The Obvious Secrets of Money

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At the age of twenty-nine I had my finance degree from Texas A&M and had earned the right to use the marks of a Certified Financial Planner. Other than being tutored by a very entrepreneurial father on the art of making a deal, I knew very little about making, saving or managing money. That’s right, I didn’t have enough experience to really know the ‘secrets’.

Success Leaves Clues

I didn’t have any money of my own and my reference points were of just a few years’ experience. Twenty-five years later, I still believe there’s a lot more to learn but most everything I have learned has come from the invitation from hundreds of good folks who’ve asked me into their lives for a closer look. You see, success really does leave clues. It didn’t take me very long to start really paying attention to the situations where people were doing very well and contrast them to the people who were really hurting; whether they knew they were hurting or not. When you see the same clue appear over and over it’s not hard to connect the dots. You see, the secrets of money are really not secrets at all.

When you know where to look for direction they are actually quite obvious. Whether you’re worth one dollar or a hundred million dollars, there’s always someone who has more and has learned more about how to manage it. From early on I purposed to learn these obvious secrets and then pass them on to others who needed the information.

And so, armed with that information and almost three decades of showing others what someone before them has done to win at the ‘save – get out of debt – retirement’ game, I have decided to begin a series of articles that relays the essence of these secrets to readers of this article. I hope you find one idea every month that motivates you to share it with someone you care about even if you’ve already mastered that particular point.

Every month we’re going to cover the why, where- fore and how-to of a particular subject dealing with one of categories that we all deal with in planning and managing our money. I’m going to share some of the ‘obvious secrets’ of money.

What’s Your Why?

Speaking of ‘why’, that’s really the starting point for about everything in life – including this series and your own money. You see, your core beliefs, your perspective from which you see and interpret the world, and the sum total of your convictions about yourself and your world are all at the center of your financial life; whether you recognize it or not. Your ‘worldview’ should and does drive all of your decisions about money.

Big Questions

Some of the really important questions about money are ‘why do you have it’, ‘who is it for’ and ‘what are you supposed to do with it’? These may seem like really simplistic questions, but most people really haven’t thought about these questions – I mean really thought about them.

For example, we’re here in the heart of the Bible Belt and many of my clients share my same Chris- tian views. Many who read this article also share these same beliefs. So as Christians our ‘worldview’ is one that is shaped by scripture. Yet very few have really put thought into how that particular worldview shapes the daily decisions they make or should make regarding money.

George Barna Research recently interviewed 1008 people by phone, asked them twenty questions about situations to which they responded how they’d deal with the situation. Of the people who were interviewed that professed to be Christians only 14% responded in a way that validated they ‘lived’ (made decisions) that was consistent with that worldview. In fact, 51% answered in a way that was more rules driven (read ‘Pharisaical’) than their worldview would suggest they respond.

Whether you share this same worldview and practice it daily or just show up to church to get your ticket punched at Christmas and Easter, you have a worldview. Even if your worldview dismisses the thought of a Creator, you have a worldview… and it influences every decision you make about money. And it’s a powerful influence that I’m suggesting you get your head around regarding your money. It leads to your ‘why’.

If you’re married and have different worldviews, it’s going to create conflict until you figure out how to resolve it. If you have a particular worldview and live inconsistent with that view, it will lead to very inefficient decision making. I’m certain that there are others much more qualified to take it deeper than this, but I’ve watched this play out time and again.

Take some time this week to write down your “why’s”. Share them with your spouse, partner, or significant other and see if you’re heading in the same direction.

Call our offices at 936-449-5952 if I can be of help on your journey. 

P.S. If you liked this post, you might also like Social Security Regrets: Joe and Evelyn’s StoryThe 4 Rules of Borrowing, and 5 Steps to Change Your Life in 30 Days



Social Security Regrets: Joe and Evelyn’s Story

A few months ago Joe and Evelyn, both in their early 70’s, came to see me after reading my articles for months. They were feeling the pressure of having to pay taxes on forced required minimum distributions from their IRA’s on one hand, and an income stream that just wasn’t keeping up on the other hand. On the income side of the conversation was their regret that they didn’t wait until a later age to begin Social Security retirement benefits.

Joe is a smart guy, he had even ‘ran the numbers’ and come to the same conclusion as 85% of all other Americans who begin Social Security retirement benefits; he believed he should begin receiving benefits at age 62. He did have a stock broker at the time, but no one to really consult with on what his best course of action would be. His tax preparer helped him understand the income tax ramifications and since he wasn’t going to work any longer it seemed like the right thing to do. After all, his spreadsheet showed him that he’d have to live to his mid-eighties before he broke even with the higher payments taken if he were to wait to age sixty-six.

