Deciding What You Want in Retirement

The day will come when you’re going to walk through an invisible golden portal with a golden portfolio to match, and you’ll begin to live the life of your dreams. Imagine having your condo on the beach in Waikiki and every day is a combination of tropical fruits, coconut sunblock lotion, paradisal music, and sunset barbecues. No? Oh, okay, so maybe instead of a tropical paradise you prefer a snow lodge on a small ranch in Colorado where you can ski for miles and entertain your grandchildren with toboggans and horse-drawn sleighs, a warm fire in your living room’s wood-stove and summers filled with blue skies and big-horned elk. No?

So what exactly do you want? If you don’t know, the chances of your having it diminish. Yes, of course you can always build a gigantic retirement fund and hope you have enough for what you’ll eventually decide you want to have. However, think about how much more empowering it is to set your goals on precisely what you do want to have, and then work toward achieving a dream life come true.

The key reason it’s important to identify your retirement goals is not only because it’s so empowering to achieve them, but also because you can stop driving yourself into deep neurosis wondering if you have enough cash for whatever ambiguous cloud of retirement images are rooted in your cerebral cortex. Wouldn’t it be so much easier to know exactly what you want, determine its exact cost, and then build your portfolio to help you achieve precisely what you want to have and enjoy in retirement?

A lack of goals can drive you crazy because you’ll never be certain you have enough. Many people choose not to plan because they are either frightened of the future, or don’t really know what they want, or have too many choices buzzing around in their head and don’t know which one to pick, are simply too busy to project the future they want, or they don’t understand how to create, set, and follow financial plans.

If planning for your future is too much to grasp, start out simply by making a list of all the things you can think of that might bring you security and pleasure. Like you, most people have good imaginations and can think of a number of ways to spend their time beside going to work every day. Think about who will be with you in the decades to come…a spouse, children, grandchildren? Think about spending your elder years in a warm climate or cold climate; which do you prefer? If you have a family, do you want to live closer to them? Where are they likely to live when you’re in your 70s or 80s? Do you like to travel, or do you have any hobbies you’d like to enjoy more thoroughly? How will you be able to make your retirement funds last the length of your life? Is there some way you can increase your income when you’re in retirement?

Once you have your master list, spend some quiet time thinking about the choices you’ve listed and begin to filter them by whatever priority feels most right for you. Eventually you’re going to wind up with a core list of choices you feel really good about and which now helps define your path. Yes, things can change. Things change all the time! But as much as things change, they can also remain the same, and it’s better to pick a star to follow than stare at all the stars and never choose one.

The good news is that once you’ve identified some of your core goals, you can meet with a financial planner who will help you monetize the value of each of the goals you’ve chosen. The cost of that condo in Hawaii or the horse ranch in Colorado can be defined monetarily. The cost of an annual trip to Europe or Asia can be calculated. Even the cost of your future bills can be monetized and everything you want in the future will convert into a number…your investment target. Once that happens, you can begin to invest sensibly with your target in mind. You’re likely to get there a whole lot faster and with much less mental stress than shooting your rocket into the sky and hoping you hit something!

Make your list today. It’s easy to do! Then make an appointment to speak with your investment advisor about how you can monetize your financial goals and make your dreams come true.

Joseph M. Maas, CFA, CVA, ABAR, CM&AA, CFP®, ChFC, CLU®, MSFS, CCIM

Synergy Financial Management, LLC

701 Fifth Avenue Suite 3520

Seattle, Washington   98104

ph: 206.386.5455

fx: 206.386-5452

www.sfmadvisors.com

5 More Rules for Your Retirement

Last month’s focus was on the first five of 10 rules for achieving a comfortable retirement lifestyle. The recommendations included shifting into your projected retirement lifestyle a few years before retirement to get used to living on a different budget and down-sizing your behavior to make the eventual shift more familiar; developing new sources of income to compensate for Social Security’s inability to provide all your financial needs; developing an estate plan to care for your loved ones in case of your demise or disability; considering relocation to warmer climes or to be more proximate with your family; and being mindful of communications from the entities managing your wealth.

