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

The Dark Side of Compounding

Compounding is the continual growth of money based on an ever-expanding sum consisting of the initial principal and the ongoing accumulation of interest. Most of us are familiar with compounding interest, an experience that often begins in childhood as the funds we deposited in our savings account grew slowly over time by just sitting there. Albert Einstein referred to it as the eighth wonder of the world!

However, just as money compounds in a positive way, it can also compound in a negative way, causing damage to your portfolio and teaching you a harsh lesson about protecting your assets from losses. The consequence of losses in your investment portfolio is harmful not only to your bottom line, but also sabotages your effective use of time which then even further diminishes your portfolio’s growth. A wise investor seeks gain on one hand and loss-prevention on the other. This may seem obvious, but human emotions can sabotage your best intentions.

Understanding the effect of negative compounding may result in changing the way you think about investing, accepting risk, planning your investment strategy, your expectations of results, and ultimately the quality of life you can achieve with more diligent reflection and wiser decision-making.

Negative compounding is not a familiar term to most people, yet it is an ever-present danger for investors. Whenever you suffer an investment loss, negative compounding is present. You had $10,000 and you lost $1,000 in an investment that didn’t work out. To return to your break-even point of $10,000 you have to do one of two things: (1) Either consume time at your present rate of return until you have restored the lost $1,000, or (2) increase your risk and invest at a higher rate of return to restore the lost $1,000 and preserve more investing time. Both choices are unappealing because either you lose time that could have been used to further advance your wealth, or you subject your remaining wealth to potential loss through increased risk.

Investment losses are a dreary situation! You’ve suffered the loss of capital, and now you have to lose investment time or subject your investments to increased risk by investing at a higher rate of return to catch up! What’s an investor to do? Don’t suffer losses…which is so much easier said than done.

Here’s the thing: When a portfolio loses 10%, it must now earn 11.1% to return to its breakeven point, not just the original loss of 10%. Here are the figures that prove this point:

Period 1:

Beginning value: $100,000

Return: -10%

Ending value: $90,000

Period 2:

Beginning value: $90,000

Return: +10%

Ending value: $99,000

So, not only does the portfolio need to earn more money to regain the breakeven point, but there is also the loss of the investment time it takes to regain the lost funds. For example, if it takes a year to reach the breakeven point, that’s the loss of a year that could otherwise have advanced the value of the portfolio. If an investor has a 30-year investment time range, the loss of a single year’s progress is equal to the loss of 3% of the available time for building a strong retirement fund. You can see how the loss of investment capital is negatively compounded, both in lost money and in lost time.

Imagine the horror of losing -40% of your portfolio…which happened to some investors during the Great Recession of 2008. If they were able to invest their portfolio with a 7% return, it would take them 7.55 years just to breakeven and regain the lost funds! And if they had a 30-year investment time range, they would also suffer the loss of about -21% of their available investment time!

The important point is that the smart investor limits his or her losses at every opportunity. If your portfolio grows 20% in Year 1, drops -40% in Year 2, grows 50% in Year 3, drops -30% in Year 4, and grows +50% in Year 5…your portfolio has averaged a rate of 10% growth…but a stable portfolio can also achieve a +10% growth rate and gain a much higher appreciation of capital because extreme losses will not diminish the capital base, allowing a steady growth rate rather than a see-saw rate that erodes the capacity of the investment from achieving a higher value.

Therefore, steady growth is a superior investment strategy. Two investments that average 10% are not equal. The one with less volatility is the one achieving greater wealth. One chases rainbows while the other gets the pot of gold.

Negative compounding is dangerous to your portfolio because it reduces both your investment capital and your investment time. A skilled investment manager can generate better-than-market returns, manage tax issues, and help you stay targeted so your portfolio achieves your investment goals. Consider working with a fee-based financial advisor with the training and experience to guide you so you can enjoy the retirement of your dreams.