But now in their seventies, the spreadsheet didn’t prepare them for real life and inflated prices. The extra 32% higher retirement income from their combined checks, had they waited until age sixty-six, would have made a lot of difference in their lives today.

Fortunately Joe and Evelyn will be just fine. It’s not going to be the end of the world financially but they have lived to regret the decision. Regret comes from things we do that we wish we hadn’t, and it comes from things we didn’t do that we wish we had. They now wish that they would have rearranged their thinking to allow for higher benefits for life. A new survey indicates that many retirees have the same regret.

Check Amount

As a Certified Financial Planning practitioner I struggle to communicate in effective ways, the truth that every person has an optimal age at which to begin Social Security retirement benefits. And that simple spreadsheets are just not enough to answer the question. An in-depth look at assets, lifestyle, taxes and other incomes is just the starting point to gaining clarity on one of your most important financial decisions.

A new Harris Interactive survey of more than 900 current retirees reveals that 38% of them who claimed benefits early now regret their decision. Waiting to claim benefits until age 66 creates 32% more income – for life! If there’s a way to structure the utilization of your savings to wait until age 70 you’ll increase it another 32%. That’s an 8% guaranteed annual increase for the rest of your life. When you begin your benefits at age 62 they are permanently reduced by 25%; as are spousal benefits and widow benefits.

This regretful group of retirees now say that they wish they would have waited until a later date to collect their benefits. Forbes reported a few years ago that there are 2,728 different rules around claiming Social Security. A married couple has something like 576 different ways that they actually could claim benefits. No wonder it’s easy to make the wrong decision and be left with regret.

In our work with clients, we have seen that the best decision can increase lifetime benefits by more than $100,000, and mean the difference in multiples of that in a higher net worth. The tough part of the process when you do this on your own is coordinating the careful utilization of all of your assets and income in order to not just optimize your retirement benefits, but also optimize your entire retirement assets. The goal isn’t just to maximize Social Security, but to have more assets and more income for a possible longer lifetime.

Yes, it gets a little complicated – which brings me to the next point. The same survey found that retirees working with an adviser are more likely to be able to afford to do the things they want to do in retirement by a margin of 82% to 62%. That’s huge! Yes, it may also seem self-serving by this adviser writing to you today, but it’s also reality. More than one-third of these retirees who were without advisers were disappointed in the amount of their benefits. Advisers aren’t able to magically get you more benefits, but working with a qualified adviser can help you understand your game plan and optimize your financial future.

Give me a call at 936-449-5952 if I can help you develop a better strategy to maximize your Social Security. 

P.S. If you liked this post, you might also like The 4 Rules of Borrowing, 5 Steps to Change Your Life in 30 Days,and How Much Should You Spend Into Retirement?.


The 4 Rules of Borrowing

This post deals with the one most critical area that Americans struggle with getting under control; young and old alike. I hope to put something in here for those who are trying to shovel out of debt as well as those that are ‘doing ok’ but trying to decide whether to pay off the mortgage before retirement.

Many years ago I received a phone call from a couple who wanted some basic financial planning. After asking a few questions I learned that what they really needed was good solid debt counselling and advice on how to pay off debt faster.

Well, I showed up at the appointed time and began to ask questions so as to learn more about their situation. Seems as though they’d been living large for a few years, basking in the glow of his good job, when ‘out of nowhere’ hubby woke up and realized that there was tens of thousands of dollars owed on the credit cards. By the time they called me, the two were fighting like cats and dogs and the atmosphere was thick with tension.  It’s not at all like this normally, but in this case it was ‘she’ that had run amuck in the retail shopping world.

The story continues with my discovery of sixteen credit cards, each charged to its max. The minimum payments and interest rates of the 1980’s were drowning them and they just couldn’t figure out what to do. My advice was simple – first step is to ‘stop using the cards and cut them up’. “Won’t work”, says hubby. I assured him that this was a solid starting point. ‘Won’t work”, he once again offers. So I just had to ask why he thought that. His answer was convincing; “Because she has every one of the sixteen cards memorized – number and expiration date”, says hubby. She then proudly stretched out her hand that was holding all of the cards and added “here, try me”. (Meeting over, family counsellor and psychiatrist referred).

I offer this real life account because it almost perfectly illustrates what most of us know or have learned the hard way about debt: the economic dangers are huge, the marital and relational consequences are severe, and the emotional/spiritual results are dramatic. Dave Ramsey does an excellent job of teaching people how to get out of debt and make better buying decisions. He has great resources for that, but it is my opinion that most all of his other materials about investing and insurance are ‘hooey’. So treat those parts like an all you can eat buffet – take what you like and just move on past the other stuff.

