For years I’ve witnessed how we give too much of our power away when we visit our Doctor’s office. Instead of asking why they recommend we do x or y, we blithely follow whatever recommendation is made. After all, they’re the one with MD next to their name, so who are we to question their instructions?
With the political news, or should I call it the political storm-y brewing in DC, we might recall that it was only a few months ago that talk of a trade war with China and potential tariffs on steel and aluminum created dizzying volatility in the stock market.
It’s often one of the most common mistakes investors make. By that I mean, letting the amount of capital gains tax owed on the sale of your asset, whether that’s a stock, bond, real estate or business, dominate your decision process.
It’s never easy to pay taxes, especially a 20% capital gains tax. So instead of diversifying your overall investment portfolio and not concentrating too much of your net-worth in say one stock for example, you let it ride.
Soon, five, ten, twenty+ years goes by and now this asset that has strongly increased in value and makes up close to 50% of your total investment portfolio. You know having too many eggs in one basket is risky, you know and have seen and read enough about the importance of diversification and maintaining a well balanced portfolio, yet still, even with that self-awareness, you’re allowing the tax tail to wag the dog.
The dictionary would define 'legacy' as:
a gift or a bequest that is handed down, endowed or conveyed from one person to another. It is something descendible one comes into possession of that is transmitted, inherited or received from a predecessor.
A financial planner would define legacy simply as:
"the amount of inheritance you plan to leave to your heirs and or charities/organizations upon your passing.
Think about the last time you set a challenging goal for yourself. Maybe your goal was getting to a certain weight. Maybe it was acquiring a higher paying job. Whatever your goal was, there’s a good chance you set your goals at the start of a new year. So here we are again, with 2018 around the corner.
As you transition from work to retirement, you should be prepared for the inevitable emotional roller coaster ride you’re about to go on.
Year after year, client upon client all report that their first year of retirement, from an emotional point of view, is the most difficult year of all. What may surprise you is that the emotional challenges occur regardless of your net-worth.
Imagine, that after 40+ years of working and being accustomed to receiving a bi-weekly or monthly paycheck, suddenly, there are no more paychecks coming your way.
Of all the many challenges couples face in life, whether married or living together - deciding how as a couple you’re going to manage your money tends to be the most confounding.
Some couples choose to keep their money absolutely separate. This is mine, that’s yours, and never the twain shall meet, or something similar. Of course, this option which seems very straight forward, clear and easy, comes with its own set of problems not usually envisioned when initially making this choice. The main problem being, you’re not working as a team when it comes to coordinating your cash flow, investing and tax planning strategies. As a consequence, you’re missing the opportunity to optimize your finances. You would never run a business this way, so why would you manage your cash flow this way?
One of the main reasons people fail at retirement is they give too much money to their children.
Let’s say you’re in your 60’s when you retire or even early 70’s. At this time in your life, your children are adults, yet they’re still hitting up Mom & Dad for cash. What’s up with that? And how can or more likely, will that impact your financial security? Although every parent wants to see their children succeed, giving too much money away can cause a severe drain on a couples retirement resources and jeopardize their own financial security.
Let’s call this blog my annual financial planning public service announcement for those two years or less away from retirement.
At the end of the day, a financially successful retirement requires an honest assessment of where you are today, financially speaking. Although that sounds like a pretty obvious task to undertake, herein lies the problem.