 

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

 

Behavior Builds Wealth

Wealth is built on behavior, not on the amount of income a person earns. Stories about NFL football players or Hollywood stars receiving huge paychecks are often accompanied by follow-up stories that tell the tragedy of wasted resources. While wealth is also often associated with advanced education or sizable inheritances, it is the behavior of the individual that determines whether or not wealth is retained. Wealth is more appropriately attributed to a commitment of basic financial planning and practices.

“Take a minute to look at your goals, look at your performance, and see if your behavior matches your goals.” Kenneth H. Blanchard, American author and management expert.
The first step is to determine how you’re spending your income. It may seem silly at first, but keeping a log of how you spend your monthly funds could be a tremendous eye-opener. Take an accounting of every penny and you might find you are regularly buying items you don’t need, and the aggregate amount you could save and invest might advance your financial strength significantly.
For example, we’ve all seen articles about the excesses of buying a daily Starbucks coffee. $4 twice a day adds up to $160 a month and almost $2,000 a year. Did this get your attention? It’s the same with having lunch out every day. A $10 lunch costs $200 a month which adds up to $2,400 a year. Could you purchase stock in a company with your extra $4,400? Of course you could! This doesn’t mean you should always forgo a morning coffee or lunch out, but by making some simple behavioral changes, you could advance your financial progress. $4,400 earning 10% could result in $8,800 in seven years… I’m sure you see the point.
Other examples include saving money by lowering your cell phone costs, or limiting your television bundle. You could also be spending too much money on gifts or clothes. Once you start realizing how you spend your money, you’ll find a number of ways you could rein in your expenses and cut waste. All too often we get involved in behavioral patterns that leak cash, robbing us of the healthier financial future we could otherwise have.
Another place to consider changing your behavior is the amount of debt you owe. The more debt you have, the less likely you’ll be able to escape its hold. Yes, some debt may be serving a good purpose, such as using it as leverage to reach a larger goal. Debt can be dangerous, however, and must be used rationally as part of your financial plan.
Also, another key aspect of healthy financial behavior is saving regularly. Funds should first be set aside to provide you with a 3-6 month emergency fund in case your car needs a repair, or you have a sudden and necessary home project that’s urgent like fixing the roof. After you’ve established your emergency fund, your focus should next be on building your retirement savings.
When planning for your retirement, perhaps the best decision you can make is hiring the services of a Registered Investment Advisor (RIA). Unless you’ve taken college classes and earned a degree in investment finance, have already spent many years investing successfully, and have studied portfolio construction, you should hire the services of a fee-based investment advisor who already has the academic and experiential background to guide you with making investment decisions customized to your unique set of circumstances.
Have you written your Investment Policy Statement (IPS)? Do you know what your individual required rate of return (RRR) is? Have you constructed a portfolio designed to achieve your financial goals during the time remaining before your retirement which builds your wealth while guarding against risk?
These are just a few examples of how an investor’s behavior can result in varying degrees of financial success. To be successful as an investor, you must first develop the mindset and behavioral practices that help you achieve the wealth you desire. It’s not uncommon that administrative assistants have larger portfolios than the doctors for whom they work. Income does not determine wealth; inheritance does not determine wealth; education does not determine wealth. A person’s wealth is best attributed to sensible behavior with wise guidance over time.
“Be + Have = Behave. You will experience your success when you BEHAVE accordingly. BE and you shall HAVE.” Steve Maraboli, behavioral scientist.
We hope this article about building your wealth through behavior was informative. Please contact us so we can review your behavioral practices and the corollary possibilities available to you for securing and increasing your personal wealth and enhancing 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

Will Your Retirement Nest Egg Last as Long as You Do?

Are you really prepared for retirement? Truly prepared to transition from your monthly paycheck to living only on your savings?

 

 

One of the biggest issues facing retirees in the U.S. today is that many of us are living longer. You wouldn’t think this was a problem, but living is expensive and getting more expensive every year.