Four Rules of Borrowing

1. The economic return for borrowing must be greater than the economic cost. One measure to use for evaluating a borrowing decision is whether borrowing costs you money or allows you to make money. A rental property that increases in value and pays you every month is an example of a wise use of debt. This is the easiest rule to misuse too, and some twist it into giving them permission to justify all sorts of bad decisions.

2.There must be a guaranteed way to repay amounts borrowed. Borrowing to start a brand new business that you have no experience in and little business background is NOT smart debt.

3.Spouses must be in agreement. Really? Yes, call me old fashioned, but money issues are the reason for almost 50% of all divorces. So if one of you don’t like it after reasonable discussion (and a lot of prayer at my household), then you’re better off moving on. Passing up an opportunity to make money is a far less cost than losing a spouse over a nasty divorce that is the result of money pressures.

4.Borrow only when there are absolutely no alternatives.  One alternative that you have to consider is ‘we can wait’ until we have the cash. A universal truth is that there are ALWAYS good deals to be had.

Debt and Retirement:

Many people ask whether they should pay off their mortgage before they retire. Interest rates are low and they are earning more on their investments. These three steps are general, but seem to work to avoid the biggest pains felt in retirement:

Step 1: pay off credit and consumer debt

Step 2: build liquid and easily accessible money

Step 3: use excess cash flow to pay off home mortgage.

I’d love to hear the ways you conquered your debt, or questions you might have on how to do so. 

Call us at 936-449-5952 


P.S. If you liked this post, you might also like 5 Steps to Change Your Life in 30 DaysHow Much Should You Spend Into Retirement?, and The Sandwich Generation.



5 Steps to Change Your Life in 30 Days

The title of this article reads like a late night infomercial promising to ultimately do nothing more than to lighten your wallet by $19.95. Relax, there’s no ‘pitch’ here. I offer only some time tested advice from someone who truly wants you to climb out from under whatever financial, emotional or spiritual rock you’ve been hiding under and move on.

The politics of our day and the general condition of the world give us plenty of reason for concern. Concern can also be translated into stress, which has all sorts of ugly effects on our health, relation- ships and money decisions. Through the decades of your life there have always been periods of turmoil – and somehow you’ve survived. If you believe as I do, you have to learn to embrace the eventual result of the condition of man; for it leads to our ultimate reward. Our recent Christmas season should have been our reminder that it’s all gonna be o.k.. Our job is to keep moving, and to do so with specific intent.

So when you finally come to the place in your life where the pain of staying where you are is greater than the pain of changing, I offer a simple road- map for effecting that change this year – right now! Since my bailiwick is finances and personal planning perhaps the context of these points can relate to getting out of debt, saving more money, getting serious about retirement, or just a simple annual financial ‘tune-up’ for the new year. But they work just the same for losing weight, getting in shape, or improving relationships in your life.

Five Steps to change your life in 30 Days:

30 Day Launch

Of all five of the steps to improving your year financially, step ONE is the most important. It sets everything in motion and launches you into a discovery mode that will produce huge rewards.

By the way, you’ll notice the absence of the ‘B’-word in my steps. What, no ‘budget’? Nope. I’m relying on what I think I’ve come to understand about the human mind. You see, most readers of this article will find it interesting, but have no real intent on making a life-changing metamorphosis. They are the ones who want more information and want to make another budget. However, for those who really want to retire, or really want to get out from under the burden of debt – they’ll just begin. For them, the pain of staying where they are is much greater than the pain of changing their habits. If that is you, congratulations – you’re ‘there’!

When you change your habits, you’ll change your life. Experts tell us that that can occur in 30 days. Step One is really significant, as I’ve said. Over the years, I’ve read about and seen many really Uninspiring methods of helping folks get a handle on their spending. Hands down, the most impactful and life-changing technique I’ve ever used is this: write down every single cent that you spend for the next thirty days. Buy a small pocket notebook for each of you (if married) or download one of a number of iphone apps that allow you to keep this info. After seven days you’ll be amazed at where your money goes. In two weeks you’ll have already shamed yourself into beginning a change in spending ‘habits’. At the end of thirty days, come together (in a truce) and see where your money is going. I doubt anyone will have to say any more to you. You’ll see that which is holding you back.

