Financial advisors and the investment community were shocked this past Friday when Bill Gross, sometimes referred to as "the bond king" resigned from Pimco, a firm he founded in 1971 that rose to become one of the largest mutual fund management firms in the world. Gross also served as fund manager for the $221.6 billion Pimco Total Return fund, and made frequent television appearances.
Although the move was surprising, it was not hard to find reasons for the departure. The Total Return Fund had seen investor redemptions totaling $68 billion in the past 16 months, and more recently, Gross has been under investigation by the Securities and Exchange Commission on a charge that an exchange-traded fund he was managing had illegally inflated its performance numbers. Prior to that, Gross publicly feuded with the man regarded as his successor, Mohammed El Erian, who had become a public face of Pimco with his book outlining a "New Normal" in the investment landscape.
Gross has taken a new position at Janus Capital Group, where he will manage a new fund called Janus Global Unconstrained Bond Fund in a new Janus office to be opened near his home in Newport Beach, CA. Some have speculated that investors will pull more money out of the Total Return Fund and follow Gross over to the new fund, where Gross will have the total control that he sought, and was denied, in his later years at Pimco.
Meanwhile, Pimco seems to be in good hands, with Gross succeeded by Daniel J. Ivascyn, formerly deputy chief investment officer. The Total Return Fund will be managed by longtime Gross associates Mark Kiesel, Scott Mather and Mihir Worah.
What are we to make of all this? Today's mutual funds are typically managed under a team approach. Gross was a throwback to an era when one manager would call all the shots and be rewarded (or not) according to whether his performance exceeded the market. Over time, it became obvious that he was impatient with consensus decision-making, which simply means he was out of step with modern fund management styles. It will be interesting to see if he is able to reproduce his (generally excellent) long-term track record in a more competitive market, particularly during this time period when the bond market has been dependent on Federal Reserve stimulus, which is winding down going into next year. Many advisors benefited from Gross's investment talents, but some are also undoubtedly happy to see Pimco Total Return managed in a more collaborative atmosphere.
Sources:
http://www.investmentnews.com/article/20140926/FREE/140929923/little-known-insider-ivascyn-takes-investment-helm-at-challenged?utm_source=BreakingNews-20140926&utm_medium=in-newsletter&utm_campaign=investmentnews&utm_term=text
http://dealbook.nytimes.com/2014/09/26/william-gross-leaves-pimco-to-join-janus/?_php=true&_type=blogs&_r=0
Sincerely,
Bill Morrissey, CFP® and Tammy Prouty, CFP®
Sound Financial Planning, Inc.
Primary Office
425 Commercial St., Ste 203
Mount Vernon, WA 98273
Phone: (360) 336-6527
info@soundfinancialplanning.net
soundfinancialplanning.net
Secondary Office
650 Mullis St., Ste 101
Friday Harbor, WA 98250
(360) 378-3022
PLEASE READ THIS WARNING: All e-mail sent to or from this address will be received or otherwise recorded by the Sound Financial Planning, Inc. corporate e-mail system and is subject to archival, monitoring and/or review, by and/or disclosure to, someone other than the recipient. This message is intended only for the use of the person(s) ("intended recipient") to whom it is addressed. It may contain information that is privileged and confidential. If you are not the intended recipient, please contact the sender as soon as possible and delete the message without reading it or making a copy. Any dissemination, distribution, copying, or other use of this message or any of its content by any person other than the intended recipient is strictly prohibited. Sound Financial Planning, Inc. has taken precautions to screen this message for viruses, but we cannot guarantee that it is virus free nor are we responsible for any damage that may be caused by this message. Sound Financial Planning, Inc. only transacts business in states where it is properly registered or notice filed, or excluded or exempted from registration requirements. Follow-up and individualized responses that involve either the effecting or attempting to effect transactions in securities or the rendering of personalized investment advice for compensation, as the case may be, will not be made absent compliance with state investment adviser and investment adviser representative registration requirements, or an applicable exemption or exclusion. This information should not be construed as investment advice. All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy. WE WOULD LIKE TO CREDIT THIS ARTICLE'S CONTENT TO BOB VERES.
Monday, September 29, 2014
Thursday, September 25, 2014
SECESSION OUT OF THE BOTTLE?