Here are the second five suggestions for achieving an anxiety-free retirement lifestyle which we hope will stir your interest and inspire you to take the necessary steps for the best wealth management for your circumstances.
Rule #6: Make funding your retirement goals your first priority. Your retirement years could be as many as 25…30…even 35 years. With medical improvements occurring yearly, it’s possible that many Americans will live into the first decade of their 100s. This should be a blessing, not a curse! If you and your spouse or partner will be living longer, you’ll need more financial resources to live independently and not under the authority of the government or through the generosity of your family. Currently life expectations are around 90 years; 10 extra years are likely to be costly, especially with inflation 25 – 35 years from now. This is why you should make funding your retirement your single most important priority, not an expensive vacation or a second home, unless it’s a good investment and treated as such.
Rule #7: Increase your savings regimen. For now, save and invest as much as possible while your ally, time, is still on your side. With sufficient time, you and your financial advisor can increase your wealth sufficiently to meet your projected needs two or three decades from now. Saving as much as you can now is the wise choice. If you find you’ve been over-saving in years to come, you can always lay off the throttle, but until your financial future is more clearly defined, save now so you won’t be throttled later by insincere planning. Use the gift of time and the wisdom espoused by every financial planner!
Rule #8: Prepare your wealth building for increased tax responsibilities. Indications are that we may now be at the low point for taxation. Given the federal economy and the state of the global financial situation, taxes may soon begin increasing to pay for the magnified liabilities of Social Security and government pension plans. With so much of our government’s resources being applied to debt service, additional taxes may be the necessary solution to maintaining our nation’s stability. Investment in tax-advantaged vehicles, like Roth IRAs for example, could be a good strategy.
Rule #9: Be sure to budget for health care. Because of the improvements in medical care, you’ll need to plan for healthcare expenses as you grow older. Counting on Medicare and supplemental insurance may be helpful, but they may not be sufficient. Remember that these forms of insurance will be costing you and your spouse or partner monthly premiums, and the costs are likely to grow each year. Another big expense could be the cost of prescription drugs which can often be expensive. Long-term care insurance could be one answer, but you should definitely consider a variety of ways to provide for your health care during retirement. Your financial advisor can assist you with understanding your options.
Rule #10: Invest your funds so you’ll be rewarded with a steady income stream when you’re retired. Most people think they must save their money so when the retirement years arrive, they can then spend down their savings. It’s a much better plan to maintain and safeguard the amount of money you’ve set aside over your four decades of work by using those funds to generate continuing income streams. Something you might want to talk to your financial planner about is owning property that provides rental income, or diversifying your portfolio so you receive a steady flow of dividends. It’s very important to remember that your financial advisor can be a great resource with helping you work through the obstacles that arise as you begin to plan and take action for the retirement life of your dreams. 
Financial planning should be #1 on your To Do List. We invite you to make a consultative appointment with us today so we can discuss ways to set your path to retirement success. Thank you!

Joseph M. Maas, CFA, CVA, ABAR, CM&AA, CFP®, ChFC, CLU®, MSFS, CCIM

Synergy Financial Management, LLC

701 Fifth Avenue Suite 3520

Seattle, Washington 98104

ph: 206.386.5455

fx: 206.386-5452

www.sfmadvisors.com

5 Rules for Your Retirement

This article’s focus is on the first 5 of 10 rules for a comfortable retirement lifestyle. Most people want to enjoy a good life through the length of their adult years while building a retirement nest egg to sustain them into their 90s, and also leave a legacy for their families. Achieving this goal isn’t horribly difficult if you follow some basic rules and “keep your wits about you” as Filch advises Harry Potter.