 

 

  • Healthcare and medications are constantly increasing

  • Basic living expenses are costing more as inflation pushes prices higher

  • A bag of groceries used to cost $10 and now costs $30

  • The price of a cup of coffee and a newspaper is ridiculous

Prices keep rising, and they are unlikely to stop. As time goes by, especially as a retiree living on a fixed income, you’ll need more money every year to stay ahead of the inexorable advance of inflation and remain financially secure, feel good about your life’s situation, meet your responsibilities, and be a blessing to your family and others.

The life expectancy for men of 65 is presently 84.3 years, and for a woman at 65, the average life expectancy is 86.6. Frankly, these numbers are ephemeral because with the advances in medical technology and pharmaceuticals, many people will live into their 90s and we’re likely to witness a surprising increase in the number of centenarians, of which you could very well be one!

This is great news if you have the resources to enjoy a life that extends into those advanced years. Clearly the question is how confident you feel about the ability of your 401(k) or pension, together with your Social Security benefits, to cover your living expenses in the future as prices for everything keep going up and up. Will your nest egg become too thin or even vanish? One of the biggest fears most seniors and retirees have is worrying that their nest egg will fall short and they’ll have to rely on their family or the government.

An unpleasant thought. Yes, you can always reduce the quality of your retirement lifestyle, and you can always work more years than you originally planned. These are unpleasant thoughts also.

This brings us to the main question: “What is your financial strategy for funding your comfortable retirement, the retirement you want to have?

Deciding how much money you need for retirement depends on the careful calculations of your financial planner. You may not realize it, but your financial planner is professionally trained to work with you in determining the exact cost of the retirement lifestyle you wish to live.

Once your lifestyle goals are identified, your financial planner can precisely calculate how much money this lifestyle will cost, extending the calculations through the decades to your 100th birthday or your 110th birthday. Then, working backward, your financial planner can calculate how much you will need for each of the intervening years, and by reverse engineering can arrive at the amount of money you need to have when you retire.

Remember also that even though you may not be physically working in your retirement years, you may also be able to secure steady income through your investments and revenue vehicles such as rental income.

The point is that now is a brilliant time to assess your current wealth and determine the amount of wealth you will need to claim the lifestyle you want in retirement. There is only so much time between today and the day you want to retire, and time is the greatest asset you have for building your financial wealth sufficiently.

Your financial planner will also identify the required rate of return (RRR) your combined investments need to achieve to reach the level of wealth that’s desired, and will help you build the best portfolio for reaching your RRR annually while also protecting your assets.

Do not delay! Make an appointment with a fee-based financial planner as soon as possible so you can make sure your retirement nest egg lasts as long as you do!

We hope this article about building the right-sized retirement nest egg for you was informative. Please contact us so we can review the possibilities for securing and increasing your personal wealth while enhancing 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

Start Your Estate Plan with These 4 Tips

One area many investors overlook is estate planning. Proper estate planning is an essential component of your financial plan because it can help your loved ones avoid a difficult and expensive process once you pass away. Here are four easy steps to help you plan for the distribution of your assets by creating and maintaining an estate plan that provides your heirs with financial confidence.
1. Make an Inventory
Before you can make a plan, you have to know exactly what you have. Take some time to document your holdings. This will include your home, other real estate you may own, vehicles, jewelry, and any other personal property that has monetary value. Make a list of your bank, brokerage, and retirement accounts, noting the funds held by each. Also document all insurance policies, and note their cash values and death benefits. It’s also important to list all your liabilities, such as mortgages and any lines of credit or other debt that needs to be resolved.
2. Conceptualize Your Plan
It’s always best to work with an experienced professional such as a financial planner or attorney. Be prepared for your first meeting by knowing the answers to these important questions:
a. If you become incapacitated or pass away, who do you want to manage your estate or its distribution?
b. Who do you select as your heir or heirs, and what do you want them to receive?
c. How would you care for your minor children, if applicable?
3. Create Your Plan
Your financial advisor or attorney will draft an estate plan that incorporates your information and is in accordance with state and federal law. Your plan will include a will that assigns how your assets will be distributed after you pass away, and will include powers of attorney documents that specify who will make financial and health decisions if you are unable.
You and your financial advisor or attorney should also conduct a professional review to make sure your paperwork is updated, and your investment account beneficiary designations properly identify your intentions.
4. Review and Modify Your Plan Periodically
Because circumstances change, your estate plan should be reviewed at least once a year as you acquire or divest assets, or as your beneficiaries increase or change. The key purpose is to make sure your estate plan truly reflects your intentions. You may purchase new property, or sell property you’ve owned, and as time goes by your family may be affected by births, deaths, marriages and divorces. Remember also that tax laws evolve and you may need to adjust your plan to accommodate these changes.
A good estate plan is likely to reassure you and your loved ones that the wealth you’ve gathered over the course of your lifetime will be properly distributed to support the people or organizations you feel deserve your final support.
We hope this article about estate planning was informative. Synergy Financial Management can help with developing and managing your estate plan, and with a variety of other financial planning services. Please contact us so we can discuss ways to increase and protect your personal wealth, and enhance your retirement. 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