Scotland has voted--for now--to remain a part of the United Kingdom, a move which avoids such huge and thorny decisions as: how much of Britain's national debt would belong to the newly-independent Scottish nation? Would Scotland have to create its own army and navy, or enter into a contract with the UK for mutual defense? What currency would Scottish citizens use--the euro, the pound or some new currency that hasn't been created yet? Would other countries have to set up embassies in the new nation, and would the country have to create its own embassies around the world? And the most interesting question of all: if Scotland leaves the UK, would Ireland follow? And Wales? And Cornwall?
The vote has put the spotlight on a lot of other separatist initiatives around the world. Prominent among these are the French-speaking citizens of Quebec in Canada, the citizens of Spain's Catalonia (who speak a different language, and whose capitol would be Barcelona), Uighurs and Tibetans in China, the Flemish in Belgium, the Istrian Italians in Croatia, the Moravians in the Czech Republic (which is itself a breakaway part of the former Czechoslovakia), the Savoyans in France, the Bavarians and Frisians in Germany, the Punjabi, Tamils and Manipuri in India, the South Moluccans in Indonesia, the Sardinians and Venetians in Italy, the Sami and Kven in Norway, the Kurds and Armenians in Turkey, Upper Silesians in Poland, and at least twenty different ethnic regions of Russia, famously including the Chechnyans. Myanmar/Burma has 12 ongoing separatist movements. The war in the Ukraine, a long-term history of violence in Northern Ireland, the Chechnyan terrorist attacks and the rise of an islamic state in Syria and Iraq illustrate some of the trauma associated with separatist efforts.
Nor is the concept totally foreign to the U.S. Texas Governor Rick Perry started his own separatist movement by publicly talked about the possibility that his state could exit the U.S., and a Texas secession petition garnered 125,000 signatures in 2012. Its backers hope to make Texas what it was for ten years in the 1800s--a sovereign nation.
In case you were wondering, the Scottish nation would have been the world's 42nd largest, behind Finland and ahead of Israel, and secession would have knocked the UK's GDP down a rung from 6th to 7th in the world, behind Brazil. An independent Quebec's GDP would rank 33rd among the world's nations, behind Colombia, comfortably ahead of Denmark. The sovereign nation of Texas would instantly become the world's 12th largest economy, larger than Mexico or Spain. The states 27 million people would qualify Texas as the world's 44th most populous, behind Venezuela and ahead of Ghana.
Constitutional experts note that, unlike Quebec and Scotland, Texas doesn't actually have the right to vote itself out of its national affiliation. Polls show that 80% of Texas voters prefer to remain American, just as Scottish voters have preferred to remain English and, so far, the Quebecois and Catalonians have voted to stay in their respective countries. But as these votes become increasingly common, it's possible that the world is entering a new era where secession initiatives are becoming more thinkable. Thirty or 50 years from now, the global map--and perhaps the American one as well--might look very different than it does today.
Sources:
http://www.dailysabah.com/opinion/2014/09/17/the-consequences-of-scottish-dependence
http://en.wikipedia.org/wiki/List_of_active_separatist_movements_in_Europe
http://www.huffingtonpost.com/2013/11/05/texas-secede_n_4213506.html
http://theweek.com/article/index/236871/what-would-happen-if-texas-actually-seceded
http://www.star-telegram.com/2013/03/24/4724519/what-if-texas-really-did-secede.html
http://en.wikipedia.org/wiki/List_of_active_separatist_movements_in_Asia
Sincerely,
Bill Morrissey and Tammy Prouty
Sound Financial Planning, Inc.
