Are you on track to retire? Find out.

Are you on track to retire? This seems like a simple question, and it is — but the answer’s not easy to get to. Pensions are fast becoming an endangered species, which puts the onus of retirement planning on you, and there are a lot of variables in play. There’s no “magic number” that works for everyone. How much do you have saved, and what is your asset allocation? How much are you saving, and what’s your company match? When would you like to retire, and what are your expenses? How much will your social security be, and when will you start taking it?

And then there are the “what-ifs”. What if you save more, or less, or raise or lower your expenses? What if you want to take a big vacation, or leave a legacy? What if you change your asset allocation? What if there’s a market correction? What if a law is passed which raises the “full retirement age” for Social Security? And on, and on, and on.

There’s little question that the retirement deck is becoming stacked against those who don’t have expert-level knowledge, or access to those who do. I’m looking to level that playing field.

How?

I’m offering a free, personalized retirement analysis. First we’ll set up a meeting to gather data from you, like your retirement package, expenses, social security information, and current investments, as well as your goals, like risk tolerance and desired retirement age. I’ll iterate on the details until I’m satisfied, run the numbers, and then meet with you again — at your workplace, or over lunch, or wherever is most convenient for you — to go over the results.

I won’t pull any punches or promise any magic financial product that will make all your worries disappear. Rather, I’ll tell you what I’ve found (in plain English, not financial-ese). We’ll be able to play around with the variables I’ve mentioned above to see what effect they’ll have on your retirement. In the end, I’ll have a specific list of recommendations, which you can implement as you see fit. Perhaps more importantly, you’ll have a much clearer sense of where you are and what knobs you can turn in order to help you get where you want to go.

What’s the catch? You’re wise to ask. I’m a Registered Investment Advisor — I should be charging for a service like this! The catch is straightforward: I’m growing my business, and you may find that you like working with me as a financial advisor, that you trust me to work for your best interest, to keep you informed rather than try to keep you ignorant, to communicate with you often, and to earn my fee and more in the value I provide.

But if we don’t end up working together, if I only shed some light on your current financial situation and then we part ways, then that’s okay by me. There are many people for whom I’ve had only one session, which ended with me telling them, “do X, Y, and Z, and then come back and talk to me in a few years.” I enjoy those meetings as much as any, because invariably these clients — and I do think of them as clients — leave the meeting wiser and more informed than they arrived, armed with knowledge that will serve them well. And that, ultimately, is why I do what I do.

What’s the next step? If you like the idea of putting some clarity around your retirement, just click here. I’ll get in touch to set up an appointment, and we’ll get the ball rolling!

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let’s figure out how we can help

I’d like to try something a little different this time around. Rather than me talking at you, I’m hoping you can talk to me — specifically, about how BGFS can give back to the community.
We engage in some giving already, of course: “pre-investing” sessions are effectively subsidized such that I don’t plan on raising the price within the next decade, and BGFS donates to Austin Children’s Shelter each month. But I’d like to do more, and I’d love it if you were involved in what that looks like. So, I’m going to keep this short and to the point, to give you room to talk: what ideas do you have on this front? A few ideas to get things percolating:
  • Volunteer with Cornerstone Financial Education
  • Donate a specific portion of each client’s investment fees to Cornerstone, or Austin Children’s Services, or Habitat for Humanity, etc. etc.
  • Hold drives for food/clothing/etc. periodically throughout the year (may want an office for this…)
  • Create a free or low-cost web tool or app to help with finances. (Sure, it’s a crowded market, but there’s always room for a unique idea. What do you wish were out there?)
So — what do you think? What would you like to see?

What do I filter out, and what do I tune in to?

People who’ve worked with me know one of my favorite sayings: “benign neglect is one of the best investment management practices you can engage in.” (I wish I could say I came up with it; rather, it was Warren Buffett, though his language was a little stronger.) The financial news is constantly looking for something to panic over; a few weeks ago, it was China, and before that it was Greece. The Wall Street Journal says it better than I can; go ahead and read, I can wait.

At the end of the day, 99% of financial news can be boiled down to this: “the markets go up, and the markets go down”. But we already knew that, didn’t we? Especially my clients, who through their weekly statements have become accustomed to the short-term ups and downs of the stock market.

But if we’re supposed to ignore 99% of financial news, that doesn’t mean that we should just stick our heads in the sand, does it? No, of course not. The question to ask is: how does this affect me in the long term? Not the gobal economy, not in the short term: me, in the long term. So if someone talks about oil prices — which are constantly bouncing around — then you can safely ignore it and change the channel (or turn to the sports section); but if you come across an article where an economist talks about a change in long-term projections, then your ears might start to perk up a bit.

Of course, while such articles do indeed discuss the long term, they don’t talk about *you*, in particular. For that, we need a metric for how on-track you are to meet your goals. And no, I don’t mean just your current portfolio balance! As we said earlier, the market is constantly going up and down, and investing isn’t a game where you’re just trying to get more dollars; rather, it’s all about balancing risks against reward. Is your portfolio too heavily weighted towards stock, such that a sudden market correction at the wrong time might throw a wrench in the works? Or is your portfolio weighted too heavily towards bonds, so that it’s not growing fast enough to meet your needs?

