Category Archives: Retirement Income

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Learning from the Mistakes of Others

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How does that old saying go, “Those who cannot remember the past are condemned to repeat it”? I believe it applies to the challenges of living successfully in retirement. What does “successfully” mean? I live by Earl Nightingale’s definition of success which is, “the day to day realization of a worthy goal”.

I think it’s safe to say that retiring on our own terms is a worthy goal. So, what can we learn from history? I recently read a post from the blog Retired and Relaxed. There was an interesting discussion on what we can learn form others’ retirement “mistakes”. Here is a sample of the things “I would have done knowing what I know now”:

  • Stay healthy as I grow old
  • Have started saving and investing sooner
  • Make sure I don’t outlive my savings
  • Know the right time to retire
  • Not worry about medical insurance

These are just a few of the revelations in the blog post. The thing that struck me was that many of these things can be accomplished through education. Of course, a lot of “staying healthy” is out of our control yet there is much we can control by learning more about nutrition and exercise, for example. I agree that learning about savings and investing earlier in life can save a lot of financial heartache later in life.

However, it is never too late to learn. Understanding Medicare and Social Security are two learning opportunities that are timeless. By working with a financial advisor, you can develop a strategy to live within your means and not outlive your money. Again, it’s all about learning.

Checkout my blog post titled, It’s Time to Leave “Someday Isle” and Start Planning Your Retirement Journey for more on the “woulda, shoulda, coulda” mentality. Another of my favorite sayings is, “the best time to plant a tree was 20 years ago. The next best time is right now. We can’t undo past mistakes. We can embrace an attitude of learning and start today where we are and make the best of the time before us. Don’t go it alone. There are people like me ready and willing to help you avoid repeating the past and retire on your own terms.

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Think Like an Athlete, Retire Like a Pro

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Like many of you I watched a little football this past weekend. As a former competitive athlete I have an appreciation for the mental part of the game. Not to take anything away from the athletic abilities of the players, if you strip that away or could somehow even-out the talent on both teams you would find that it’s the team and players with the mental edge that will usually win.

I have been an athlete most of my life and once I made the transition to the business world after playing college football I found myself relying on the same qualities in business that served me well as a competitive athlete. In many cases they gave me an edge over my coworkers and competitors. I also realized that these qualities were not limited to athletes. They could be learned. So what is “the mental edge”?

One of my classmates from Stanford, Mariah Burton Nelson, who was a terrific competitive athlete in her own right in college (basketball), wrote a compelling book titled, We Are All Athletes, where she explores how everyone can apply the athletic qualities of champion athletes to everyday life.

To clarify, when I discuss the “qualities” of a champion athlete I am referring to qualities like discipline, goal-oriented, humility, commitment, courage and having a plan. Let’s take a closer look at these qualities so you have a better understanding of how you too can “think like an athlete and retire like a pro”.

  1. Goal-oriented – Think for a minute about your favorite athlete or sports team. Do you think that at some point there was a goal or do you think that individual or team success “just happened”? I know from my own athletic experience I always had a goal. I wanted to be the best I could be in my sport. But I learned at an early age that wishing wasn’t going to get it done. I had coaches who helped prepare me and parents who encouraged me and a belief in myself that I could get there i.e. passion. I also had a belief in my ability.

    So how can you apply this to your retirement planning? Well, it all starts with goals; short-term goals (1-5 years) and long-term goals (5+ years). It involves you sitting down with a pad and pen (or iPad and stylus) and deciding on what your retirement will look like and how you will get there i.e. savings and investing goals, lifestyle and timeframe.

  2. Have a plan – One of my college coaches, the late Bill Walsh (yeah, he coached at Stanford before his 49er fame), used to script the first 20 plays of every game. Part of it was contingency planning so if things didn’t go as planned there was another play to call that would address the new situation. We have to do the same with our own financial planning. We can hope to get a 7% return on our investments but what if we don’t? That is Plan B. A football team can plan for a strong running game, but what if the team comes out passing? How will they defend the change in plan? We have to know what the goal is and the plan will make sure we get there, maybe with a few detours but we will get there.
  3. Humility – Hey, life happens, right? That’s what Plan B is about. Frankly this is a quality many athletes struggle with, how to be humble. What was that old poster from years back, “It’s hard to be humble when you’re as great as I am”? I’m sure we all know a few people who embody that saying. Humility and our financial lives do go hand in hand though. To me, humility means having respect for wherever we are in life and that applies to your financial life. So if you are not where you want to be financially, respect that and make a commitment to “put a stake in the ground” and say, this is where I start, today”.
  4. Courage – It takes courage to be a champion athlete and it takes courage to execute a successful financial plan. Just like an athlete you make sacrifices and tough decisions for the good of your financial plan because you believe that your plan will take you to the “Super Bowl” of retirement whatever you perceive it to be. You own it.
  5. Discipline – The most disciplined athletes are the most successful. Your discipline will be a reflection of how committed you are to realizing your financial goals. I put discipline and courage together. You can’t have one without the other. Discipline takes sacrifice. Your financial success will be a direct result of the disciplines you embrace. No it won’t be easy. Things worth having rarely are.
  6. Commitment – Do you “walk your talk”? This is where games are won and lost and financial fortunes are made and lost. I’m not referring to staying with an investment or a plan that just isn’t working. Coaches change up game plans at halftime to respond to things that are working or not working. Commit to the right activities and behaviors. Change your plan as necessary and don’t do it alone.
  7. Teamwork – Just as championship athletes rely on their team for their individual success we have to rely on our financial professional to help us develop and execute our financial game plan. This is no time for going it alone. The “stadiums” of financial planning are littered with retirees who went broke trying to do it themselves. Work with someone that you trust. Do it as a team!

