I work with a number of clients that are at or near retirement, so this question comes up a lot. Everyone wants to know when they should get out of stock funds and move completely to bonds for income. The simple answer is never. Here are a few points to consider:
First, just because you are retired does not mean that you will no longer being living a full and active life. Many of my clients will live, statistically, 20 years in retirement. To me, that is a long time. Stocks have proven to outperform bonds over the long term and you need growth of a portfolio to keep ahead of inflation.
Secondly, there are a number of stock funds that pay nice dividends. A combination of dividend paying stock funds + bond mutual funds may provide the income you need in retirement while your portfolio continues to grow.
Lastly, I had a conversation last week with a 92 yr. old client who does not wish to change from his moderately aggressive risk tolerance. He likes the growth he has realized, and still has a lot of things he would like to do.

There is no set time at which your portfolio mix has to change. Your lifestyle and health will determine your mix.

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A popular strategy for withdrawing from your retirement nest egg, the 4% rule, was developed in 1994 by William Bengen. This rule went under the assumption that if retirees only withdrew 4% from their retirement accounts, adjusted for inflation, their nest egg would last at least 30 years. This rule also assumes that the investment mix is one of 60% equities and 40% bonds, which at the time bonds were paying 5%, well below what they are paying today.
Another assumption is that the 4% rules is based on life expectancy vs. income needs. Spending in retirement is anything but static and simply adjusting for inflation does not allow for emergencies or major health issues.
Our tax system is another issue that may blow up the 4% rule. Currently, we all expect to pay less in taxes under the new tax laws. These laws will expire, and we have seen that tax laws can be ever changing. Add to that the various types of retirement accounts to draw from and the 4% rule simply does not apply anymore.
When planning for retirement, try to factor in some fluid spending in retirement, and make sure to review your accounts and spending annually.

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I have been asked this question a number of times in the past few weeks, most recently by two men that are past age 70 but still working at their corporate jobs.

Q: “If I am older than 70.5 years but am still contributing to my 401(k), do I need to take withdrawals?”
A: Withdrawals need to be taken from any standard IRA, or Rollover IRA that you may have, but if you are contributing to your company 401(k), you do not need to take required withdrawals from that account.

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2018 will bring a change that should be positive for most taxpayers – a lower tax bill. We are mid-way through the year, so now is the time to look at your potential tax-saving moves.
First and foremost, if you are still working and not contributing the maximum to your retirement account, do it now. You either send the money to Uncle Sam or yourself – I think your pocket is the better choice.
Check your deductions as the standard deduction has been increased for 2018. The standard deduction for single tax filers is $12,000 and for joint filers, it is $24,000. If you are just at the line between itemizing and using the standard deduction, try “bunching” your deductions. One way to do this is to pay your property tax for 2018 and 2019 this year to be able to itemize. Please keep in mind, you may have to use the standard deduction next year by bunching deductions this year.
If you have a lot of medical expenses, 2018 brings a lower threshold to qualify. For 2018, the medical expense threshold has dropped to 7.5% of adjusted gross income vs. 10%. Keep in mind that the threshold returns to 10% in 2019, so you may want to bunch in this area also.
By looking at your potential 2018 tax bill now, you will not over pay your estimated tax, thus giving Uncle Sam an interest free loan all year.

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I love my career. I get to help my clients plan for their children’s or grandchildren’s education, family trip, retirement, family legacies, and many more financial concerns my clients bring to the table. While going through the planning process, I ask a lot of questions, some of which are tough to answer, but the answers are vital to a plan that has meaning. How long has it been since you answered some of these questions:
Do you know how much you save or spend each year?
What is my current net worth?
Am I borrowing money the most efficiently?
How much am I investing in my own human capital or that of my children and grandchildren so they can earn the most during their working years?
Do I have the proper choices in my retirement or 401(k) plan and is it enough to allow me to retire when I intend to?
Do I have the proper amount in an emergency fund?
If something were to happen to me, will my family be able to put everything together?
Do I have the proper amount of insurance so my family will be taken care of if I die, become disabled or am sued?
Does long term care make sense for me?
What is my risk tolerance and how much risk am I taking right now?
Have I named the proper beneficiaries on my insurance policies and retirement accounts?
What is my greatest extravagance?