Primary Office
425 Commercial St., Ste 203
Mount Vernon, WA 98273
Phone: (360) 336-6527
Secondary Office
650 Mullis St., Ste 101
Friday Harbor, WA 98250
(360) 378-3022
info@soundfinancialplanning.net
soundfinancialplanning.net
PLEASE READ THIS WARNING: All e-mail sent to or from this address will be received or otherwise recorded by the Sound Financial Planning, Inc. corporate e-mail system and is subject to archival, monitoring and/or review, by and/or disclosure to, someone other than the recipient. This message is intended only for the use of the person(s) ("intended recipient") to whom it is addressed. It may contain information that is privileged and confidential. If you are not the intended recipient, please contact the sender as soon as possible and delete the message without reading it or making a copy. Any dissemination, distribution, copying, or other use of this message or any of its content by any person other than the intended recipient is strictly prohibited. Sound Financial Planning, Inc. has taken precautions to screen this message for viruses, but we cannot guarantee that it is virus free nor are we responsible for any damage that may be caused by this message. Sound Financial Planning, Inc. only transacts business in states where it is properly registered or notice filed, or excluded or exempted from registration requirements. Follow-up and individualized responses that involve either the effecting or attempting to effect transactions in securities or the rendering of personalized investment advice for compensation, as the case may be, will not be made absent compliance with state investment adviser and investment adviser representative registration requirements, or an applicable exemption or exclusion. This information should not be construed as investment advice. All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy. WE WOULD LIKE TO CREDIT THIS ARTICLE'S CONTENT TO BOB VERES.
The vote has put the spotlight on a lot of other separatist initiatives around the world. Prominent among these are the French-speaking citizens of Quebec in Canada, the citizens of Spain's Catalonia (who speak a different language, and whose capitol would be Barcelona), Uighurs and Tibetans in China, the Flemish in Belgium, the Istrian Italians in Croatia, the Moravians in the Czech Republic (which is itself a breakaway part of the former Czechoslovakia), the Savoyans in France, the Bavarians and Frisians in Germany, the Punjabi, Tamils and Manipuri in India, the South Moluccans in Indonesia, the Sardinians and Venetians in Italy, the Sami and Kven in Norway, the Kurds and Armenians in Turkey, Upper Silesians in Poland, and at least twenty different ethnic regions of Russia, famously including the Chechnyans. Myanmar/Burma has 12 ongoing separatist movements. The war in the Ukraine, a long-term history of violence in Northern Ireland, the Chechnyan terrorist attacks and the rise of an islamic state in Syria and Iraq illustrate some of the trauma associated with separatist efforts.
Nor is the concept totally foreign to the U.S. Texas Governor Rick Perry started his own separatist movement by publicly talked about the possibility that his state could exit the U.S., and a Texas secession petition garnered 125,000 signatures in 2012. Its backers hope to make Texas what it was for ten years in the 1800s--a sovereign nation.
In case you were wondering, the Scottish nation would have been the world's 42nd largest, behind Finland and ahead of Israel, and secession would have knocked the UK's GDP down a rung from 6th to 7th in the world, behind Brazil. An independent Quebec's GDP would rank 33rd among the world's nations, behind Colombia, comfortably ahead of Denmark. The sovereign nation of Texas would instantly become the world's 12th largest economy, larger than Mexico or Spain. The states 27 million people would qualify Texas as the world's 44th most populous, behind Venezuela and ahead of Ghana.
Constitutional experts note that, unlike Quebec and Scotland, Texas doesn't actually have the right to vote itself out of its national affiliation. Polls show that 80% of Texas voters prefer to remain American, just as Scottish voters have preferred to remain English and, so far, the Quebecois and Catalonians have voted to stay in their respective countries. But as these votes become increasingly common, it's possible that the world is entering a new era where secession initiatives are becoming more thinkable. Thirty or 50 years from now, the global map--and perhaps the American one as well--might look very different than it does today.
Sources:
http://www.dailysabah.com/opinion/2014/09/17/the-consequences-of-scottish-dependence
http://en.wikipedia.org/wiki/List_of_active_separatist_movements_in_Europe
http://www.huffingtonpost.com/2013/11/05/texas-secede_n_4213506.html
http://theweek.com/article/index/236871/what-would-happen-if-texas-actually-seceded
http://www.star-telegram.com/2013/03/24/4724519/what-if-texas-really-did-secede.html
http://en.wikipedia.org/wiki/List_of_active_separatist_movements_in_Asia
Sincerely,
Bill Morrissey and Tammy Prouty
Sound Financial Planning, Inc.