You don’t have to be an athlete or even follow sports to embrace the qualities that go into a championship athlete and team. You are an athlete when it comes to building your financial success. Think like an athlete, retire like a pro!

Time Out! Which quality do you struggle with when it comes to executing a successful retirement income game plan? You can leave a comment here.

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Your Life Experiences Affect Your Money Decisions

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A financial advisor was trying to get the business of a wealthy, retired man in San Diego. At their previous two meetings, the advisor talked about making big returns on the client’s money and had the client pegged as an “aggressive” investor. At the next meeting, the advisor was going for the “close” and had fancy charts to cement his presentation and what he thought was a sure sale. As the client sat stoically the advisor asked, “You seem somewhat distracted. Have we missed something?”

The client proceeded to tell the advisor that he didn’t like his strategy and his proposal to invest in risky stocks made him somewhat angry. He explained that his father died penniless after investing too aggressively in the stock market. He went on to explain that his father lost his manhood and his money and that wasn’t going to happen to him.

The lessons in this story are two-fold. First, the advisor failed to ask the right questions. Secondly, he didn’t respect how the client’s life experiences impacted the way he viewed money, which he would have learned had he asked the right questions. We are a product of our environment and life experiences. We either learn from them or we are destined to repeat the mistakes of those who influenced us.

My parents were hard-working people. My father was a career Marine and my mother a stay at home mom. We lived paycheck to paycheck during my childhood though I never felt I lacked anything. My parents never had enough money to even think about saving for retirement as they were busy paying for necessities for my brother, sister and me. So they never thought about retirement income. Fortunately, my father had two pensions and Social Security so they ended up in a financially ok place when my father retired from the City of San Diego.

As a result of my life experiences, I had a keen interest in money and finances growing up. As a kid, I sold flower seeds door to door and I had two paper routes to earn spending money. In high school, I worked at the local drive-in theater.

Not only did I want to have a more comfortable financial life than my parents, but I also wanted to know all about personal finance. That thirst for knowledge drove me to a career in financial services. I have certainly made my share of financial mistakes along the way; too much credit card debt in the past, investing in a “sure thing”. The good news is that those mistakes have made me a better teacher and advisor. They have also made me more prepared for retirement than I probably would have been otherwise.

How about you? What lessons can you take from your life experiences with money? Here are three suggestions to make the most of those experiences:

  1. Write down the mistakes you and/or your parents made with money. Be specific. How do you feel about them? Have they helped or hindered you?
  2. What lessons have you or can you take with you to improve your personal financial life? Write them down in a Financial Journal.
  3. Write down your short and long-term goals in your journal. These could be to get out of debt (long-term), start saving for a grandchild’s college education (long-term), decreasing your spending (short-term), not using credit cards (short-term), etc.

Finally, as we learned from the story at the beginning of this post, find a financial advisor or coach who you trust and who asks the right questions to get to know you and your financial life. There is no such thing as one size fits all when it comes to your unique financial goals and concerns. Don’t let anyone short change the experience for the sake of their personal gain. You are in charge! Please leave your comments below. You can also check out my FREE personal budgeting course here.

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5 Reasons to Consider Life Insurance Today

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I was newly married, in my 20’s, when my good friend suggested that I meet with his father who was a life insurance agent with a large life insurance company. My first reaction was, “life insurance? I’m too young for that. Besides, I have other, more important expenses now that I own a home and have two car payments.”

This was and still is a typical response to life insurance needs when we are “young”, and we think we will live forever. I eventually met with my friend’s father who laid out an affordable executive $100,000 term life policy for me and my wife. I think the payment was something like $18.00 a month. As Cher sings, “If I could turn back time…”. Or as Rod Stewart and Faces sing, “I wish that I knew what I know now, when I was younger.”

Both songs offer good advice when it comes to decisions about life insurance. Hindsight is always 20/20. We procrastinate because death protection is most likely the furthest thing on the horizon when it comes to where we spend our hard-earned dollars.