I’m sure there are a number of important questions that I didn’t include on this list. I’d love to hear yours so that I can write about them in the future.

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Planning for retirement takes a lot of factors into account and there are a lot of myths to plan for that many neglect. These myths can ruin a retirement – let’s look at a few so your retirement will not be ruined.
Your income needs will drop.
Many people think because they will not be commuting, wearing dress clothes, or having business lunches, their spending will decrease. This is a big myth. Hobbies, travel, and especially heath care costs will add more in the expense column than any suit or commute will ever add. You should plan on your retirement income starting at as much as 80% of your pre-retirement expenses just to be safe.
You will work past “standard” retirement age.
For many of us today, a family health crisis, especially from our parents, as well as how much we have saved, means we are working longer than first expected. As many as half of those who wish to work past the standard retirement age actually do. Layoffs, as well as the reasons previously mentioned, are the biggest causes of retiring earlier than planned for.
You will only need to draw 4% from you accounts to maintain your retirement.
Inflation does not stop for the retiree. Many people are living much longer than in past generations and health care costs are rising at a pace faster than inflation.
If you plan for the worst, you will be prepared for the best in retirement.

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I have always looked at Social Security as one leg of the retirement stool, with personal savings, and a pension if you have one, as the other legs. Many retirees no longer have a pension and have placed their Social Security benefit in higher regard. Social Security was always meant to be a supplement to retirement, not the base of retirement income that is has become, and now we hear that the trust fund is in trouble. We have been saying the trust fund would be depleted sometime around 2036, and the Medicare fund around 2028. The Social Security Trustees are now projecting that the Social Security trust fund will be depleted in 2034, with the Medicare trust fund hitting the wall in 2026. What does this do to your benefit?
We have already seen some changes as to how we claim our Social Security benefit and the full retirement age for many taxpayers has been pushed back. There is talk of “means testing” Social Security benefits in the future. Means testing could take the form of more income taxes, a reduction in benefits, a surtax or some other method. Anyone who has done a good job saving for their retirement on their own should consider the chance that Social Security benefits will be means tested in the future. What we know right now is that current tax withholding will provide Social Security benefits for many years in the future. We have not heard of any changes either currently or projected that would reduce anyone’s benefit. While nothing is written in stone, I imagine any changes to the Social Security system will be discussed at great length and not made without much discussion.

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June is known as the marriage month. Having just gone through my daughter’s wedding, I know how much planning goes into the big event. We spent close to a year planning everything, as is typical for most couples. The question is, how much time does the new couple spend planning their financial future? Because my daughter is my daughter, merging their income and outflows started when they moved in together a good year before they were engaged but this is not the norm. Here are a few topics to discuss as you are merging your new lives:

• Be clear on what each of you bring to the table.
• What debts do you have?
• Do you pay more than the minimums on those debts?
• How much have you saved and how much do your save from each paycheck?
• Be open and honest without judgement when learning how each of you have managed saving and spending prior to your merge.
• What are your financial goals?
• Discuss when you might like to buy a house and how much to save for a down payment as well as how you will pay your monthly household bills.
• Discuss how much you need for an emergency fund – this is an amount of money that will stay in a liquid account for emergencies.

Individual goals are ok too. It is important to be on the same page for the big items, but individual goals are important also. Each person should write a list of “yours,” “mine,” and “our” goals, then compare the lists so you can focus on the differences.

As I approach my 32nd anniversary, I can say that we came together practicing some of these tips, but were not aware of all of them. We practice all of these tips now and have successfully merged love and marriage.

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When I lived up North, I had auto insurance through AAA as most everyone did. When I moved to Florida, I had to find another company to insure my car. Everyone I knew had State Farm because they bundled their renters or homeowners insurance together for a “lower” cost. I took everyone’s advice and stayed with State Farm through our home purchase all the way through the hurricanes of 2004.
After the 2004 hurricane season, State Farm decided not carry home owners insurance, so I decided to shop everything. What I found out and what should have been obvious is that it pays to compare. Not only does it pay to compare, it may not be cost effective to have all of your insurances with the same company.
There are a lot more choices today for auto and homeowners insurance. I suggest that when your policy comes up for renewal, you shop and compare.

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