Primary Office
425 Commercial St., Ste 203
Mount Vernon, WA 98273
Phone: (360) 336-6527
Secondary Office
650 Mullis St., Ste 101
Friday Harbor, WA 98250
(360) 378-3022
info@soundfinancialplanning.net
soundfinancialplanning.net
PLEASE READ THIS WARNING: All e-mail sent to or from this address will be received or otherwise recorded by the Sound Financial Planning, Inc. corporate e-mail system and is subject to archival, monitoring and/or review, by and/or disclosure to, someone other than the recipient. This message is intended only for the use of the person(s) ("intended recipient") to whom it is addressed. It may contain information that is privileged and confidential. If you are not the intended recipient, please contact the sender as soon as possible and delete the message without reading it or making a copy. Any dissemination, distribution, copying, or other use of this message or any of its content by any person other than the intended recipient is strictly prohibited. Sound Financial Planning, Inc. has taken precautions to screen this message for viruses, but we cannot guarantee that it is virus free nor are we responsible for any damage that may be caused by this message. Sound Financial Planning, Inc. only transacts business in states where it is properly registered or notice filed, or excluded or exempted from registration requirements. Follow-up and individualized responses that involve either the effecting or attempting to effect transactions in securities or the rendering of personalized investment advice for compensation, as the case may be, will not be made absent compliance with state investment adviser and investment adviser representative registration requirements, or an applicable exemption or exclusion. This information should not be construed as investment advice. All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy. WE WOULD LIKE TO CREDIT THIS ARTICLE'S CONTENT TO BOB VERES.
Thursday, September 18, 2014
IMPULSE TRAVEL APPS
If you make your travel plans at the last minute, you'll pay a lot for the privilege. Right?
Not necessarily. A new, free iPhone app called Flight Tonight identifies all plane flights leaving within 24 hours from your home city, and shows you which airlines are willing to sell the unfilled seats at significant discounts. It sorts all flights by cheapest price. A small number of those flights will be cheaper or the same price as those booked 30 to 50 days in advance.
The spontaneous traveler can then turn to Hotel Tonight or Hotel Quickly, which shows rooms available at a discount for the same night. Recently, Groupon also launched Getaway Tonight, which shows same-day hotel deals in the U.S. The services are ideal for people who want to travel, who have very flexible schedules, and can pack and get ready for a travel adventure within 24 hours.
Citations
http://www.reuters.com/article/2014/08/04/us-apps-travel-idUSKBN0G41BP20140804?feedType=RSS&feedName=technologyNews
Sincerely,
Bill Morrissey and Tammy Prouty
Sound Financial Planning, Inc.
Primary Office
425 Commercial St., Ste 203
Mount Vernon, WA 98273
Phone: (360) 336-6527
Secondary Office
650 Mullis St., Ste 101
Friday Harbor, WA 98250
(360) 378-3022
info@soundfinancialplanning.net
soundfinancialplanning.net
PLEASE READ THIS WARNING: All e-mail sent to or from this address will be received or otherwise recorded by the Sound Financial Planning, Inc. corporate e-mail system and is subject to archival, monitoring and/or review, by and/or disclosure to, someone other than the recipient. This message is intended only for the use of the person(s) ("intended recipient") to whom it is addressed. It may contain information that is privileged and confidential. If you are not the intended recipient, please contact the sender as soon as possible and delete the message without reading it or making a copy. Any dissemination, distribution, copying, or other use of this message or any of its content by any person other than the intended recipient is strictly prohibited. Sound Financial Planning, Inc. has taken precautions to screen this message for viruses, but we cannot guarantee that it is virus free nor are we responsible for any damage that may be caused by this message. Sound Financial Planning, Inc. only transacts business in states where it is properly registered or notice filed, or excluded or exempted from registration requirements. Follow-up and individualized responses that involve either the effecting or attempting to effect transactions in securities or the rendering of personalized investment advice for compensation, as the case may be, will not be made absent compliance with state investment adviser and investment adviser representative registration requirements, or an applicable exemption or exclusion. This information should not be construed as investment advice. All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy. WE WOULD LIKE TO CREDIT THIS ARTICLE'S CONTENT TO BOB VERES.
Not necessarily. A new, free iPhone app called Flight Tonight identifies all plane flights leaving within 24 hours from your home city, and shows you which airlines are willing to sell the unfilled seats at significant discounts. It sorts all flights by cheapest price. A small number of those flights will be cheaper or the same price as those booked 30 to 50 days in advance.