Why should a hopeful retiree go through this drill? Because the single biggest determinant of whether you’ll be able to retire AND stay retired comes down to this number. I have clients with millions whose funds aren’t going to last them as long as others with tens of thousands into retirement. Your lifestyle priorities, as evidenced by your spending ‘habits’, is the greatest single factor in your savings’ longevity. I suggest that you spend the next thirty days and discover what this number is for you.

Once you’ve identified where your spending is going, it’ll be much easier to make priority decisions about how to allocate the resources that you have. So moving to Step Two becomes possible – you have something quantitative with which to set the goal.

Feel free to correspond if I can be of assistance on your thirty day journey; I’d like to hear your success story.

P.S. If you liked this post, you might also like How Much Should You Spend Into Retirement?The Sandwich Generation, and 5 Tips to Tune Up Your 401k.


How Much Should You Spend Into Retirement?

Make It Last


Not long ago my wife and I decided to do the‘downsize routine’. I’m not quite sure of the timing of this great epiphany but it may have been shortly after I received my annual property tax statement. On second thought, it may have become a priority one Saturday after along day of yard work on the lush beautiful lawn and accompanying flower beds. I was too cheap to actually pay for someone else to do that work. After all, I had two strapping young lads around the house to help with the ‘fun’.

Regardless of the when, it was time to make a change. Boy did we discover a whole new freedom from the responsibility and financial load.It has worked out wonderfully and we feel very satisfied in having simplified our lives.

As in our case, not all downsizing is a result of financial distress. However, one of the fastest ways to stretch your retirement nest egg is to downsize. Selling a more expensive home and moving to a smaller home can give an instant boost to the retirement savings balances and open the door to a variety of ways to generate more income. Moving to a smaller home reduces your cost of living much more dramatically and faster than skipping the expensive coffee or clipping coupons. In the process of helping clients plan for their retirement, I enjoy the visible response I receive when they see the impact on their future by the implementation of a few simple steps to lower their annual expenses. It never ceases to amaze me how often a client’s long term security is greatly enhanced by reducing annual expenses by a mere $400 per month.

Spend More of It


On the flip side, is it your goal to leave your kids more money than you ever had? That’s exactly what we see with many of our clients. They’ve been so conservative all their life, saved well, and continue to live frugally all the rest of their lives. This is admirable – to an extent. Why did you save all those years? To sit on the couch and watch TV, or to get out and enjoy the fruits of your lifelong labors?

‘Well, you never know what’s gonna happen when we get old.’ True, but for many people we talk with, there is a balance to that logic. Many could actually spend more in their retirement years and still be left with plenty to meet reasonably expected needs and emergencies. When we do retirement evaluations and put together retirement income strategies for clients, we like to play with the notion of increasing annual expenses by a modest amount – just to see what the results would be. We often find that they could spend much more without jeopardizing a thing.

A long- time client recently decided to retire. He’s the nervous type, worried about almost everything. His ‘generous’ estimate of his living expenses was just short of $65,000 per year. If interest rates never increase and he never invests in the stock market, our projections are that he could actually spend $80,000 per year for the rest of his life, increasing that annually for inflation. In addition, he could spend an additional $15,000 per year for the next ten years (his ‘prime’ retirement years) for travel, gifts, or whatever. Using the more expensive set of data he still dies with more money than he retired with.

My objective is not to encourage a wasteful lifestyle but to help you make the most of this season of your life. If you can afford to do more, see more, and be more generous with others – then ‘why not’!? The reason people still live overly conservative is very simply the fear of the unknown.

Do you need to make changes now that will add greater security to your retirement? What are the limits to how much lifestyle your retirement assets can generate for the rest of your life? These are all questions that have simple solutions if you begin with some good old fashioned retirement planning. Call now at 936-449-5952 to schedule a time for us to help you see how all of the pieces fit together.

P.S. If you liked this post, you might also like The Sandwich Generation5 Tips to Tune Up Your 401k, and Social Security: Your Most Important Financial Decision.



The Sandwich Generation

How we deal with so many things in life is all a matter of perspective! Do you recall the parable of the three blind guys who were led to an elephant, and without knowing ‘what’ they were touching, were asked to describe what they were experiencing?

Are you feeling the pressure building from all sides? Your adult kids need help, your aging parents seem to need more and more from you, and then there’s your own retirement to deal with; “Never felt this before! Not sure what it is.” Many of the Baby Boomers reading this article are currently facing some of the most confusing circumstances of their lifetimes which are causing a great deal of stress. The media, friends, tax and financial advisers are all offering different perspectives on how to deal with these monumental questions. It’s con- fusing to know what to do and who to listen to.

