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More than Money Newsletter - January 2017

Dear Friends,

 “Real Life Questions – Real World Answers”

“I’m 77 and my health is failing me.  I’m the husband I’ve heard you talk about so many times on your radio show.  I’ve been handling our family finances since my wife and I wed just over 55 years ago.  We’ve been blessed with three wonderful children and eight grandchildren.  I had a great career.  I retired when I was 62, we’ve traveled – we’ve had a grand life. Now I see I’ve done my wife a grave disservice.  She has never been involved in our finances.  We both know my time is short and she worries about me constantly.  The only thing I’m really worried about is how she will handle things when I’m gone.

How do I fix this mess I’ve made?”

First, God bless you and your family.  You are facing real challenges and yet your concern is for your wife.  That tells me what a fine man you really are. 

Second, please understand that you have not done your wife a disservice – certainly nothing that can’t be easily remedied.  I believe, if I had the opportunity to speak with your wife, she would tell me how blessed she has been.  She’s had the peace of mind knowing you were tending to the financial side of your lives.  She loved and trusted you and that gave her great confidence and allowed her to enjoy all the wonderful things her marriage to you provided.

What you seek is what many who have entered our More than Money offices before have sought – the comfort of knowing they have entrusted their loved ones to the care and service of an advisor who will be there when they cannot.  You should accompany your wife as you complete the process of selecting a financial advisor for her that will be at her service when your time here is done.  It will be a great gift to your wife is you are able to help her select the person who will attend to her financial needs as you have done for more than 55 years.

You have done an outstanding job as a husband, father, and financial caretaker for your family.  You have my admiration.

“I have three IRAs.  2016 was my first year to take my RMDs.  I took my entire RMD from my one IRA that’s been doing the worst.  I never expected that a second IRA would in December send me an RMD too.  I don’t want or need this extra money and I certainly don’t want to pay income tax on it if I don’t have to.  Is there any way to fix this?"

I am hopeful this will be an easy problem to fix.  The IRS code permits a ‘do over’ when it comes to IRA withdrawals.  If you return the funds you received – but didn’t want – to your IRA (any of the three) within 60 days (the sooner the better to be safe) you will not be taxed.

In order to avoid similar problems in the future, you might consider bringing your three IRAs into one IRA.  That may simplify your life a bit and insure that your RMD is correct.

“My wife and I are both 28 years old and both enjoy good jobs.  In total we earn just over $140,000 each year.  We’ve been saving for our first home and have nearly $40,000 toward the down payment we need.  We want a nice home, but we don’t want to be overwhelmed with the expense and not be able to enjoy ourselves.  Of course, some day we also want to start a family.

What guidance can your 780 years of experience offer us?”

Thanks for noticing all my experience – was it the grey hair that gave it away.  Or was it the fact that I repeat that so often on our More than Money Radio Show?

My first reaction to your question was an enthusiastic – good for you!  You and your wife are already doing and planning lots of very wise things.  You both have good jobs – a real blessing.  You’re been seriously saving – an unusual action for a young copy these days.  This tells me you are already seeing the big picture (or you’re already getting some sound financial counsel – maybe from your parents?).

Your goal of a nice home that won’t also be a burden is a throwback to my parents’ generation (the greatest generation as they’ve been called).  Intelligent people have always taken two important steps in buying their first (and often second and third) homes.  First, they budgeted to buy their home based on only one income.  Though lenders will be happy to offer you lots more money based on your joint incomes – don’t do it.  Use only the income of whoever will continue to work after you’ve started your family.  Notice I didn’t say you – you might be the stay at home dad as mom goes off to work.  Pretty up to date thinking on my part – don’t you think?  Borrow only as much as you can support on one salary.