The spontaneous traveler can then turn to Hotel Tonight or Hotel Quickly, which shows rooms available at a discount for the same night. Recently, Groupon also launched Getaway Tonight, which shows same-day hotel deals in the U.S. The services are ideal for people who want to travel, who have very flexible schedules, and can pack and get ready for a travel adventure within 24 hours.
Citations
http://www.reuters.com/article/2014/08/04/us-apps-travel-idUSKBN0G41BP20140804?feedType=RSS&feedName=technologyNews
Sincerely,
Bill Morrissey and Tammy Prouty
Sound Financial Planning, Inc.
Primary Office
425 Commercial St., Ste 203
Mount Vernon, WA 98273
Phone: (360) 336-6527
Secondary Office
650 Mullis St., Ste 101
Friday Harbor, WA 98250
(360) 378-3022
info@soundfinancialplanning.net
soundfinancialplanning.net
PLEASE READ THIS WARNING: All e-mail sent to or from this address will be received or otherwise recorded by the Sound Financial Planning, Inc. corporate e-mail system and is subject to archival, monitoring and/or review, by and/or disclosure to, someone other than the recipient. This message is intended only for the use of the person(s) ("intended recipient") to whom it is addressed. It may contain information that is privileged and confidential. If you are not the intended recipient, please contact the sender as soon as possible and delete the message without reading it or making a copy. Any dissemination, distribution, copying, or other use of this message or any of its content by any person other than the intended recipient is strictly prohibited. Sound Financial Planning, Inc. has taken precautions to screen this message for viruses, but we cannot guarantee that it is virus free nor are we responsible for any damage that may be caused by this message. Sound Financial Planning, Inc. only transacts business in states where it is properly registered or notice filed, or excluded or exempted from registration requirements. Follow-up and individualized responses that involve either the effecting or attempting to effect transactions in securities or the rendering of personalized investment advice for compensation, as the case may be, will not be made absent compliance with state investment adviser and investment adviser representative registration requirements, or an applicable exemption or exclusion. This information should not be construed as investment advice. All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy. WE WOULD LIKE TO CREDIT THIS ARTICLE'S CONTENT TO BOB VERES.
Monday, September 15, 2014
DEBUNKING A FEW POPULAR RETIREMENT MYTHS
Certain misconceptions ignore the realities of retirement.
Generalizations about money & retirement linger. Some have been around for decades, and some new clichés have recently joined their ranks. Let's examine a few.
"When I'm retired, I won't really have to invest anymore." Many people see retirement as an end instead of a beginning - a finish line for a career. In reality, retirement can be the start of a new and promising phase of life that could last a few decades. If you stop investing entirely, you can risk losing purchasing power; even moderate inflation can devalue the dollars you've saved.1
"My taxes will be lower when I retire." You may earn less, and that could put you in a lower tax bracket. On the other hand, you may end up waving goodbye to some of the deductions and exemptions you enjoyed while working, and state and local taxes will almost certainly rise with time. So while your earned income may decrease, you may end up losing a comparatively larger percentage of it to taxes after you retire.1
"I started saving too late, I have no hope of retiring - I'll have to work until I'm 85." If your nest egg is less than six figures, working longer may be the best thing you can do. You will have X fewer years of retirement to plan for, so you can keep earning a salary, and your savings can compound longer. Don't lose hope: remember that you can make larger, catch-up contributions to IRAs after 50. If you are 50 or older this year, you can put as much as $23,000 into a 401(k) plan. Some participants in 403(b) or 457(b) plans are also allowed that privilege. You can downsize and reduce debts and expenses to effectively give you more retirement money. You can also stay invested (see above).1,2
"I should help my kids with college costs before I retire." That's a nice thought, but you don't have to follow through on it. Remember, there is no retiree "financial aid." Your student can work, save or borrow to pay for the cost of college, with decades ahead to pay back any loans. You can't go to the bank and get a "retirement loan." Moreover, if you outlive your money your kids may end up taking you in and you will be a financial burden to them. So putting your financial needs above theirs is fair and smart as you approach retirement.