Here are the first five suggestions for achieving an anxiety-free retirement lifestyle.
Rule #1: Many people like to live the life they can afford before they retire, and then also expect to enjoy a similar lifestyle afterward, though in many cases retirees must live more conservatively. Therefore, there is wisdom in moving your pre-retirement lifestyle to a level that’s similar to the lifestyle you’ll live in retirement, making the segue easy by preparing yourself emotionally and financially for your new post-work life.
Rule #2: Your Social Security benefits are intended to provide approximately 40% of the income you’ll need during retirement, so it’s up to you to secure the remaining income you’ll need. Remember also that this 40% number is based on a lower income model for average Americans, meaning that if you’re living at a higher level now, Social Security benefits will provide even less of your expectations. Aside from all the rhetoric that the Social Security program may go bankrupt, your Social Security benefits will only contribute a small proportion of the funds you’ll need in the last third of your life. This means you’ll need to figure out how to provide additional sources of income.
Rule #3: It’s very important that you have an estate plan so you can provide for your spouse and other family members who are depending on you, should you die prematurely or become incapacitated and unable to support your loved ones. Your estate plan should include a will, and possibly insurance policies and investment income streams. Providing this security for your loved ones is a priority.
Rule #4: As you begin to develop your thinking about retirement, an important topic is considering if it’s wise for you to relocate to another part of the country. While you may enjoy winter sports now, will you be preferring a warmer climate in your 80s? Perhaps you’ll want to move closer to other family members, or downsize your home so you have less yard-work, or won’t have to climb stairs when you get older.
Rule #5: Always pay careful attention to the emails or printed material sent to your physical mailbox from people and institutions holding your funds or advising you about your finances. This includes messages from Social Security, your 401(k) plan, pension information from your employer, your stockbroker and insurance providers, etc. Not only do you need to stay informed on a regular basis, but you also must be ready to take action and avoid making a mistake with a deadline or some other requirement that could cause financial damage to your wealth and your options.
These are the first 5 of 10 suggestions for helping you achieve a comfortable retirement lifestyle. Next week we’ll look at the second set of five rules everyone should know and practice.

Financial planning for a relaxed and comfortable retirement should be #1 on your To Do List. Consider making an appointment with us today so we can discuss ways to increase your personal wealth and enhance your retirement.

Joseph M. Maas, CFA, CVA, ABAR, CM&AA, CFP®, ChFC, CLU®, MSFS, CCIM
Synergy Financial Management, LLC
701 Fifth Avenue Suite 3520
Seattle, Washington 98104
ph: 206.386.5455
fx: 206.386-5452
www.sfmadvisors.com

Your 2018 Investor’s “NFL” Playbook

Successful investors know when to buy, how long to hold, and when to sell. They know when to pass, when to kick, and when to fake. They know whether they should use the shotgun, or if a nickel defense is their best bet. How is investing like NFL football? The coaches have a playbook, they know how to read signs, and they know the odds. The difference between a rookie and a veteran is that success is based on cold, hard planning. As exciting and terrifying as investing can be, veteran investors remove themselves from emotional play-making and follow the rules they’ve made to play their game.