The Blueprint for Your Investment Success

Being a successful investor is not an easy accomplishment, requiring knowledge, experience, and the wisdom to know when to enter a trade, how the trade will affect the rest of your portfolio, and when to exit. This is simplistic, of course, but one sign of a successful investor is having a plan of what to do and when. Plans that achieve the best results have an underlying structure. We call this the Investment Policy Statement.

Imagine yourself building a house without a set of blueprints. On a section of barren land you would dig a foundation for a house whose square footage you didn’t know, pour concrete and set studs for the wooden framework you haven’t designed, add walls with windows and doors … all according to a mental plan in your head. Can it be done? Yes, but can it be done well? Would results be more compatible if you had first created blueprints?
Similarly, investing your financial resources can be greatly expedited and more secure once you’ve developed your investment policy statement (IPS). The main purpose of your IPS is to help serve your financial analysis process with a specific set of rules that guide your decision-making. Here are the components of a good investment policy statement:
1. Identify the person responsible for creating the investment policy, executing the policy, monitoring the policy’s results, and making changes as necessary. This could be you or your financial advisor.
2. Describe your investment philosophy. You may choose to invest conservatively, moderately, aggressively, or some combination based on a weighting of asset allocation. Your investment philosophy guides you with identifying your current situation, determining your goals, and measuring the gap between. This is sometimes referred to as a “GAP” analysis.
3. State your investment objective as a monetary sum. Most investors want to acquire as much as they can, but this does not lead to a carefully organized and measured plan of growth. It’s much better to know at the outset the amount of money you need so you can structure the steady advance of your investments toward an achievable goal. Most investors want sufficient wealth for a comfortable retirement lifestyle. If you’re not certain what your retirement lifestyle will be, now is a good time to consult with an advisor to figure this out.
4. State your return objective. Your return objective is the amount of return you must earn annually on your investment to achieve your investment goal. Known as the required rate of return (RRR), this return rate is different for everyone. You might need to earn 5% to achieve your investment goal over a 20-year period, or you might need 9% over the 20 years. Consulting with your financial planner should provide you with a rate of return that is reasonable and protects you from undue risk.
5. State your risk objectives. Every investment carries risk, and knowing how much risk you can accept is an important part of building your portfolio. Your financial advisor can help you diversify your vulnerability among assets that have a likelihood of achieving your return objective.
6. Examine your constraints. The amount of time you have to invest before retiring is an important variable, as are the impact of taxes, inflation, and investment fees on your wealth accumulation. Again, your financial advisor can assist you with identifying constraints and planning for them.
Clearly, having an investment policy statement as the underlying structure and plan of action for selecting, managing, and exiting investments brings structure to the steady acquisition of wealth and serves as a neutral guide for making decisions about your investments, keeping you emotionally impartial during storms so your investment decisions for entry and exit are based on previously approved decision points and not the caprice of fear and greed.
We hope this article about creating an investment policy statement was informative. Synergy Financial Management can assist with developing and managing your IPS so you achieve your financial goals as quickly and safely as possible.
Please contact us so we can discuss ways to increase your personal wealth and enhance your retirement. 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

Eye On Retirement? Focus On Your Exit Plan!