One in eight Boomers are simultaneously helping support boomerang kids, saving for retirement, and providing some sort of financial assistance to a parent. This month’s article will focus on a few tips on dealing with the issues and stress that is caused when helping parents and honoring their needs.

My own family has been touched by the reality of what happens inside the family when parents need help; nursing homes, protecting assets, and maintaining independence are all issues we work through.  And there isn’t a week that passes that we don’t have conversations with clients about these very issues and offer some perspective and pro- active solutions.

New Challenges

  • Part of our problem is that many of ‘Sandwich’ issues are new challenges to our culture:
  • Increased life expectancy means that we have greater odds that our parents will need help longer.
  • Small families or families with siblings spread out geographically will place the responsibility on fewer siblings.
  • Couples that delayed having kids early to pursue career will probably have kids still in college when parents need support.
  • Current high unemployment rates coupled with rising divorce rates add to the challenges of ‘boomerang kids’ who’ve returned home for help.
  • Many Boomers are facing pension shortfalls, eroding retirement savings, and wonder about the future of Medicare and Social Security.

Practical Steps

Your financial health may very well be the engine that sustains all the parties to this real life challenge. Here are a few practical steps you can take now that really will reduce the stress levels and keep the ‘engine’ strong:

  •  Make certain that you know what your monthly expenses are and what your parents need too.
  • Work hard to control or eliminate much of your debt, and develop a plan to make wise decisions concerning your parent’s debt too.
  • Review your own retirement projections and financial goals first, and regularly.
  • Eliminate unnecessary risk from your retirement savings and avoid tying up too much in investments that are difficult to gain access to.

Legal Steps

As long as everyone is healthy and the siblings are getting along, life is simple. But when the crud hits the fan, you had better have memorialized the ‘game plan’ in writing. There are three critical documents that any estate planning attorney worth his salt will insist on discussing with you.

  • A Will. Yes, you need one, and so do your parents. No, I don’t think an online service is good enough for most everyone. This is one of life’s most important documents – don’t scrimp.
  • Durable Power of Attorney. When someone you love and care about loses capacity to make financial decisions, someone has to have authority to do so. A limited power of attorney won’t do.
  • Physicians/Medical Directive. Many people have some version of this, but almost all of the directives signed at the hospital do not have HIPAA waivers in them which allow the physicians to discuss conditions with the family member given responsibility.

The Solution?

Communication and Planning. Talk with everyone involved openly and invest the time in planning ahead. Start with YOUR financial plans and see where it leads you. Why should you just ‘feel your way around this elephant’ when there are trusted advisers who’ve been down this road before. If you are not getting a seasoned perspective from your advisor, then he/ she may be a fourth person added to the parable mentioned above. Throwing another financial product at the uncertainty won’t move you any closer to understanding the real issues. I encourage you to call me to get a second opinion and fresh ideas on how to communicate with your loved ones and how to plan for the financial challenges that exist. By 2030 there will be twice the number of ‘aging parents’ to be honored and cared for. Set the standard of care high today, as you may very well be the one reaping the benefits of the standard you set in your family today.


5 Tips to Tune Up Your 401k

Take Full Advantage of the Company Matching.


What if someone could guarantee you a 30%, 50%, or even 100% annual return on every dollar you invested into your retirement plan? Pretty good deal, eh?! That’s exactly what many companies do, to some degree anyway, for their employees.

If your company offers ANY kind of matching provision, it’s really nonsense to pass up the amount they give you. Yet many employees still don’t maximize their own contributions by saving at least what the company will match into their employee retirement plans.

The only exception would certainly be the situations where funds would be redirected form meeting other obligations. If you are having problems being able to contribute to your plan, it may be time to look at your expenses. “When your outflow exceeds your inflow, then your upkeep becomes your downfall”. Start small and commit to increase your savings amounts every six months.

Guard Against an Obese 401k.

It is still a wise philosophy to do everything in moderation! Too much of a good thing can really work against you. With income tax rates increasing and the pressure on social security looming, it may benefit many savers to build savings outside of their 401k now – while tax rates are lower. Many retirees find that they’ve saved well, but without ‘balance.’ When all of your savings is in your 401k, you leave yourself very few tax planning options after retirement. Seriously! This is the single greatest financial challenge facings retirees. You may be better served by redirecting savings to accounts that are after tax accounts.

Take Control of Your Accounts


Normally you can only get your money out of the retirement plan if you change employers or retire. We speak with many clients who are very unhappy with the investment options, service levels, or performance of their retirement plan. Most people think that they don’t have any option but to just hang in there and suffer through poor plan alternatives.

