Four Questions to Test Your Retirement Readiness During Turbulent Times

Four Questions to Test Your Retirement Readiness During Turbulent Times

There are so many unknowns when it comes to the impact this pandemic is going to have on our economy, the stock market, and your individual financial plan.

Here are four questions to find out your investment-in-retirement readiness:

Question One

Do you have enough money set aside so that you won’t have to sell any portion of your portfolio to pay for your lifestyle expenses? One retirement withdrawal strategy that our clients use is called the three-bucket strategy.

Question Two

Have you recently reviewed to see that your portfolio is properly diversified, given the current circumstances of what’s going on?

Question Three

Are you certain that your fear or worry around future market losses will not cause you to sell your investments if things were to decline again?

Question Four

Do you have a written plan in place that you continually update? Especially during times like what we’re going through now, do you have something that you can continually update every year, to make sure that you’re still on track? 

If you answered no to any of these questions, and you’re a client, then please give us a call so that we can talk and review your plan.

If you’re not a client, then read through or listen to the questions again, and then think what “would I have to do so that I can answer yes to all four of these questions?” or bring it up to your advisor.

If you don’t want to do either of those things, then I welcome you to our website, streamlineplanning.com. See if there’s a time slot available; we’ve got 15 minutes slots available throughout the week. I, or one of our advisors, would be glad to talk you through these questions.

Two Reasons Not To Worry if the Market Goes Down

Two Reasons Not To Worry if the Market Goes Down

When we look at our investment accounts, it can seem so unpredictable these last few months, and really this whole year. They go up and they go down, there’s big swings in the market, there’s an upcoming election, and it just seems like a lot of uncertainty out there. And you might be wondering if you’re doing the right thing.

A lot of people are thinking that as they’re seeing these ups and downs in their accounts.

But one thing we know is that markets and account values, they do go down. It’s inevitable and it’s normal, but what’s important is what you do during those times when things don’t feel as good.

So I’m going to go over two reasons why smart investors and retirees don’t worry when the markets go down. And then I’m going to share how we help clients achieve this sort of peace and comfort in their investments and their plans. If you can achieve these two things, then it’s going to help you feel better during scary times, and it’s going to help deliver a peace of mind with your finances.

And just so you know, it’s normal when you turn on the news to feel a sense of worry or anxiety. We know that this is the way that the news wants people to feel because what keeps our attention is not the good news. And the media does a good job of doing this. Also the financial media does a good job of doing that; they’re having us second-guess our finances and wonder, “are we really doing the right thing with our financial plans?” And they’re playing a game that smart investors don’t have to play. Successful retirees don’t have to play that game.

Here are two reasons why smart investors don’t worry when the markets go down.

NUMBER ONE

They’re not invested the same way as the numbers that they see on the news. Back in March, we were seeing headlines about how the Dow was down 2000 or 3000 points, and the S & P was down 35 percent. Yet we know that we’re not taking on the full risk of what the markets are doing and the plans that we’re creating. And why is that? It’s because we’re diversified. We’re not just in one sector or one country or one asset class, but we’re really in a balanced mix.

And that mix is all based on the investor and their income plan. Now the Callan chart is an example of, and the case for, diversification. This is showing key indices and what they’ve done each year back to 2000, and we can see things like large cap, small cap, real estate, emerging market equities, and things like that, high yield bonds, and even cash. And as you can see, it really depends on the year. There’s never a clear top performer, and there’s never a clear bottom performer, but really it depends. And what this table highlights is the uncertainty inherent in capital markets.

Having a balanced and right mix for you is key. There’s really not one investment account that fits everyone. Personal Finances is more personal than it is finances. So it really depends on you, the individual.

NUMBER TWO

Their investment plan is built on their income plan as well. So what this means is that before every investment plan that we build, we know what sort of income the client needs each year, and then we make sure that we have enough in their conservative bucket. Now that conservative bucket is considered the safe money that doesn’t get affected by these big market swings that we saw, and hopefully we’ll see in the future. This is so important because if we know that somebody needs a hundred thousand dollars a year and they have 500,000 in the safe bucket, then this gives them five years worth of withdrawals. And that allows our clients to feel better because they know that they can let those investments that are going up and down stay invested, and they don’t have to worry about selling them when it is a down period.

If you’d like to get a better idea of how your plan is set up, and if it’s right for you, then you can head over to streamlineplanning.com for a free planning session. I’d love to talk with you and go over your plan. And if you have a friend who brought up concerns or they’re thinking about the economy or the elections or their investments, then please share this video with them. And hopefully it could start helping them think proactively about what to do during these interesting times.