If you’re thinking about someday selling your business, as most owners are, you need to plan ahead and start your process early. It often takes a long time to find the right buyer for your business.

You should always be thinking about exit planning. Some owners think they can sell their business within a few months, but the chance of that happening would be miraculous. Other business owners think a 3 – 5 year window is a reasonable range of time to plan the exit of their business, but this is also very shortsighted. What’s even more astonishing is that about 70% of business owners surveyed do not have an exit plan.
Instead of getting a sales check, business owners may be getting a reality check.
As early as possible, business owners should begin picturing exactly what they want when it comes time to exit their business. Do they plan to close their business, sell it to a third-party, sell it to an insider, or stay in business part-time or remain as an advisor? Owners should also bring together their team of professionals…their accountant, attorney, and business broker, quarterbacked by their financial planner, to make sure everyone is focused on the same outcome.
If you want to sell your business, you should be looking to maximize the value of your business years ahead…in fact, as soon as you purchase or start your new business. Time is your ally, giving you the opportunity to build and shape your business for sale.
Just as a homeowner tries to optimize the value of their home by adding an extra bedroom, or putting on a new roof, installing a few windows or building a deck near the flower garden, so also should you be developing the facets of your business by adding to your product line, increasing sales, building goodwill, etc., so more value is constantly being created.
Remember that the marketplace will assess the true value of your business according to legal standards of value that can be represented and reviewed in a court of law, so having your business assessed through the process of a business valuation is a serious event. You may think you know the value of your business through your own estimations of EBITDA or other arbitrary assumptions, but the market will rely on the official valuation of your business’s worth.
Rather than be severely surprised by a dismal valuation, it will pay you royally to know ahead of time how the market will weigh the worth of your business so you can prepare now, with years you can use, to build your business in ways the market will appreciate and reward.
It is also always a good time to begin identifying possible buyers because the sooner you begin, the more likely you are to find one! With Baby Boomers turning 65 at the rate of 250,000 per month, many businesses will go unsold and simply shutter because there is a lack of buyers and a lack of salable businesses. As a business owner, your future buyer could be very close by, and you might think about nurturing your relationship with an interested family member, an employee, a customer, a vendor, or even a nearby competitor who may wish to expand their market reach. Finding a buyer takes a lot longer than most owners realize, and the process of selling your business is more complicated than selling your home, especially when selling a larger business.
Remember to start your exit planning process immediately so you can use time to your advantage and have the opportunity to build your business in ways the market values. Having an exit plan is essential to good business practices so you can create the future you want through clear and careful planning that helps you transition out of your business with less anxiety and a lot more money.
We hope this article about exit planning was informative. Synergy Financial Management can help with developing, managing and achieving your exit plan goals and the sale of your business. Please contact us so we can discuss ways to increase your personal wealth and enhance your retirement. 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

 https://www.cnbc.com/2015/04/13/ew-small-biz-have-an-exit-plan.html 

4 Important Retirement Savings Tips for Women

Women face additional challenges when planning for retirement. By being aware of these concerns, women can take steps to overcome them.

1. Longer Retirement

Women usually have a longer retirement than men because they outlive their husbands by about five years, according to the National Center for Health. This means women must save more because they will have more years in retirement due to their increased lifespans.

As people age, they typically reduce the ratio of stocks to bonds in their investments; women should discuss with their financial advisor how much of their resources should stay in stock investments during retirement to diminish the effect of inflation.

2. A Woman’s Retirement Is More Expensive

Because women live longer, it is wise to expect higher expenses such as additional medical costs, or the increased possibility of having to stay in a nursing home, an assisted living community, or employing home-care which can be very expensive. While Medicare may cover some of these expenses, now is a good time to look into long-term care insurance or other forms of insurance protection.

3. Women Earn Less so They Must Save More

It is well-known that women do not earn as much as their male counterparts. According to the U.S. Census Bureau, a woman earns about 80 cents for every $1 a man earns. In addition, women sometimes miss some of their working years caring for children. This significant discrepancy in earnings translates to less savings. Women can, however, catch up by increasing their contributions to their 401(k) and using automatic deposits from their paychecks. Contributing additional funds to an IRA is another way to speed up savings.