Just as you would never build a house without a set of blueprints, you should also not invest until you and your financial advisor have developed an Investment Policy Statement (IPS). With an IPS, you are completely clear about your investment goals, the constraints you are likely to face, and the impact these constraints may have on your portfolio so you can achieve your required rate of return (RRR).
Your Investment Policy Statement contains your investment philosophy which guides you with crafting your investment goals. For example, you may decide to invest only in companies that help people, or because of your professional background in technology you may choose to only invest in companies developing new technologies because this is an area you know well. On the other hand, because of your unique situation, you might decide to only invest in tax-deferred or nontaxable investments. Then again, you might decide you’re an aggressive investor and want to have a portfolio that accelerates your gains.
Your IPS identifies your required rate of return (RRR), which is the amount of return you need to earn annually on your investments to meet your financial goals. Because everyone’s financial circumstances are unique, the RRR can vary from person-to-person. One person may require an RRR of 5.7% for the next 20 years while another person might require an RRR of 7.8% for the next 10 years. If you are uncertain what your RRR is, you should consult with a financial advisor who will help you determine the dollar value of your financial objectives and how to make intelligent investments that help you achieve your goals.
Another key feature of your IPS is knowing the investment risk you’re willing and able to accept. Every investment carries a risk, even holding cash. No one likes to see the value of their portfolio decrease, and yet it happens every day. Knowing your appetite for risk is essential for building your portfolio. Your financial planner can analyze risk and help you diversify your vulnerability among the assets you select, maximizing your portfolio’s rate of return while minimizing your exposure to risk. Part of establishing your risk profile is understanding if you are a conservative, moderate, or an aggressive investor. There are, of course, variations for each of these three levels.
Still another key feature of your Investment Policy Statement is acknowledging the constraints particular to your situation. You may have a time constraint that limits the potential for growth. For example, if you are over 50 years old, the time remaining before you’ll need your funds is less than those of a 20-year-old just starting out. On the other hand, an investor of 50 is probably a larger income producer than a 20-something, so it’s possible more funds can be allocated for investments. Taxes can also be a constraint and a potential investment must be analyzed to determine if the best option is taxable or tax-free, income producing or growth through appreciation, etc. Also, portfolio turnover can accelerate taxes in a taxable account, and capital gains taxes can harm your portfolio’s investment performance. These are some examples of how your risk profile should be determined so you can retain as much of your investments’ proceeds as possible.
Your Investment Policy Statement is essential as a successful investor. It’s the playbook that helps you make investments in a rational and organized manner, without the chaos induced by the emotions of fear and greed. Your IPS helps identify good investments so your collection of investments increases the possibility of gain while also increasing your defense against risk.
Think of your portfolio as a Super Bowl team: you have players who are expert at offense, and players who are expert at defense. You and your financial planner are the quarterback signaling the right play at the right time to score touchdowns and win the Lombardi Trophy for a game-winning comfortable retirement lifestyle!
If you’re interested in creating or discussing your Investment Policy Statement and making sure it correctly details your investment strategy for optimal returns and risk protection particular to your circumstances, please contact us so you can develop and follow a plan of action which brings you closer to your financial goals.
Joseph M. Maas, CFA, CVA, ABAR, CM&AA, CFP®, ChFC, CLU®, MSFS, CCIM
Synergy Financial Management, LLC
701 Fifth Avenue Suite 3520
Seattle, Washington 98104
ph: 206.386.5455
fx: 206.386-5452
www.sfmadvisors.com

The Dark Side of Compounding

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

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

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

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

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

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

Period 1:

Beginning value: $100,000

Return: -10%

Ending value: $90,000

Period 2:

Beginning value: $90,000

Return: +10%

Ending value: $99,000

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

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

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

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

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

 