Actually, many employers have adopted rules that allow employees to withdraw a significant amount of their plan balance while they are still actively employed and continuing to contribute to the plan. This ‘in-service distribution’ amount can be rolled over to a self-directed IRA for greater control, service, and investment options.

Assign Correct Beneficiary Designations

When it comes to naming the beneficiary of your IRA or 401k, it is normally pretty cut and dried. If you’re married, you leave it to your spouse. If single, most leave it to their kids or to their parent.

However, where it can get really sticky is when there’s a mixed family involved or when some other family situation has changed which ultimately has an impact on ‘who’ you want the funds left to. More than one beneficiary has been undesirably dragged in or through the courts to defend the bequest of a loved one. Just leaving it to the oldest daughter and assuming she’ll divvy it up amongst the others is a recipe for disaster – even in the best of familial circumstances. Seek the counsel of an estate planning attorney for the best advice.

Update Your Investment Strategy


Unfortunately, most financial advisers still recommend a traditional buy-and-hold strategy that suggests you just ‘sit tight’ during difficult markets. Following this advice over the last decade has simply not produced long-lasting returns.

This wild roller-coaster ride of late produces great short term returns, only to be lost to the next dramatic downturn. Measuring over a longer period of time this strategy has not produced the results most savers have hoped for.

We believe the following to be true and base our Active Portfolio Strategies on these principles:

  • Longer term rising and falling market cycles are identifiable at an early stage and allow for timely adjustment of investing tactics.
  • Intermediate-term trends in the markets lasting weeks to months, are also identifiable and provide profit opportunities.
  • The momentum and strength of different investment categories tend to persist once they are identified; allowing investors to construct portfolios of only the candidates that exhibit the best strength

You do not have to ‘time’ the stock market to identify when the trends have changed. If you can avoid the biggest down days or be in just the right spot during the shorter term cycles, you can protect your assets and position yourself for better current opportunities.

Don’t get lulled to complacency by investment strategies that simply do not perform well in volatile markets.

How have you tuned up your 401k? What other tips do you have to do so? I’d love to hear your feedback in the comments below!

P.S. If you liked this post, you might also like The 10 Myths of Modern Investing4 Tips to Tame the Tax Beast, and Social Security: Your Most Important Financial Decision.


Social Security: Your Most Important Financial Decision

The later you claim Social Security retirement benefits, the higher your monthly benefit. Yet an overwhelming majority of retirees elect to receive these benefits at the earliest possible age. Many of the people I meet with are shocked when they realize that waiting to receive benefits later can raise their monthly income benefit significantly.

Quite often I meet with the number crunchers out there who have ‘done the math’ and come to the realization that they’ll receive more total lifetime benefit (get more back from the system) if they elect to begin receiving their retirement benefit at age 62. While this may be true it doesn’t at all mean that it is the best strategy for their specific circumstances. Much more needs to be taken into account than a simple breakeven analysis on a spreadsheet.

Your optimal date to begin benefits also should take into account a complicated mix of factors such as your health and life expectancy, your need for income at various stages in the future, your income tax situation, whether you’re going to continue to work, and even the simple element of how secure you feel about the future. When we review these factors along with your other assets and sources of income we can allow emotion and politics to take the back seat to simple mathematical projections to find the truth of what’s best for you. Often what’s ‘best’ can mean a significant increase in Social Security income amounts. When combined with a comprehensive retirement income strategy, the goal is to maximize your income while making the most of your retirement savings.

Perhaps a real life example can give you some idea of how important a comprehensive income strategy can be to your future. This might just be the ‘Most Important Financial Decision’ you’ll make. Consider ‘Steve’ and ‘Sue’ and their projected Social Security (SS) Retirement Benefits:

Monthly Benefits

What’s the ‘best’ strategy for Steve and Sue?


When should they begin receiving benefits? Well, we went into the ‘For-Financial-Geeks-Only’ workroom and did a little engineering for this couple based on their entire financial picture. You see, Steve and Sue have other assets that they were planning on waiting to tap into later in their life, so we wanted to find out how to optimize their income and put those as- sets to better use. In this case we discovered that they’re much better off using some of those as- sets during the first few years of retirement in order to get a much higher guaranteed income stream from Social Security payments for the rest of their lives. Our analysis and recommendation for them makes a huge difference:

Most Common Strategy:

Steve files for early retirement benefits at age 62, and Sue does the same. These benefits occur sooner than waiting and have a cost of living adjustment (COLA) applied over time.