4. Social Security Contributions Are Less

Since women earn less with smaller salaries and less years in the workplace, their SS contributions are also smaller. The Social Security Administration reported in 2015 that women average approximately 20% less in social security benefits than men. Care must be taken when planning Social Security payouts so these benefits can be maximized. If possible, this planning should be done in conjunction with their spouse so survivor benefits can be coordinated to the best advantage.

We hope this article about retirement tips for women was informative. Synergy Financial Management can help with your retirement planning…please contact us so we can discuss ways to increase your personal wealth and enhance your retirement. 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

Are Financial Advisors Worth the Money?

Low-fee investing can be a two-edged sword because while no one likes to pay fees that compromise their portfolio’s continued growth, there is also wisdom with having an experienced and trained financial advisor. The money you spend in fees could very well result in returns that replace your good investments with great investments and change your retirement lifestyle from sufficient to comfortable.
When it comes to deciding whether or not to hire a financial advisor, there are two main factors to consider.

1. First, you have to decide on the kind of financial advice you need.
Research shows that advisors can add value in two different ways: they can be very helpful with managing your investments, and they can provide expertise with financial planning. Of course, the value of these benefits depends largely on each investor’s individual situation, experience, and knowledge.  The quality of the advisor you select is critical because there are a wide range of abilities, qualifications, and costs.

 

 

Working with an investment advisor makes sense if any of these fit your circumstances:
·         You have a large amount of money in your investment portfolio
·         Your finances are complicated in the areas of retirement, taxes, and estate issues
·         You lack a sophisticated knowledge of investing
·         Your time is limited or you prefer to spend your time on other tasks and pleasures
2. Secondly, you must measure the value of the financial advice you’re receiving.
There is a wide variety of ability among financial advisors, and you will have to identify the difference between poor advice, mediocre advice, and good advice. Experience, training, and knowledge vary greatly, and the expertise of financial advisors may range from mutual fund salespeople with minimal qualifications to highly-trained experts with advanced designations such as certified financial planner (CFP) and chartered financial analyst (CFA).
Should you choose to be a do-it-yourself investor you will need to have, at the minimum, basic investment knowledge and a strong sense of confidence in being your own resource. You will have to be fairly well-read with asset allocation and know how to conduct periodic portfolio rebalancing, and you will need to have the time to regularly review and manage your investments. Having convictions for staying the course when markets are moving rapidly up and down is also a necessity because vacating your investment positions prematurely could have a significantly deleterious effect on your long-term returns.
As a do-it-yourself investor choosing a passive investment approach, you’ll need to be able to select individual ETFs to satisfy the requirements of your asset allocations. You will also need to know how to select the investment strategies that will work best for your future, such as “value” or “momentum” ETFs, and be aware of avoiding investments in fads or opportunities too risky for wealth preservation.
If your investing will take an active approach, you will need to be even more educated with selecting investments and knowing how your selections work together in synergy, protecting your downside risk while also giving you a trading edge with wealth appreciation. As you can imagine, this will take a great deal of time and there are very few individual investors capable of this level of ability and commitment. Relying on the media for investment insight may often be misleading, so a solo investor really needs to know what he or she is doing because the pain of making a serious mistake can be so huge.
When it comes to financial planning, a CFA can provide you with information you don’t even know you don’t know, and can be that critical advisor making the difference between having to work into your retirement years to create the wealth you need, or securing your financial future in a reasonable time so you can enjoy the life you’re working so hard to attain.
Ultimately you’ll have to decide whether a financial advisor is worth the cost or not. Think of it in terms of having a personal trainer helping you when you work-out at the gym. Almost everyone would benefit from having a fitness advisor guiding them to health. Similarly, you can have a financial advisor guiding you to wealth.
Please contact us so we can review the possibilities for securing and increasing 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
701 Fifth Avenue Suite 3520
Seattle, Washington   98104
ph: 206.386.5455

 

Aggressively Monitor Your Investments…

…Or Pay Someone Skilled To Do So

When markets are rising and amateur investors are doing very well, it’s easy to forget that protecting your assets during declining markets requires skill, discipline and constant attention. Investors need to expect and be prepared to react to fast-moving markets. No market rally is permanent and no decline lasts forever, meaning there are no investments you can buy and forget about, which many amateur investors tend to do. The pace of change in today’s markets is too great for investors to be complacent.