My clients are familiar with the “success rate” metric that I use for exactly this purpose: a percent value that represents the likelihood, after all the ups and downs of the market, of meeting your goals. This kind of number is the Gold Standard, the ultimate arbiter of whether you should take action based on the financial news: if the market takes a dip, but your success rate is still in your target range, then you can sleep peacefully. If your success rate starts to drop below target, then you can still sleep peacefully, but now you have work to do: perhaps changing your allocation, revising your goals, increasing your savings rate, or delaying retirement. Regardless, you have an indicator that tells you exactly how much action to take –no more, and no less.

Sounds pretty cool, doesn’t it? Instead of some vague feeling of dread that you might not be able to retire, you can get a concrete indicator that tells you exactly when it’s time to take action. If this is something that sounds interesting to you, I’d be happy to put together a financial projection for you, gratis. (Even if you already have a financial advisor, it’s worth getting a second opinion — or a first opinion, if they don’t offer this kind of metric!) Just click the link, and I’ll be in touch!

defeating your worst enemy

Last week, we talked about how your own worst enemy when it comes to investing is yourself. So how does one go about defeating an enemy so subtle, so intelligent, and so very…you? Well, here are a few systems that can help.

Have a written plan, and a regular date in your calendar for reviewing it. Whatever your plan is — whether you’re a businessman or an academic — write that plan down. If you don’t have a written, solid plan, it’s a good bet that you’re going to let your emotions change that plan whenever you feel like it. If the market crashes, it’s too late — if you sell then, you’re just buying high and selling low! So write a plan, review it once every 6-12 months, and only change the plan when it’s up for review. This will keep you from trying to chase performance and falling victim to that dreaded Behavior Gap.

In particular, have a systematic rebalancing plan. If your investing plan is asset allocation based — and I recommend that it should be — make sure you regularly check to see if it needs rebalancing. Notice that I said “check”; don’t just mindlessly rebalance every quarter, or trading costs could eat any gains you may have gotten. No, it’s better to have a concrete plan in place, with rules like “if the absolute percentage of international stocks is more than 5% from the target, rebalance” or “if any individual stock becomes more than 2% of my portfolio, rebalance”.

Stick to the Yahoo principle. William Baldwin at Forbes wrote an article in which (along with recommending fee-only advisors) he outlines the Yahoo principle: buy things that trade in large volumes with prices you can see. Read the article for his reasoning, but I only needed one story to convince me: a friend of mine, incredibly intelligent, who had been investing since before college, had money tied up in some fancy dutch-auction securities which, after 2008, simply would not sell, at any price. Sure, nothing ventured, nothing gained, but there’s such a thing as the reward not being worth the risk.

Once a year, run the Overnight Test. This gem comes from Carl Richards. The idea is simple: once a year, imagine that one night, some crazy guy took all your assets and liquidated them, but left the proceeds in your account, so you wake up and find that everything you have is in cash. What would you buy? If it’s not the securities you currently own, why do you still own them?

These are some of my favorites, but it’s by no means an exhaustive list. How about you? What are some of your favorite systems?

what to do with those annoying prepaid credit cards

If you’re anything like me, you pine for the days when rebates and gifts came in the form of simple checks. Nowadays, however, it’s all the rage to give out prepaid Visas or Mastercards. Which is all well and good, except that most vendors only accept one credit card at a time, not allowing you to split your payment across multiple cards. So what to do? The answer: amazon.com gift cards to the rescue, in three easy steps!

  1. Purchase an amazon gift card in the amount of your prepaid card, using the prepaid card. Edit: You may have to register the card online before the transaction will go through, e.g. for “Vanilla Visa” cards. It’s generally as simple as entering a ZIP code.
  2. Send the gift card to your e-mail address.
  3. Apply the card’s code to your amazon.com account.

It’s completely free, and from that point on, the amount of your prepaid card can be applied against any purchase you make from amazon — from which you can buy just about anything (and the shipping is free).

Problem solved!

Financial Geekery Monthly Reminders: keeping you on track, a little at a time

Remember all that financial stuff you’ve been thinking about doing? You know, like updating your credit report, figuring out when the best time would be to buy a new PC, or backing up your financial information? Yeah, it sits in the back of your head, but it flies out the moment you sit down to your computer (and open up facebook). Well, what if you had an e-mail that popped into your inbox at the beginning of every month, reminding you of just a few of those things. “Next month’s items can wait,” it would say — “just do these things, this month.” After a year, you’d be doing pretty well, wouldn’t you?

As it so happens, such a thing exists: the Financial Geekery Monthly Reminder. No trick, no gimmicks, just a pretty little e-mail in your inbox to give you that little push to get your finances in line. Sound great? Click here — and click on the Facebook icon below, to clue your friends in.