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Using The Money Management Tool: Connecting Accounts

Recently we introduced The Money Management Tool to help clients better organize their financial lives. The tool has lots of features and we will occasional explain how some of the features are being used by our clients (or should be used) to help them reach their financial goals.

This post will deal with a prospective client who has many accounts and struggles to keep track of where they are located.

Situation: A prospective client approached us looking for help managing his investments. He had about 10 different accounts – multiple checking and savings accounts and a several different retirement accounts from current and previous employers. These accounts were held with several different financial organizations.

Problem: He struggled to keep track of all the accounts. He was constantly forgetting passwords used to view his balances online. He was spending hours trying to stay organized and reading the statements. The inconvenience grew to the point where he just ignored his accounts.

Solution: The Money Management Tool could be used to connect all the accounts together. After establishing the connections between the tool and his accounts, he would be able to see daily account balances for all the accounts from a single account. No more trying to remember multiple passwords or trying to read different statements each month.

new account

If you or someone you know needs help getting their financial house in order, this tool can help.

Contact us today to get started.

The One-Page Financial Plan: A Book Review

I recently read Carl Richard’s “The One-Page Financial Plan” and was impressed with Richard’s approach to working through some complex financial issues.  In particular, he focused almost exclusively on the emotional issues that investors face.  What does money mean to the investor?  What are the investor’s goals?  It’s these issues that overwhelm many investors to the point where they give up or procrastinate for years.

For folks that need a plan and don’t know where to start, this is a useful resource.  It’s simple and easy to follow and the principles are very similar to what I employ with my clients. This is a great guide to help investors think about money in terms of goals and how to get on the same page with a spouse on what the future looks like.  It is the most difficult part of financial planning.

It lacks specificity and implementation ideas.  Since every investor has a unique situation.  This makes the title of the book a little misleading since you don’t end up with a true financial plan on one page.  The book doesn’t go into detail about growth rate assumptions or serial payments or how to calculate time value of money.  Rather it focuses on concepts at a high level.

If the goal is to starting thinking and talking about the future, this is a great place to start.

Social Security Discussion

CNBC posted an article online yesterday about how to collect social security. It’s over simplified and generalizes the issues and concepts.  The interesting part was the number of comments the article received.  Close to 600 comments over the last 36 hours!  It was scary to browse through these comments to see all the misinformation that was being spread among the commenters.

If you’re thinking about Social Security, or have questions, talk to us.  We can help to think through the issues with you and help you avoid some of the common mistakes folks make.

How to Save for Retirement When You Can’t Work Longer

When working longer is no longer an option, it is time to develop strategies to maximize your remaining resources. A combination of planning, adapting and downsizing may be the best course.

Evaluate the Situation

At age 60 or so, life has usually simplified. Children are gone by now and expenses have become more predictable. Since Social Security is still on the horizon, you must find ways to create income from what remains. A realistic draw-down strategy and a workable budget are critical to a comfortable retirement.

Reduce Expenses

If your budget prohibits maintaining your prior lifestyle,  expenses must be reduced. Many retirees enjoy creating economical solutions to everyday activities. Senior discounts abound while shopping for auto insurance and other products designed for seniors will lower expenses.  Perhaps you could even cut the cord to cable TV.

Housing Options: Downsize, Reverse Mortgage or Line of Credit

Downsizing to a smaller, less expensive home is an option. You’ll save on mortgage, taxes, insurance and utility costs. You may also withdraw equity from the sale of your original home.

A reverse mortgage can be an option if you prefer to stay where you are and have substantial equity. You can remain in your home while the bank pays you a monthly payment to own your home after you are gone.

Tax Consideration for Retirement Accounts

Before Social Security starts and you have little or no taxable income, the early period is a great time to convert 401ks and Traditional IRAs into Roth IRAs. In doing so, you convert all your retirement assets into accounts from which future withdrawals are tax free. This minimizes the tax burden from the conversion.

Delaying Social Security

If your resources allow, delay Social Security as long as possible. Each year you delay beyond 62 increases your benefits substantially. And if you can wait until 70, the benefits increase by 8% each year past the defined retirement. If Social Security benefits are due for both individuals, it may be practical to draw from the lesser account at retirement age and allow the other to grow to the maximum at 70 years of age.

Annuities

In the current low interest environment, payback on annuities is historically low. However, when interest rates rise, these insurance company-backed policies that you purchase can guarantee a fixed payout for the rest of your lives.

If you’re approaching retirement and concerned that you haven’t saved enough but know that working longer is out of the question, there are a lot of options to consider.  Start with looking for ways to reduce your expenses.  That will have the greatest affect.  Hopefully, a combination of these strategies can make up for the difference.