Joseph M. Maas, CFA, CVA, ABAR, CM&AA, CFP®, ChFC, CLU®, MSFS, CCIM

Synergy Financial Management, LLC

701 Fifth Avenue Suite 3520

Seattle, Washington   98104

ph: 206.386.5455

fx: 206.386-5452

www.sfmadvisors.com

Behavior Builds Wealth

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

“Take a minute to look at your goals, look at your performance, and see if your behavior matches your goals.” Kenneth H. Blanchard, American author and management expert.
The first step is to determine how you’re spending your income. It may seem silly at first, but keeping a log of how you spend your monthly funds could be a tremendous eye-opener. Take an accounting of every penny and you might find you are regularly buying items you don’t need, and the aggregate amount you could save and invest might advance your financial strength significantly.
For example, we’ve all seen articles about the excesses of buying a daily Starbucks coffee. $4 twice a day adds up to $160 a month and almost $2,000 a year. Did this get your attention? It’s the same with having lunch out every day. A $10 lunch costs $200 a month which adds up to $2,400 a year. Could you purchase stock in a company with your extra $4,400? Of course you could! This doesn’t mean you should always forgo a morning coffee or lunch out, but by making some simple behavioral changes, you could advance your financial progress. $4,400 earning 10% could result in $8,800 in seven years… I’m sure you see the point.
Other examples include saving money by lowering your cell phone costs, or limiting your television bundle. You could also be spending too much money on gifts or clothes. Once you start realizing how you spend your money, you’ll find a number of ways you could rein in your expenses and cut waste. All too often we get involved in behavioral patterns that leak cash, robbing us of the healthier financial future we could otherwise have.
Another place to consider changing your behavior is the amount of debt you owe. The more debt you have, the less likely you’ll be able to escape its hold. Yes, some debt may be serving a good purpose, such as using it as leverage to reach a larger goal. Debt can be dangerous, however, and must be used rationally as part of your financial plan.
Also, another key aspect of healthy financial behavior is saving regularly. Funds should first be set aside to provide you with a 3-6 month emergency fund in case your car needs a repair, or you have a sudden and necessary home project that’s urgent like fixing the roof. After you’ve established your emergency fund, your focus should next be on building your retirement savings.
When planning for your retirement, perhaps the best decision you can make is hiring the services of a Registered Investment Advisor (RIA). Unless you’ve taken college classes and earned a degree in investment finance, have already spent many years investing successfully, and have studied portfolio construction, you should hire the services of a fee-based investment advisor who already has the academic and experiential background to guide you with making investment decisions customized to your unique set of circumstances.
Have you written your Investment Policy Statement (IPS)? Do you know what your individual required rate of return (RRR) is? Have you constructed a portfolio designed to achieve your financial goals during the time remaining before your retirement which builds your wealth while guarding against risk?
These are just a few examples of how an investor’s behavior can result in varying degrees of financial success. To be successful as an investor, you must first develop the mindset and behavioral practices that help you achieve the wealth you desire. It’s not uncommon that administrative assistants have larger portfolios than the doctors for whom they work. Income does not determine wealth; inheritance does not determine wealth; education does not determine wealth. A person’s wealth is best attributed to sensible behavior with wise guidance over time.
“Be + Have = Behave. You will experience your success when you BEHAVE accordingly. BE and you shall HAVE.” Steve Maraboli, behavioral scientist.
We hope this article about building your wealth through behavior was informative. Please contact us so we can review your behavioral practices and the corollary possibilities available to you for securing and increasing your personal wealth and enhancing your retirement.
Joseph M. Maas, CFA, CVA, ABAR, CM&AA, CFP®, ChFC, CLU®, MSFS, CCIM
Synergy Financial Management, LLC
701 Fifth Avenue Suite 3520
Seattle, Washington   98104
ph: 206.386.5455
fx: 206.386-5452
www.sfmadvisors.com

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

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

One of the biggest issues facing retirees in the U.S. today is that many of us are living longer. You wouldn’t think this was a problem, but living is expensive and getting more expensive every year.
  • Healthcare and medications are constantly increasing
  • Basic living expenses are costing more as inflation pushes prices higher
  • A bag of groceries used to cost $10 and now costs $30
  • The price of a cup of coffee and a newspaper is ridiculous
Prices keep rising, and they are unlikely to stop. As time goes by, especially as a retiree living on a fixed income, you’ll need more money every year to stay ahead of the inexorable advance of inflation and remain financially secure, feel good about your life’s situation, meet your responsibilities, and be a blessing to your family and others.
The life expectancy for men of 65 is presently 84.3 years, and for a woman at 65, the average life expectancy is 86.6. Frankly, these numbers are ephemeral because with the advances in medical technology and pharmaceuticals, many people will live into their 90s and we’re likely to witness a surprising increase in the number of centenarians, of which you could very well be one!
This is great news if you have the resources to enjoy a life that extends into those advanced years. Clearly the question is how confident you feel about the ability of your 401(k) or pension, together with your Social Security benefits, to cover your living expenses in the future as prices for everything keep going up and up. Will your nest egg become too thin or even vanish? One of the biggest fears most seniors and retirees have is worrying that their nest egg will fall short and they’ll have to rely on their family or the government.
An unpleasant thought. Yes, you can always reduce the quality of your retirement lifestyle, and you can always work more years than you originally planned. These are unpleasant thoughts also.
This brings us to the main question: “What is your financial strategy for funding your comfortable retirement, the retirement you want to have?
Deciding how much money you need for retirement depends on the careful calculations of your financial planner. You may not realize it, but your financial planner is professionally trained to work with you in determining the exact cost of the retirement lifestyle you wish to live.
Once your lifestyle goals are identified, your financial planner can precisely calculate how much money this lifestyle will cost, extending the calculations through the decades to your 100th birthday or your 110th birthday. Then, working backward, your financial planner can calculate how much you will need for each of the intervening years, and by reverse engineering can arrive at the amount of money you need to have when you retire.
Remember also that even though you may not be physically working in your retirement years, you may also be able to secure steady income through your investments and revenue vehicles such as rental income.
The point is that now is a brilliant time to assess your current wealth and determine the amount of wealth you will need to claim the lifestyle you want in retirement. There is only so much time between today and the day you want to retire, and time is the greatest asset you have for building your financial wealth sufficiently.
Your financial planner will also identify the required rate of return (RRR) your combined investments need to achieve to reach the level of wealth that’s desired, and will help you build the best portfolio for reaching your RRR annually while also protecting your assets.
Do not delay! Make an appointment with a fee-based financial planner as soon as possible so you can make sure your retirement nest egg lasts as long as you do!