The Three-Bucket Strategy

The Three-Bucket Strategy

There are quite a few different retirement withdrawal strategies out there and in this video I’m going to be going over the Three-Bucket Strategy. When using a strategy like this one, I’ve seen clients able to handle and move through bear markets or big corrections, like the one that we’re currently in, a little bit easier than those people who do not have a plan or who did not prepare for moments like this. And that’s why it’s one of the favorite strategies that we use when it comes to income planning for people.

The basic idea is that you divide your investments into three different buckets, all with a different and specific purpose and goal tied to them.

So, the first bucket is money that you’re going to need in the near future. Usually, it’s two to five years worth of expenses in that now bucket. And as an example, if you’ve got expenses or if you’re going to be withdrawing about 50K from your investments each year, then you would possibly have 100 to 250K in this first bucket. The types of investments that go into the first bucket would be things that are considered safe assets, things like cash or money market or certain types of bonds. But you want to be careful of the kinds of bonds that you put in this first bucket if you want them to truly be safe. Now we’re not going to expect big returns in this first bucket. It’s really more of a conservative play, where we’re looking to more preserve and conserve and not grow so much in this first bucket. Think of it more like an insurance for a market crash. It’s money that the goal is not going to be that it fluctuates much and what it has done in the past is bring peace of mind to people during market corrections, knowing that they have this bucket set aside money that they’re using right now, and it’s really been sort of like an insurance policy for their retirement income plan.

The second bucket is money that you’re not going to need within the first two to five years, but you will in the next five to 10 years. It’s slightly riskier than bucket number one. It’s going to have more fluctuations, ups and downs, but it’s not going to have wild swings like you’re seeing in the stock market. Some people even hold some specific investments that produce a higher level of income and they use that income to funnel to bucket number one so that the first bucket continually gets replenished.

And then finally the third bucket is a bucket that has higher risk investments, things that are going to go up and down a lot more. But the goal here would be higher-risk, hopefully, higher-return. These are things like stock funds or mutual funds. Some real estate is sometimes held in the third bucket or possibly even alternative investments. We can expect with things like that, that there’s going to be a lot more fluctuations both up and down for that third bucket. But because it’s 10-year-plus money, we can allow that money or allow those investments to do what they do because we’ve got the other two buckets in place. So that’s really the basics of the Three-Buckets Strategy.


Trump v Biden 2020 Election: How Will It Impact My Retirement

Trump v Biden 2020 Election: How Will It Impact My Retirement

How will the 2020 election impact my retirement if Trump or Biden wins?

We’re seeing more and more news every day around the 2020 presidential election, what this means for the economy, and what it means for our investments. And I’m hearing more questions from clients around this topic and how it might affect their retirement and investments. I want to give you some thoughts on preparing yourself for different potential outcomes. The big question is: what’s going to happen to the markets, whether it’s Biden or whether it’s Trump. It’s common to believe that a Democratic candidate, if he’s favored to win, usually scares stocks. People think that it scares stocks more than if it’s a Republican candidate favored to win, and there’s actually a pattern of that happening in past years.

Take a look at this information from First Trust Portfolios which shows the S&P 500 Index since 1928 and what the results were if a Republican was elected (15.6% average return) and if a Democrat was elected (7.6% average return). You can see that with Republican candidates, the market reacted better in those years. But what’s interesting is that in the following year, the inaugural year, the reverse actually happens.

Next, take a look at this chart from Business Insider. The blue line shows the average from the first year with a Democratic president and the red line is with a Republican president. It’s almost like it flip-flops from the first year to the inaugural year and when you look at the averages, it all comes out to be nearly the same. So it almost doesn’t matter when you look over two years; it’s just interesting data that shows some patterns. But the big thing to remember is: don’t make decisions based on things that have happened in the past or what you think might happen, because it usually doesn’t work out.

And speaking of patterns, here’s information from Dimensional Funds showing the past nine presidents and what the results were for the S&P 500 Index. Now, do you see any patterns in the chart referenced? Well, if you’re like me, then you don’t see any because there are none. There were no patterns for who is president and what the market does, because there’s so much more that goes into the returns of the market than just who the president is. It might have an effect for some period of time, but when you look at the total, if you’re an investor and you’re investing for more than one or two years, then there’s no pattern to who’s president and what the markets do. That’s just the facts; that’s what the data has shown.

Now, some people bring up the concern, “What if it’s a one-party Congress and president, then couldn’t that be a risk because so much more can get passed during that presidency?” Here’s what it looks like when, for example, there’s a Democrat as president and also a Democratic Congress. This is also from First Trust Portfolios, showing from 1950 to 2019, but you can see there’s no pattern here either. So it doesn’t matter if it’s full Democratic Congress or if it’s full Republican, or if it’s split, whether it’s a Democrat president or a Republican. There’s no clear pattern there.