"I'll live on less when I'm retired." We all have the cliché in our minds of a retired couple in their seventies or eighties living modestly, hardly eating out and asking about senior discounts. In the later phase of retirement, couples often choose to live on less, sometimes out of necessity. The initial phase of retirement may be a different story. For many, the first few years of retirement mean traveling, new adventures, and "living it up" a little - all of which may mean new retirees may actually "live on more" out of the retirement gate.
"No one really retires anymore." Well, it is true than many baby boomers will probably keep working to some degree. Some people love to work and want to work as long as they can. What if you can't, though? What if your employer shocks you and suddenly lets you go? What if your health won't let you work 40 hours or even 10 hours a week? You could retire more abruptly than you believe you will. This is why even workaholics need a solid retirement plan.
There is no "generic" retirement experience, and therefore, there is no one-size-fits-all retirement plan. Each individual, couple or family needs a strategy tailored to their particular money situation and life and financial objectives.
Sincerely,
Bill Morrissey and Tammy Prouty
Sound Financial Planning, Inc.
Citations.
1 - tiaa-cref.org/public/advice-guidance/education/financial-ed/empowering_women/retirement-myths [8/29/14]
2 - 401k.fidelity.com/public/content/401k/Home/HowmuchcanIcontrib [8/29/14]
Primary Office
425 Commercial St., Ste 203
Mount Vernon, WA 98273
Phone: (360) 336-6527
Secondary Office
650 Mullis St., Ste 101
Friday Harbor, WA 98250
(360) 378-3022
info@soundfinancialplanning.net
soundfinancialplanning.net
PLEASE READ THIS WARNING: All e-mail sent to or from this address will be received or otherwise recorded by the Sound Financial Planning, Inc. corporate e-mail system and is subject to archival, monitoring and/or review, by and/or disclosure to, someone other than the recipient. This message is intended only for the use of the person(s) ("intended recipient") to whom it is addressed. It may contain information that is privileged and confidential. If you are not the intended recipient, please contact the sender as soon as possible and delete the message without reading it or making a copy. Any dissemination, distribution, copying, or other use of this message or any of its content by any person other than the intended recipient is strictly prohibited. Sound Financial Planning, Inc. has taken precautions to screen this message for viruses, but we cannot guarantee that it is virus free nor are we responsible for any damage that may be caused by this message. Sound Financial Planning, Inc. only transacts business in states where it is properly registered or notice filed, or excluded or exempted from registration requirements. Follow-up and individualized responses that involve either the effecting or attempting to effect transactions in securities or the rendering of personalized investment advice for compensation, as the case may be, will not be made absent compliance with state investment adviser and investment adviser representative registration requirements, or an applicable exemption or exclusion. This information should not be construed as investment advice. All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy. WE WOULD LIKE TO CREDIT THIS ARTICLE'S CONTENT TO MARKETING PRO INC.
ADJUSTING TO RETIREMENT
What people don't always realize about life after work.
If you have saved and invested consistently for retirement, you may find yourself ready to leave work on your terms - with abundant free time, new opportunities, and wonderful adventures ahead of you. The thing to keep in mind is that the reality of your retirement may not always correspond to your conception of retirement. There will inevitably be a degree of difference.
Some new retirees are better prepared for that difference than others. They learn things after leaving work that they wished they could have learned about years earlier. So with that in mind, here are a few of the little things people tend to realize after settling into retirement.
Your kids may see your retirement differently than you do. Some couples retire and figure on spending more time with kids and grandkids - they hang onto that five-bedroom home even though two people are living in it because they figure on regular family gatherings, or they move to another state to be closer to their kids. Then they find out that their children didn't really count on being such frequent company.
Financial considerations come into play here as well. Keeping up a big home in retirement can cost big dollars, and if you move to another area, there is always the chance that a promotion or the right job offer could make your son or daughter relocate just a few years later. The average American worker spends 4.6 years at a given job, and less than 10% of U.S. workers in their twenties and thirties stay at the same job for a decade.1
Medicare falls short when it comes to dental, vision & hearing care. Original Medicare (Parts A & B) will pay for some things - cataract surgery and yearly glaucoma tests for people at risk for that disease, for example, as well as dental procedures that are deemed necessary prior to another medical procedure covered under Medicare. These are exceptions to the norm, however, and as people's sight, teeth and hearing become more problematic as they age, it can be frustrating to realize what Medicare won't cover.2
You may lose the impulse to work a little. These days, most retirees at least think about working part-time. Actually doing that may not be as easy as it first seems. It is a lot harder to get hired at age 65 than it is at age 45 - no one is denying that - and part-time work tends toward the mundane and unfulfilling. If you are able to earn income as a consultant or through other types of self-employment, you may be truly satisfied by the work you do and be able to set your own schedule, too.