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

Joseph M. Maas, CFA, CVA, ABAR, CM&AA, CFP®, ChFC, CLU®, MSFS, CCIM

Synergy Financial Management, LLC

701 Fifth Avenue Suite 3520

Seattle, Washington 98104

ph: 206.386.5455

fx: 206.386-5452

www.sfmadvisors.com

Start Your Estate Plan with These 4 Tips

One area many investors overlook is estate planning. Proper estate planning is an essential component of your financial plan because it can help your loved ones avoid a difficult and expensive process once you pass away. Here are four easy steps to help you plan for the distribution of your assets by creating and maintaining an estate plan that provides your heirs with financial confidence

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

 

Joseph M. Maas, CFA, CVA, ABAR, CM&AA, CFP®, ChFC, CLU®, MSFS, CCIM

Synergy Financial Management, LLC

701 Fifth Avenue Suite 3520

Seattle, Washington  98104

ph: 206.386.5455

fx: 206.386-5452

www.sfmadvisors.com

The Blueprint for Your Investment Success

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

Imagine yourself building a house without a set of blueprints. On a section of barren land you would dig a foundation for a house whose square footage you didn’t know, pour concrete and set studs for the wooden framework you haven’t designed, add walls with windows and doors … all according to a mental plan in your head. Can it be done? Yes, but can it be done well? Would results be more compatible if you had first created blueprints?
Similarly, investing your financial resources can be greatly expedited and more secure once you’ve developed your investment policy statement (IPS). The main purpose of your IPS is to help serve your financial analysis process with a specific set of rules that guide your decision-making. Here are the components of a good investment policy statement:
1. Identify the person responsible for creating the investment policy, executing the policy, monitoring the policy’s results, and making changes as necessary. This could be you or your financial advisor.
2. Describe your investment philosophy. You may choose to invest conservatively, moderately, aggressively, or some combination based on a weighting of asset allocation. Your investment philosophy guides you with identifying your current situation, determining your goals, and measuring the gap between. This is sometimes referred to as a “GAP” analysis.
3. State your investment objective as a monetary sum. Most investors want to acquire as much as they can, but this does not lead to a carefully organized and measured plan of growth. It’s much better to know at the outset the amount of money you need so you can structure the steady advance of your investments toward an achievable goal. Most investors want sufficient wealth for a comfortable retirement lifestyle. If you’re not certain what your retirement lifestyle will be, now is a good time to consult with an advisor to figure this out.
4. State your return objective. Your return objective is the amount of return you must earn annually on your investment to achieve your investment goal. Known as the required rate of return (RRR), this return rate is different for everyone. You might need to earn 5% to achieve your investment goal over a 20-year period, or you might need 9% over the 20 years. Consulting with your financial planner should provide you with a rate of return that is reasonable and protects you from undue risk.
5. State your risk objectives. Every investment carries risk, and knowing how much risk you can accept is an important part of building your portfolio. Your financial advisor can help you diversify your vulnerability among assets that have a likelihood of achieving your return objective.
6. Examine your constraints. The amount of time you have to invest before retiring is an important variable, as are the impact of taxes, inflation, and investment fees on your wealth accumulation. Again, your financial advisor can assist you with identifying constraints and planning for them.
Clearly, having an investment policy statement as the underlying structure and plan of action for selecting, managing, and exiting investments brings structure to the steady acquisition of wealth and serves as a neutral guide for making decisions about your investments, keeping you emotionally impartial during storms so your investment decisions for entry and exit are based on previously approved decision points and not the caprice of fear and greed.
We hope this article about creating an investment policy statement was informative. Synergy Financial Management can assist with developing and managing your IPS so you achieve your financial goals as quickly and safely as possible.
Please contact us so we can discuss ways to increase your personal wealth and enhance your retirement. Thank you!
Joseph M. Maas, CFA, CVA, ABAR, CM&AA, CFP®, ChFC, CLU®, MSFS, CCIM
Synergy Financial Management, LLC
701 Fifth Avenue Suite 3520
Seattle, Washington 98104
ph: 206.386.5455
fx: 206.386-5452
www.sfmadvisors.com

