Searching for the right financial advisor can be an extremely tiring process. Unless you’ve worked directly in the industry yourself, it can be difficult differentiating the good advisors from the bad.
The reason for that is because there isn’t just one, single thing that makes an advisor good or bad. There are several factors to consider when trying to separate the two. To help jumpstart your search for the perfect financial advisor, start with these 8 questions to ask a financial advisor and pay close attention to how they answer.
Like anyone who is about to retire, you probably want to know how much income you will receive when you begin collecting your Social Security. There isn’t necessarily a cut-and-dry answer for this; much of it depends on you and the decisions you make in the years leading up to and during your retirement. This is true for anyone, male or female. However, for this specific blog post, I will be focusing more specifically on Social Security benefits for women.
More often than not, people claim their Social Security benefits as soon as they retire. It’s an instinctive reaction of both men and women when they retire, and I suppose on some level that makes sense. You’re retired—it’s finally time for you to cash in on your Social Security, right? Well, not necessarily…
It is no secret that investing in the stock market is a risky game to play. You are gambling with every second that your money is exposed to the volatility of the market.
That was proven on Monday when the Dow Jones saw its biggest drop since August 2011, with a 588-point decline.1
If you’ve read any of my past blogs or listened to my radio show, you know that I am NOT opposed to people investing in the stock market. I don’t feel that people should completely stay away from investing in the stock market in retirement. I just have strong opinions on how I believe people should go about it, especially when it comes to retirement (I’ll touch more on that in a minute).
It has been a while since we’ve seen this degree of chaos and panic surrounding the markets, and it started when China’s Shanghai Composite index dropped 8.5%. As of August 25, 2015, the index was down 42% from its June peak, and it seems to only be going downhill.2
These catastrophic declines aren’t only causing chaos for China’s markets.
The concept and comparison of savings vs. investments is important to understand, especially for people planning their retirement. It isn’t discussed nearly as often as I believe it should be. In my opinion, this should be one of the initial conversations financial advisors have with people heading into retirement (or anyone for that matter). I talk more about this in the link above, so I’m not going to go into too great of detail here
I just wanted to quickly mention it because it ties in directly with what I’m about to share with you today—the actual planning part. This step involves the creation of what I call your “floor and upside.
Successful implementation of this concept plays a key role in building a foolproof cash flow plan.
It’s the part where we very strategically allocate your hard-earned money in places that will allow every one of your retirement goals to be met.
You’ve probably read and/or been told to avoid investing in the stock market in retirement. While your priorities do need to shift as you plan for retirement, avoiding the stock market altogether does not necessarily need to be part of that shift unless you want it to be. There is just a slightly different way you should approach the stock market in retirement.
The first step is locking in complete protection of a portion of your income…
This is called building your floor.
According to Don Blanton (insurance industry spokesman and software creator who developed The Private Reserve Strategy™), there are three ways to make major, capital purchases like automobiles:
1) Going in debt. You may not have a choice. Millions of Americans don’t, and that is what keeps the wheels of the banking industry turning. Debtors aren’t earning any interest, so they are forced to pay interest.
2) Save up for it. Saving up for something in order to pay cash for it is an admirable discipline. Savers earn interest on their savings dollars and then pay for the purchase outright. Paying cash is better than borrowing money, but you still have to pay yourself back in some way or another. Then there’s the third way:
3) Collateralize. This method is used by individuals who could pay cash for the purchase, but they understand that second principle of compound interest: it works best if left alone to grow. These are the ones who earn compound interest on their savings and they collateralize their major purchases. This is the method most conducive to creating wealth. Collateralization simply means to pledge a portion of one’s money as security for an amortizing loan against one’s cash purchases. That way, your money is still earning interest while you are paying interest.
When you are in your career and receiving guaranteed, monthly paychecks, it’s an easier decision to gamble in the stock market. The reason I call it “gambling” is because that’s exactly what it is!
Imagine going to a casino with only $20 in hand. You place $5 into a slot machine. You have now given up complete control of that $5. What happens to that $5 from that moment forward relies on the fate of that one, single slot machine and you have absolutely zero control over what it decides to do.
So, what ends up happening? You end up losing that $5 in the blink of an eye, leaving you with $15 left of gambling money.
You decide another slot machine may give you better luck. So, you move to another slot machine and put another $5 into it. This time, you end up winning $15 from that! Great! You’re ahead now and you’re feeling confident, so you decide to go all in.
Imagine living in a world of “what ifs.” What if I married someone different? What if I didn’t have kids? What if I did have kids? What if I was raised in a different country? What if I went to college in a different city? You can ask yourself these questions all day. But, at the end of the day, they are just “what if” questions to which you will never truly have an answer.
There is, however, one “what if” question to which you can control the answer. This is perhaps the of the most important “what if” questions anyone who is retiring will ask themselves…
What if I don’t have the income I need in retirement
to last the rest of my family’s and my life?
This is the #1 concern retirees face: running out of money in retirement, and it’s an understandable fear. When you are used to working and getting that guaranteed paycheck, it may be difficult let go of that, regardless of how much money you’ve saved.
Well, what if you could take all of that money you’ve saved and turn it into a guaranteed paycheck? What if you could live out your retirement years never having to worry about receiving a guaranteed income stream month in and month out?
Keep reading… We’ll get there…
When it comes time to retire, there are a lot of important decisions to make. These decisions can be hard to make with so many “rules” that seem to change on a consistent basis. Unfortunately, that is the world in which we live. Things are constantly evolving and changing, and the same is true when it comes to retirement. What was once true for your parents may not be true for you.
For example, it is more likely than not that you will not be retiring with a traditional pension. The days of being able to count on income from a pension are long gone, as employers today rarely provide pensions to their employees. While there are ways today to replace the loss of a pension, the fact of the matter is you can’t count on a pension from your employer like your parents could. Therefore, the rules have changed and you have to work around it.
Here are 4 more rules you need to STOP following when planning for retirement today:
How you regulate your cash flow can make the difference between financial success and financial failure. Thanks to software developer Don Blanton, we have the Personal Economic Flow Model to give us a visual picture of how your money flows.
If you are able to visualize your money from perhaps a different perspective than you have ever seen before, it may help you to increase the overall efficiency of how you manage your cash flow.
To begin, you have a lifetime wealth and income potential. Everyone does. It’s the total amount of money that will pass through your hands during your working years. It is a large but finite amount. The primary source of capital is probably the earnings from your occupation.
You may also have other sources – an inheritance, for example. We usually receive our money from our employer on a weekly or monthly basis. For some, the amount fluctuates from pay period to pay period. For others, it is a fixed amount.
Now imagine that money in a large tank that is
being fed by your paychecks week in and week out.
At the bottom of the tank is outflow pipe. Fortunately, for you, there is a regulator valve that you can control. You can choose to divert some of your lifetime capital into savings and investments.