The list of 30 individual companies that compose the Dow Jones Industrials, which are some of the largest publicly traded companies in the U.S., has changed numerous times since the Dow’s inception in 1896. Companies were removed as they declined, were acquired, went private, or simply went bankrupt, and others took their place. This is an example of the constant state of change in the markets, even among giant companies.

Investing with long-term assets is not child’s play since most investors can ill-afford to lose part of their nest egg. Today’s markets are no place for dabblers that lack the time, patience, training, discipline, and diligence to do the research and invest properly. If you aren’t completely sure you have the time, expertise and experience to manage your investments clearly and with a defined purpose, it may be wise to find a Certified Financial Planner® who will create your financial plan with you, and then monitor and manage it for you.

Understand the Difference between Average Annual Returns and Compound Average Annual Returns

A common mistake investors make is assuming a certain rate of return and the impact it has on their portfolio growth. Because many investment rates of return are calculated on a simple average basis, investors are often overconfident about what their portfolio will grow to become. Most retirement planning programs used by financial planners work on this premise; i.e., a simple average return is assumed in the calculation of the growth of a portfolio.

Big mistake!

If you don’t know the actual compound rate of return of your investments, or if you are assuming a high rate of return, you may not be taking into account the effect volatility could have on the actual growth rate of your investments.

How can you determine the success of your investments if the basic data you’re using is incorrectly assumed to be legitimate? At Synergetic Finance, we take great care in calculating the potential growth of your portfolio, guiding you with our personalized service so your investments have the greatest likelihood of realistic growth with the most reasonable amount of risk for your unique circumstances.

Know Exactly What You Pay in Fees

Remember that every dollar spent on fees is a dollar which won’t be appreciating in your account. It is important to know the cost of these fees, their impact on your portfolio’s earnings, and what you are receiving in return.

Many investors work with a broker or financial advisor, which technically are registered securities representatives but not independent Certified Financial Planners®. This is normal and acceptable as long as you understand exactly what your chosen professional is doing for you, how they get compensated for their activity, and for whom they are actually working…which is not you.

A lot of investment fund brokers are compensated solely through the transactions they solicit and are not required to represent the clients’ best interest in these transactions.  The commissions are not always fully disclosed and certain transactions will carry continuous fees that are also not fully disclosed.

This could be quite costly to you, and though these costs should be fully disclosed, don’t be surprised if you own investments right now that have costs you are not aware exist or are higher than you think. Costs are good…so long as you are receiving an equivalent economic value that is agreeable. Too often, investors are paying high fees, and in some instances are unaware they are even paying them. These fees can be substantial and may erode your returns.

Investors should be careful to ask detailed questions of every cost and exactly how much compensation will be received by the broker prior to agreeing to any transactions. A better decision might be to select an independent fee-based Certified Financial Planner® (CFP®) whose first priority is your best interests. A fee-based CFP® is paid by you, not by agencies or investment companies that pay commissions to representatives.

At Synergetic Financial, your financial goals are our priority. We start by listening to your plans for the future, and then set your dreams into short, midterm, and long-term goals.

We then create a financial plan to achieve your goals, and monitor and manage your customized financial plan for steady but cautious growth, loss protection, limited taxes, controlled fees, and estate preservation … assuring your financial future.

Please contact us so we can review the possibilities for securing and increasing 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

701 Fifth Avenue Suite 3520

Seattle, Washington   98104

ph: 206.386.5455

fx: 206.386-5452

www.sfmadvisors.com

Is your business worth enough to secure your retirement?