Retirement income comes with income taxes. While retirees anticipate (and certainly appreciate) distributions from an IRA or an employer-sponsored retirement plan, few retirees map out a sequence or strategy intended to let them take distributions from retirement and investment accounts with the least tax impact. Generally speaking, you want to draw down your taxable accounts first, then the tax-advantaged accounts, and lastly your tax-free accounts. This way, you are giving the retirement money that is taxed least more time to compound.
Under the typical model withdrawal scenario, this sequencing a) offers the potential to reduce the tax bite from all these distributions, b) promotes greater longevity for retirement savings. The wealthier the retiree is and the higher the projected rate of return for his or her portfolio, the more sense the strategy usually makes. If a retiree has very low taxable income or large unrealized gains on taxable assets, it may not be wise to follow this rule of thumb. Health and longevity factors also influence withdrawal strategies, of course.3
Retirees also need to know something about the IRS rules for retirement accounts - if the assets are withdrawn too soon or used for an inappropriate purpose, penalties can result and tax advantages can be lost.
Retirement is a transition, but it isn't a solution. There are people that are really eager to retire, people that come to believe that retirement will wipe away all that is dull and restrictive from their lives. Retiring often leads to a rewarding new phase of life, but it won't solve health issues, family dilemmas or business or money problems.
You may have plenty of time on your hands. If you and/or your spouse have routinely worked 50-60 hours a week, it can be tough to come down from that once you are retired. Your urge to be productive will persist, and sooner or later, you will find ways to stay busy, contribute and make a difference. Thinking about how you will spend your time in retirement before retirement is wise, as you don't want to risk staring at (or climbing) the walls.
Adjusting to retired life takes a bit of time for everyone. Adjustment can become easier with a candid recognition of certain retirement realities.
Citations.
1 - marketwatch.com/story/americans-less-likely-to-change-jobs-now-than-in-1980s-2014-01-10 [1/10/14]
2 - ncoa.org/enhance-economic-security/benefits-access/how-to-get-help-for-dental.html [4/17/14]
3 - tiaa-crefinstitute.org/public/institute/research/trends_issues/ti_taxefficient_1006.html [10/06]
Sincerely,
William T. Morrissey and Tammy Prouty
Sound Financial Planning Inc.
wtmorrissey@soundfinancialplanning.net
Primary Office
425 Commercial Street, Suite 203
Mount Vernon, WA 98273
Phone: (360) 336-6527
Secondary Office
650 Mullis St., Suite 101
Friday Harbor, WA 98250
(360) 378-3022
PLEASE READ THIS WARNING: All e-mail sent to or from this address will be received or otherwise recorded by the Sound Financial Planning, Inc. corporate e-mail system and is subject to archival, monitoring and/or review, by and/or disclosure to, someone other than the recipient. This message is intended only for the use of the person(s) ("intended recipient") to whom it is addressed. It may contain information that is privileged and confidential. If you are not the intended recipient, please contact the sender as soon as possible and delete the message without reading it or making a copy. Any dissemination, distribution, copying, or other use of this message or any of its content by any person other than the intended recipient is strictly prohibited. Sound Financial Planning, Inc. has taken precautions to screen this message for viruses, but we cannot guarantee that it is virus free nor are we responsible for any damage that may be caused by this message. Sound Financial Planning, Inc. only transacts business in states where it is properly registered or notice filed, or excluded or exempted from registration requirements. Follow-up and individualized responses that involve either the effecting or attempting to effect transactions in securities or the rendering of personalized investment advice for compensation, as the case may be, will not be made absent compliance with state investment adviser and investment adviser representative registration requirements, or an applicable exemption or exclusion. This information should not be construed as investment advice. All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy. WE WOULD LIKE TO CREDIT THIS ARTICLE'S CONTENT TO MARKETING PRO INC.
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