Now it’s common to have the view that if my candidate wins, then things are going to be great; if my candidate loses, then things are going to be bad. But looking at the numbers, it might not be as bad as you think and I do have a few pieces of advice that are going to be helpful:

Number One is, very simply, don’t try to predict anything. Just because you have a feeling or you think that you know how it’s going to turn out, or, if you look at the patterns and think, “Okay, I’ll make decisions based on the past,” don’t try to predict it because it usually doesn’t work. Look at what happened in 2016: not many people predicted that Trump was going to win and people who did think that he would win, thought the markets were going to suffer because of the unknown. So, don’t predict anything.

Number Two is to remember that the headlines are designed to grab your attention. We’re going to see a lot more between now and election day with these headlines and they’re just looking for eyeballs so they can sell more ads. A client sent me a video from a major news source and it was talking about selling everything because so-and-so is going to get elected or reelected – I don’t even remember – but either way, it scared her. We had to talk through it and look at her plan to see that we’re prepared for any scenario.

Number Three is to focus on what you can control and create that retirement withdrawal plan for various scenarios. And if you need help doing that, go to our website, streamlineplanning.com, and sign up for a free planning session and I can go over that with you.

Number Four is to look at the big picture. As investors, we want to capture that long-term growth of the capital markets, regardless of who is president. So last thing to look at is all the different presidents and what the market or really the S&P 500 Index has done each term. And you can see that people who are long-term investors, they do get rewarded over time.

If you’ve talked to someone recently who has brought up worries or concerns about the election or market impact, share this post with them and maybe it will help them. And I’ll also be putting out more posts like this; so be sure to subscribe so that you don’t miss the next one.

Retirement Planning During Uncertain Times: Three Things To Do Right Now

There’s so much uncertainty happening in our world right now; in our country, in the stock market, and in the economy. But there are still things that you can be doing right now to set yourself up for success in retirement. In this post, I’m going to go over three things specifically to be thinking about and to do so that you feel a little bit better about your plan and then feel a little bit more certain about the next steps that you’re taking when it comes to retirement planning.

One of the key parts of retirement planning is income, right? So in volatile times, or in times of uncertainty, sometimes it could feel a little bit shaky, where you might feel, do I have enough and do I have enough to sustain over my lifetime? Now for periods like this, it’s always helpful to review, and if you don’t have one yet, to create, a specific retirement withdrawal plan. Now, one of the things that we’ll talk about when planning with clients is a very simple, but a very effective withdrawal strategy called the Three-Bucket Strategy. This is going to be a high-level view, but it will at least give you an idea. The clients who had this during the months of March and April in this  past year of 2020, it helped them to rest a little bit easier at night when a lot was happening in the markets and everything. But these three buckets, just to sum it up, we’ve got bucket number one, being conservative-type investments, bucket number two, more growth-income-type investments, and then the third bucket is the long-term-growth bucket.

Now in bucket number one, depending on your expenses and things like that, having two- to five-years worth in this conservative bucket and setting up systematic distributions, helps people knowing that they’ve got a specific amount of years of conservative assets. It helps you when things aren’t looking good, like in March of 2020, this growth-and-income bucket may even provide income and continually pump up the cash in the conservative bucket throughout the year. And then with this long-term growth-bucket, you know there’s going to be ups and downs that happen, and there will be in the future. But knowing that you might not have to touch this money for 10-plus years, it makes it a little bit easier to stay invested and to not worry about what’s going to happen tomorrow and know your return, your withdrawal plan, won’t be affected. So, the first thing to think about is just making sure you’ve got that retirement withdrawal strategy set. If we do step one correctly, then we’ll feel better about the money that’s coming into the bank account, having that, that retirement plan set up.

Now, step two is related to knowing where are we going to spend that money on that’s coming in and what are we going to spend it on? And really, the best thing to do that we’ve seen in uncertain times is to divide your expenses into two categories. The first one is the must-have expenses and then the second one is the nice-to-have expenses. And if you can do this in uncertain times, for that second category of nice-to-have, it’s helpful to know what you can cut from the budget or from the regular monthly expenses to help get you through a period of difficulty or get you through a period of uncertainty. And maybe you won’t have to cut the expenses, but just knowing which ones are must-haves and nice-to-haves is very helpful. As an example, some of those nice-to-have expenses might be things like the subscription services that you have, or maybe even the type of cable, whether you’re paying for basic cable or the all-access-to-everything cable. And then also things like eating out or ordering take-out food, these are examples of some discretionary expenses.

Since so much does change during uncertain times, the third step to take is have a total review of your retirement plan. I’ll show you exactly what that looks like because all these things might change, like your income or your job or your expenses, or just the projections of when you think you might start to have to use this money that you’ve saved. It’s important to do a total plan change, look at the account values and what they are now, and then adjust your retirement plan to make sure that it’s still working and to make sure that you’re on track.