Second, they always lived on one salary.  Not just with their home purchase, but with everything.  They lived on one salary and banked the second.  This allowed them to get their budgets and financial choices in line long before they signed for their home.  It also allowed them to save far more than they thought they could.  Of course, it will require that you make choices and spend wisely.  It will also allow you to grow more and more confident in your financial future.  If it turns out that you are fortunate and continue to enjoy two incomes for your careers – fantastic!  That simply means your wise spending choices and disciplines will allow you to save even more for your bright financial futures.

Good luck and come back to us often with your questions as your lives unfold.

“My husband and I are within a couple years of retirement.  We’ve been seriously planning for retirement for the last 10 or 12 years.  I think we’re both confident we’ve done what we should and we’ve saved more than we need.  But I have to admit – in the back of my mind – I’m still afraid of another 2008.

How much is enough is 2008 happens again?

Well . . . it depends.

The fundamental question – upon which all other questions will then be answered – is this.  What income do you need in retirement so the two of you can pay all your bills, be healthy, and be happy?  Once you have that answer you can confidently address both your fears and your opportunities.

If, for example, you told me your retirement income need was $3,000 per month and you’ve saved $500,000 how worried would I be?  Likely – not very.  If you and your husband both qualify for modest social security benefits you will receive $3,000 per month or more just from your social security.  Your worries about another 2008 can disappear.  You aren’t at all dependent on the income from your savings to meet your needs.

If you had the same $500,000 saved but you told me your income need was $6,000 per month I would have some significant concern.  Allowing for the same $3,000 of social security, your investments would need to generate $36,000 annually to meet your needs.  This would require your investment portfolio to produce a consistent 7.2% return each year.  This – in my experience – simply isn’t something you can expect within today’s economic environment.  A repeat of 2008 just after your retirement would sink your plans and your financial futures.

The true answer to your question is you must sit with an experienced financial advisor who spends the bulk of his/her time working with clients who are retired or soon to retire.  Such an advisor can – in less than an hour – determine exactly where the risks/weaknesses are in your retirement plans.  Such an advisor can also – in the same less than an hour – outline the most appropriate strategic options for you to consider.  Thereafter it’s a matter of getting educated on your options and selecting the one(s) that give you the greatest shot at a long and satisfying retirement.

“I use a financial advisor who charged me $11,000 last year, met with me once, and my investments made 1% return.  How much should I have paid for this?”

Your question about the appropriate compensation for a financial advisor is a very interesting one.

Some financial advisors are a great value at $11,000 per year.  Some financial advisors are over-paid at $110.

The only judge that matters is – you.  Do you feel you’re getting a good value for your dollar – or not?   If you do – then $11,000 per year is fine. If you do not – then clearly $11,000 is way too much.

Does your advisor only manage your investments or do you receive advice and guidance on income tax issues, estate planning, life and long term care insurance planning, retirement planning, and all your other financial questions?

For many people who aren’t sure they’re getting a good value for their dollar a second opinion meeting is useful.  In a second opinion meeting you review your current advisory relationship with a second advisor and receive feedback and recommendations.  This gives you sound information with which to make your decision about your current advisor.

A second opinion meeting is conducted at no cost with no obligation and no expectation except that you will learn a great deal.  If a second opinion meeting seems appropriate to you, please let me know and we’ll arrange one for you.

More than Money Radio and Television

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Words are Powerful Tools for American Freedom

You think you know all about George Washington.  I’m betting you don’t.  I’m also willing to bet you’ll find the book I just read about Washington to be a fascinatingly new way to look at our first President.  I think you will also find Edward G. Lengel’s book, First Entrepreneur:  How George Washington Built His – and the Nation’s – Prosperity immensely instructive for the challenges facing America’s government and its people in the 21st century.

I would select a quote from Lengel’s book, but that wouldn’t do Lengel, his book, or Washington justice.  The premise of the book is exciting.  The lessons are exciting.  The possibilities for America’s future are exciting.  Grab a copy and see for yourself.   And tell Ed Lengel that Gene sent you.

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Thank you,



P.S.  Let me know what you think of First Entreprenuer!

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