Optimal Strategy:


  • Steve files for benefits – and ‘suspends’ receiving them – at age 67 and 9 months, making Sue eligible for spousal benefits at her age 66.
  • Sue files a ‘restricted application’ for spousal benefits only, at her age 66.
  • Steve begins benefits based on his earnings record at his age 70.
  • At Sue’s age 70, she switches to benefits based on her earnings.


The results are dramatic:


*At any age Steve dies, Sue’s survivor benefits equal Steve’s retirement benefits. Note the dramatic increase in Sue’s survivor benefits by making the optimal election for benefits.


Choosing the optimal strategy increases their stable source of income at age 70/68 by $21,000 per year – a 58% increase! When Steve is 80 years old, their combined benefits are estimated to be over $81,000.

If one of the goals is to maximize the income into retirement and for the surviving spouse, then finding the optimum age to receive benefits is pretty valuable. Simply running a break even calculation does not go far enough in creating the best retirement income strategy. One must do comprehensive planning.

Maybe you’re wondering when you should begin your benefits.

Call me today at 1(800) 676-0703 to schedule a complimentary evaluation and let’s find out the answer to that question and to many others.

When did you start your benefits? What other strategies would you like to hear about? I would love to hear from you in the comments below!

P.S. If you liked this post, you might also like The 10 Myths of Modern Investing4 Tips to Tame the Tax Beast, and The Unexpected Tax. 



The Unexpected Tax

Certainly one of the biggest issues that we try to plan for with our clients is how to create sufficient and reliable sources of income into retirement. Hopefully you’ve taken steps to maximize the amount of income you’ll receive from your various assets too. But when you’re developing a strategy for you and your spouse, have you also taken into consideration the potential tax impact on the surviving spouse? It could make a huge difference. I’d like to show you what I mean…



Tom and Sue currently earn $60,000 in income – half from Social Security, half from distributions from an IRA. Their federal income taxes are $1,500. If either one dies, the Social Security income for the surviving spouse will be reduced by $10,000.

Because the Social Security goes down, the extra income needed will have to come from the IRA to maintain the current income level, making the taxable IRA distribution increase to $40,000. Because the tax status would move from married to single, the federal income taxes for the surviving spouse will increase to $7,500.

The $6,000 of additional unexpected taxes will presumably add to the amount that gets drawn down out of the IRA since most retirees don’t have a lot of after-tax money. So we are taking $16,000 more each year out of the IRA for living expenses and taxes.

So there are three potential tax concerns for a surviving spouse that are not often discussed or planned for:

  1. Tax rates are substantially different when you’re single instead of married.
  2. Standard deductions and personal exemptions decrease from two to one, subjecting more of your income to tax.
  3. You must consider the taxability of the remaining various income sources.

Obese 401k’s

piggy bank

I’ve written at length about the mistake that most make by saving a disproportionate amount of their retirement in a 401k or tax-deferred retirement account. When developing a retirement income plan you must consider what and how much you leave to your surviving spouse. For example, in IRA’s and 401k’s:

  1. All distributions are fully taxable,
  2. Distributions can be mandatory, not voluntary
  3. Distributions can occur to put the spouse in a higher tax bracket,
  4. The spouse will probably be in a higher tax bracket anyway.


Very few retirees rush into my office asking me to find them a good life insurance policy. Most are glad to not need life insurance for covering debt or retirement and never consider that there may still be a need for insurance. But at this stage in the game it is used to solve a very different set of problems. In the scenario mentioned above, a very reasonable financial planning solution may be found in using a specially designed life insurance policy. While both spouses are alive, they could take taxable distributions from their IRA, provided that the funds are not needed currently to support their lifestyle. Taking the distributions while both are alive allows them to pay income tax on the distributions at married rates. They can use the distributions to leverage the purchase of a larger life insurance benefit available at the death of the first spouse to give the remaining spouse a lot of options that they would not otherwise have. Some of the options are as follows:

  1. Use the life insurance proceeds to create a tax-favored income for the surviving spouse, allowing him/her to disclaim the IRA and send it to the next generation.
  2. Convert the IRA to a Roth IRA and use the life insurance proceeds to pay the tax liability due.
  3. A combination of options 1 and 2. Life insurance is just one solution, but often allows you to pay pennies on the dollar for taxes or lifestyle money later in life.

Do it Right

The kind of strategies that use life insurance at this stage of life need to be well planned and financially engineered by professionals that really understand these issues. This is not the kind of transaction that you want to run to your local life insurance person or investment guy and ‘buy’. I suggest that you need a coordinated strategy that makes sure that you get what you need, and nothing more.

What are you doing NOW to combat the unexpected tax? What strategies did I miss? I’d love to hear your feedback in the comments!