So here’s an example of what it might look like for some of our favorite clients, Clark Kent and Lois Lane. Now, let’s pretend that early retirement was forced upon us. We can see that the plan is working. And again, this is a made-up client and made-up dollar values, but if you got forced into early retirement, what does that look like for your plan? How does that change your projections now, would that mean maybe we would want to sell this business a little bit earlier? How does that affect the total plan so that we can just keep things on track? So it’s things like that. This is our planning software that we use, but talk with a planner or have a review of your plan and just make sure that you’re still on track. That’s really the third, most important step to take.

Now, just to recap, the three things are:

  1. review your retirement withdrawal strategy or create one; 
  2. write down those must-have expenses and the nice-to-have expenses; 
  3. do a complete review of your retirement plan and make sure that you’re still on track and get those adjusted numbers in there.

I hope that was helpful for you. If it was, and if you like these retirement-specific posts, consider subscribing so that you don’t miss the next one. And if you looked at these three different things that I mentioned, and you don’t have any of them, or you want help implementing some of these things, feel free to reach out to me and have a conversation. On my calendar, I make some spaces available each week to talk with people who are not clients. So if that’s you, consider reaching out and I’d love to chat with you.

The One-Page Retirement Plan

The One-Page Retirement Plan

The One-Page Retirement Plan

When most people think of a retirement plan, they think of an extensive and detailed spreadsheet that includes every single dime and circumstance that will be involved in life after retirement. People with a lot of assets get overwhelmed thinking about the many loose ends to tie up. People without a lot of assets get overwhelmed by the fear of running out of money. 

No matter how you picture retirement, there is no denying that the planning can be exhausting. 

But it doesn’t have to be. 

The truth is, with the right advisor, your retirement plan, every single important part of it, can fit onto one single page.

 

What is the One-Page Retirement Plan?

The one-page retirement plan is a unique and thorough plan that outlines all of the essential parts to a retirement plan in a tangible way that can be looked over time and time again. While a fifty-page plan in a binder may seem like a more thorough approach to this, the truth is, many fail to ever go back and revisit or revise their fifty-page plan because of the extensive nature of it. 

Our one-page retirement plan not only captures the essential essence of these longer plans, but it organizes it in a way that allows clients to return to the plan, understand the plan, and revise the plan as their lifestyle changes. It is a single recipe to follow ingredient by ingredient, step-by-step,  in order to achieve your desired retirement goals. We work to not only find the right direction for your unique situation, but to outline this direction in a clear and concise formula- so clear and concise that it can fit on, you got it, one page. 

 

The parts of a One-Page Retirement Plan

So what might this look like for you? We separate the one page plan into multiple different sections to ensure that we create the right plan and direction for you and your unique situation.

 

Values

The first part of your plan focuses on the values. We take time to understand what matters to you most, to ensure that you have the things of value to you when you enter into retirement. If you have a strong grasp on your values and priorities, the financial decisions become a lot clearer to make. Some people value security- they want a hefty savings for the “just-in-case” moments. Some want just enough to live on. Some value experiences, they want to use their retirement to travel, while others value their own home, and want to ensure that they can afford retirement in their own home, or in a home that feels most comfortable to them. No matter your unique values, taking the time to identify them when establishing a retirement plan is essential. 

 

Goals

What do you hope to accomplish in retirement? Do you want to leave your career and never work another day in your life? Do you want to continue investing or working in a hobby that you particularly enjoy? Do you want to buy an RV and travel across the country? These are the plans and details discussed in the tangible goals section. You will take time to identify your goals for retirement, and how to get to a financial place where these are achievable. 

 

The Most Important Next Steps

Once you identify your goals and values, it is time to identify the tangible next steps to get there. This may look different for everyone depending on age, investments, 401k’s, family situations, and other factors. In this part, we will typically outline the next three or four things you need to do to ensure that you can reach those goals and values set forth. In most cases, you should focus on the things that you can control for these step. That might include the amount of income that you put away for a 401k or outline a retirement withdrawal strategy. 

After outlining these goals, you will need to implement them. This might mean that you get a little bit more conservative with your current budget to ensure that the target amount you need put away is placed where you need it every month.

Finally, you will need to focus on the ongoing planning, to make sure all of those items are set in place to continue meeting your goals through the years. This might include finalizing an estate plan or aiming to pay off your mortgage or downsize by a certain date. These goals will continue to keep you on track toward what you value most about your own retirement.

If you are looking to create your retirement plan, or you are looking to make your current plan much more tangible by forming it into a one-page plan, contact Streamline Financial today. Our team of financial experts will work with you to help you form the one-page retirement plan that works best for your unique goals, values, and financials