The bottom line is that we all need it. The irony is that it is less expensive the younger we are for the simple reason that life insurance is risk protection for our family and our assets, and the risk of dying is obviously lower the younger we are, provided we are in good health. Here are five reasons to consider buying life insurance:

  1. Debt Cancellation – Do you have debt that will outlive you such as a mortgage, credit cards, auto loans? Unless you have a big pot of cash set aside for paying off these debts, your heirs will be stuck with the bill. You should consider mortgage life insurance, a debt cancellation policy or a term life policy.
  2. College Education – Do you have young children who want to go to college? Should you or your spouse die, are there funds to cover their college expenses.
  3. Estate Taxes – Are estate taxes an issue? Why use your investments to pay for those when a life policy can be set up to pay your estate taxes, so your heirs inherit more of the nest egg.
  4. Income Replacement – Are you the sole income provider? Should you die, how will you replace the income your family depends on? Again, life insurance can be a solution.
  5. Affordability – Coverage is affordable. Most people can afford life insurance. The younger and healthier you are, the lower the premiums. Your advisor will help you compare policies and find the one that best fits your needs.

Many people approach the life insurance discussion much like they do when buying a car. They are skeptical and often distrusting of the agent. Like any important decision you make such as buying a house or investing your money, you want a professional to help you with these important decisions. So, it is with life insurance.

Speak with a financial advisor or life agent and find one that you can trust, and feel is working for your best interests. Don’t let the fear of being bullied into buying something you don’t need keep you from making this important financial planning decision.

I eventually did buy life insurance. Unfortunately, I waited until I was in my 30’s and, of course, I paid more than I would have as a newlywed. Better late than never. The best time to plant a tree was 20 years ago. The next best time is today. Do not let procrastination get the best of you. Have a financial professional help you assess your life insurance needs today!

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Getting Rollovers Right

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“Tis the season”, as many people say this time of year. The Holidays are a season of celebration of many varieties. It is also the time of year when many people choose to change jobs or “retire” from one career to start a new career. Often left out of the celebration is the company retirement plan that gets left behind many times without much thought. We live and work in an era of defined contribution retirement plans. Yes, it’s not our father’s or grandfather’s retirement plan.

No longer does the company provide a guaranteed pay check in retirement in the form of a pension or “defined benefit” plan, as they are called in financial services parlance. For most of us, the benefit is “undefined” because we are responsible for putting some of our hard-earned money into 401(k) plans and the like. It’s a self-service retirement these days and the more we save, the better off we will be.

Even more reason to make sure that you don’t leave that retirement plan behind at your former employer unless there is a good reason to. Here are 5 Rollover Mistakes and How to Avoid Them.

  1. Leaving your plan at your employer – This one is a little tricky because with some research you may find that it makes sense to leave your 401(k) with your former employer’s plan sponsor if it is an exceptional plan. My advice is to engage a financial advisor to review your plan to see if that is your best option. Usually it is not but don’t take any chances. In some cases, your employer won’t allow you to leave it so check with your human resources department for your options.
  2. Missing the 60-day Rollover Deadline – So, let’s say you have decided to rollover your retirement plan into an IRA at your bank or credit union. The 60-day window starts as soon as your money leaves your original account. Again, my advice is to work with a trusted financial advisor, so you don’t have any unnecessary delays. You can transfer the funds from your old plan to an IRA tax-free if you complete the transfer within the 60-day window. The penalty is steep if you whiff on this one. The whole distribution will be taxable in one year. If you are under 59 ½ you will also pay a 10% penalty.
  3. Not paying off loans before rolling over – I see a lot more of this situation today as many people have taken out a loan against their 401(k). If you don’t pay off any outstanding loans before you do a rollover, the outstanding loan amount will be considered a distribution by the IRS and you will pay taxes on the amount of the loan. Again, if you are under 59 ½ you will get socked with the 10% penalty.
  4. Cashing out or taking an indirect rollover – It can be tempting to take some of your retirement funds directly and use them to buy an RV or a boat or a new car. Some people do this with the intention of replacing it within the 60-day window. Keep in mind, any funds you don’t replace within the 60-day window will count as a distribution and will be subject to taxes and a penalty. My advice is to leave the funds intact and avoid spending the money.
  5. Failing to consider a Roth IRA – We love the benefits of tax deferral. Unfortunately, it doesn’t last forever. At some point we will all have to pay taxes on your retirement funds. If you roll your retirement funds into a Roth IRA you will pay taxes on the funds in the year that you do your rollover, yet future investment earnings will be tax-free. If you can tolerate the tax hit, you won’t have to worry about paying taxes on your IRA distributions in the future. Talk to a financial advisor to do an analysis to see if the Roth Rollover makes sense for you.

    If you are thinking about retiring in the next five years or so, check out my Retirement Ready Checklist. It’s free!