Eye On Retirement? Focus On Your Exit Plan!

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

You should always be thinking about exit planning. Some owners think they can sell their business within a few months, but the chance of that happening would be miraculous. Other business owners think a 3 – 5 year window is a reasonable range of time to plan the exit of their business, but this is also very shortsighted. What’s even more astonishing is that about 70% of business owners surveyed do not have an exit plan.
Instead of getting a sales check, business owners may be getting a reality check.
As early as possible, business owners should begin picturing exactly what they want when it comes time to exit their business. Do they plan to close their business, sell it to a third-party, sell it to an insider, or stay in business part-time or remain as an advisor? Owners should also bring together their team of professionals…their accountant, attorney, and business broker, quarterbacked by their financial planner, to make sure everyone is focused on the same outcome.
If you want to sell your business, you should be looking to maximize the value of your business years ahead…in fact, as soon as you purchase or start your new business. Time is your ally, giving you the opportunity to build and shape your business for sale.
Just as a homeowner tries to optimize the value of their home by adding an extra bedroom, or putting on a new roof, installing a few windows or building a deck near the flower garden, so also should you be developing the facets of your business by adding to your product line, increasing sales, building goodwill, etc., so more value is constantly being created.
Remember that the marketplace will assess the true value of your business according to legal standards of value that can be represented and reviewed in a court of law, so having your business assessed through the process of a business valuation is a serious event. You may think you know the value of your business through your own estimations of EBITDA or other arbitrary assumptions, but the market will rely on the official valuation of your business’s worth.
Rather than be severely surprised by a dismal valuation, it will pay you royally to know ahead of time how the market will weigh the worth of your business so you can prepare now, with years you can use, to build your business in ways the market will appreciate and reward.
It is also always a good time to begin identifying possible buyers because the sooner you begin, the more likely you are to find one! With Baby Boomers turning 65 at the rate of 250,000 per month, many businesses will go unsold and simply shutter because there is a lack of buyers and a lack of salable businesses. As a business owner, your future buyer could be very close by, and you might think about nurturing your relationship with an interested family member, an employee, a customer, a vendor, or even a nearby competitor who may wish to expand their market reach. Finding a buyer takes a lot longer than most owners realize, and the process of selling your business is more complicated than selling your home, especially when selling a larger business.
Remember to start your exit planning process immediately so you can use time to your advantage and have the opportunity to build your business in ways the market values. Having an exit plan is essential to good business practices so you can create the future you want through clear and careful planning that helps you transition out of your business with less anxiety and a lot more money.
We hope this article about exit planning was informative. Synergy Financial Management can help with developing, managing and achieving your exit plan goals and the sale of your business. Please contact us so we can discuss ways to increase your personal wealth and enhance your retirement. Thank you!
Joseph M. Maas, CFA, CVA, ABAR, CM&AA, CFP®, ChFC, CLU®, MSFS, CCIM
Synergy Financial Management, LLC
701 Fifth Avenue Suite 3520
Seattle, Washington   98104
ph: 206.386.5455
fx: 206.386-5452
www.sfmadvisors.com

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