if you’re living at a higher level now, Social Security benefits will provide even less of your expectations. Aside from all the rhetoric that the Social Security program may go bankrupt, your Social Security benefits will only contribute a small proportion of the funds you’ll need in the last third of your life. This means you’ll need to figure out how to provide additional sources of income.
Rule #3: It’s very important that you have an estate plan so you can provide for your spouse and other family members who are depending on you, should you die prematurely or become incapacitated and unable to support your loved ones. Your estate plan should include a will, and possibly insurance policies and investment income streams. Providing this security for your loved ones is a priority.
Rule #4: As you begin to develop your thinking about retirement, an important topic is considering if it’s wise for you to relocate to another part of the country. While you may enjoy winter sports now, will you be preferring a warmer climate in your 80s? Perhaps you’ll want to move closer to other family members, or downsize your home so you have less yard-work, or won’t have to climb stairs when you get older.
Rule #5: Always pay careful attention to the emails or printed material sent to your physical mailbox from people and institutions holding your funds or advising you about your finances. This includes messages from Social Security, your 401(k) plan, pension information from your employer, your stockbroker and insurance providers, etc. Not only do you need to stay informed on a regular basis, but you also must be ready to take action and avoid making a mistake with a deadline or some other requirement that could cause financial damage to your wealth and your options.
These are the first 5 of 10 suggestions for helping you achieve a comfortable retirement lifestyle. Next week we’ll look at the second set of five rules everyone should know and practice.

Financial planning for a relaxed and comfortable retirement should be #1 on your To Do List. Consider making an appointment with us today so we can discuss ways to increase your personal wealth and enhance your retirement. 

Joseph M. Maas, CFA, CVA, ABAR, CM&AA, CFP®, ChFC, CLU®, MSFS, CCIM
Synergy Financial Management, LLC
701 Fifth Avenue Suite 3520
Seattle, Washington 98104
ph: 206.386.5455
fx: 206.386-5452
www.sfmadvisors.com

Your 2018 Investor’s “NFL” Playbook

Successful investors know when to buy, how long to hold, and when to sell. They know when to pass, when to kick, and when to fake. They know whether they should use the shotgun, or if a nickel defense is their best bet. How is investing like NFL football? The coaches have a playbook, they know how to read signs, and they know the odds. The difference between a rookie and a veteran is that success is based on cold, hard planning. As exciting and terrifying as investing can be, veteran investors remove themselves from emotional play-making and follow the rules they’ve made to play their game.

Just as you would never build a house without a set of blueprints, you should also not invest until you and your financial advisor have developed an Investment Policy Statement (IPS). With an IPS, you are completely clear about your investment goals, the constraints you are likely to face, and the impact these constraints may have on your portfolio so you can achieve your required rate of return (RRR).
Your Investment Policy Statement contains your investment philosophy which guides you with crafting your investment goals. For example, you may decide to invest only in companies that help people, or because of your professional background in technology you may choose to only invest in companies developing new technologies because this is an area you know well. On the other hand, because of your unique situation, you might decide to only invest in tax-deferred or nontaxable investments. Then again, you might decide you’re an aggressive investor and want to have a portfolio that accelerates your gains.
Your IPS identifies your required rate of return (RRR), which is the amount of return you need to earn annually on your investments to meet your financial goals. Because everyone’s financial circumstances are unique, the RRR can vary from person-to-person. One person may require an RRR of 5.7% for the next 20 years while another person might require an RRR of 7.8% for the next 10 years. If you are uncertain what your RRR is, you should consult with a financial advisor who will help you determine the dollar value of your financial objectives and how to make intelligent investments that help you achieve your goals.
Another key feature of your IPS is knowing the investment risk you’re willing and able to accept. Every investment carries a risk, even holding cash. No one likes to see the value of their portfolio decrease, and yet it happens every day. Knowing your appetite for risk is essential for building your portfolio. Your financial planner can analyze risk and help you diversify your vulnerability among the assets you select, maximizing your portfolio’s rate of return while minimizing your exposure to risk. Part of establishing your risk profile is understanding if you are a conservative, moderate, or an aggressive investor. There are, of course, variations for each of these three levels.
Still another key feature of your Investment Policy Statement is acknowledging the constraints particular to your situation. You may have a time constraint that limits the potential for growth. For example, if you are over 50 years old, the time remaining before you’ll need your funds is less than those of a 20-year-old just starting out. On the other hand, an investor of 50 is probably a larger income producer than a 20-something, so it’s possible more funds can be allocated for investments. Taxes can also be a constraint and a potential investment must be analyzed to determine if the best option is taxable or tax-free, income producing or growth through appreciation, etc. Also, portfolio turnover can accelerate taxes in a taxable account, and capital gains taxes can harm your portfolio’s investment performance. These are some examples of how your risk profile should be determined so you can retain as much of your investments’ proceeds as possible.
Your Investment Policy Statement is essential as a successful investor. It’s the playbook that helps you make investments in a rational and organized manner, without the chaos induced by the emotions of fear and greed. Your IPS helps identify good investments so your collection of investments increases the possibility of gain while also increasing your defense against risk.
Think of your portfolio as a Super Bowl team: you have players who are expert at offense, and players who are expert at defense. You and your financial planner are the quarterback signaling the right play at the right time to score touchdowns and win the Lombardi Trophy for a game-winning comfortable retirement lifestyle!
If you’re interested in creating or discussing your Investment Policy Statement and making sure it correctly details your investment strategy for optimal returns and risk protection particular to your circumstances, please contact us so you can develop and follow a plan of action which brings you closer to your financial goals.
Joseph M. Maas, CFA, CVA, ABAR, CM&AA, CFP®, ChFC, CLU®, MSFS, CCIM
Synergy Financial Management, LLC
701 Fifth Avenue Suite 3520
Seattle, Washington 98104
ph: 206.386.5455
fx: 206.386-5452
www.sfmadvisors.com

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