Call us at 936-449-5952 or log onto

P.S. If you liked this post, you might also like The 10 Myths of Modern Investing, 4 Tips to Tame the Tax Beast, and Are You Going to Retire TO or FROM?



The 10 Myths of Modern Investing

A recent article in The Wall Street Journal reminded me of the difficulty many have in changing attitudes and beliefs about the stock market. The writer was actually taking a similar position as this article; that the retail brokerage community and “1-800 reps” just don’t get it, and that their business practices promote myths about the stock market. If you continue to hold on to the advice that worked in the decades of the 80’s and 90’s, you’ll experience the same results as you have for the last ten years. How’s that working? Thought so.

Does it seem like the financial world is upside down these days? It may seem as though the same things you used to do just don’t work that well any longer. At times like this, most retail brokers offer familiar wisdom and advice that just isn’t relevant in today’s world. Here are a few that need more scrutiny:

“This is a good time to invest in the stock market.”

Copyright: nito500 / 123RF Stock Photo

Wow, now that’s surprising to hear from someone who makes money by selling financial products! Sort of like asking the barber if you need a haircut, eh? Ask the broker when it was that he warned clients that it was a bad time to invest. October 2007? February 2000?

“Stocks on average make you about 10% a year.”

Old news and numbers. The decades of the 80’s and 90’s saw average returns in excess of 12%. The last 50 years’ average is (arguably) 6-7%.  Based on current valuations, we will likely see returns in the 4-5% range over the next decade of retirement. Which number do you want to depend on?

“Our economists are forecasting…”

Copyright: hjalmeida / 123RF Stock Photo

The brokerage community and ‘1-800’ boys love to brag about their highly paid economists. Ask them if the firm’s economists predicted the most recent recession – and if so, when? The track record of most economic forecasters is pretty poor. Their comments are typically loaded with a lot of ‘outs’ in case they are wrong. If the big boy’s economists are so smart, why have so many of their firms’ clients lost so much wealth? Hmmm.

“Stock market investments let you cash in on economic growth.”

The Japanese have found that NOT to be true. Their economy has grown 25% in the last twenty years, yet their stock market has fallen 75%. Or how about your Wall Street investments that you made in 2000? The economy has grown, yet your investments are likely down.

“If you want higher returns, you have to take more risk.”

Copyright: lightwise / 123RF Stock Photo

The only way to earn higher returns is to buy stocks that are inexpensive relative to their future cash flows. Over the last twenty-five years, the FactSet Research utilities index has out- performed the Nasdaq index of small companies. Risk is not just volatility; it is the real chance you’ll lose principal.

“Stocks are cheap now, with a Price/Earnings ratio of ‘x’…”

This is a favorite of the old guard; it makes them sound so smart and market savvy. However, the truth is that by many measurements, P/E included, stocks are actually still pretty expensive relative to earnings potential.

“You can’t time the market.”

Copyright: aaronamat / 123RF Stock Photo

No fool would   even attempt to convince you that they can time the twists and turns of the market. But that doesn’t mean that you have to dance just because the music is on! Use some judgment and reasoning before you throw good money into today’s stock market. Most often, the brokerage world relies on this mantra as an excuse for NOT paying attention to your investments. Pay attention to where money is being made in the various markets. Move to where the growth is actually occurring; it is measurable and identifiable if someone will put some energy into actually managing your investments.

“We recommend that you diversify across many mutual fund groups.”

Even if most of them are losing money? Why would I want money in a fund that is going down? Just to have money in a different asset group? You’ve heard this oldie over and over, but really, does it make any sense at all? Even a twelve year-old can tell you to get out of something that is not making money. The investment results of the last decade have proven that this philosophy is outdated and no longer provides reasonable returns.

“This is a stock picker’s market.”

Aren’t they all? Yet most stock pickers, individual or broker, consistently lose money. Most of your returns will come from being in the right asset group, and by having enough money in that group to actually make a difference.

“Stocks outperform over the long term.”


How broad a statement is that? How long is long term? Does that even apply to your investment and retirement objectives?

“Crazy horseless carriages, they’ll never catch on!” “Computers maybe have a world demand of five.” And now you have another ten statements that sounded right, but with time and experience have been proven really wrong.

If you’re looking for a fresh perspective, call me for a free second opinion and a complimentary comprehensive retirement projection. Maybe it’s time to make a few changes. 

Call us at 936-449-5952 or log onto


P.S. If you liked this post, you might also like 5 Critical Pieces of a Sustainable Retirement Plan, 4 Tips to Tame the Tax Beast, and Are You Going to Retire TO or FROM?