financial planning

Five Questions To Ask Before You Retire

May 4, 2017
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The first step in any retirement income plan is to envision your retirement and make some decisions about how you will live. If the numbers don’t support the life you have in mind, now is the time to find out. Adjustments can always be made, whether it means working a little longer now in order to avoid working later, or scaling back your lifestyle in order to retire a little sooner. The more accurately you can answer these questions, the more likely you are to create a retirement income plan that will sustain you throughout life.

Where will you live?
The answer to this question affects not only housing costs, but other living costs as well. Whether you choose to move or stay put, consider the following:

  • Proximity to children and grandchildren. If you live far away from the kids, you’ll need to build travel costs into your budget and/or have extra space in your home for when the family comes to visit.
  • Affordability. Many people opt for more affordable living costs when they retire. Key factors in assessing a location’s living costs are the price of housing; the cost of food, utilities and transportation; and taxes (state income tax, property tax and sales tax).
  • Employment and business opportunities. If you plan to work during retirement, consider the job market for the type of work you want to do, or the business climate if you plan on starting a new business. This factor is often contrary to affordability: the towns with the lowest cost of living generally have the most limited employment and business opportunities; if you are looking for work that pays well or an active market for your product or service, you may have to choose a less affordable city.
  • Travel plans. If travel is expected to play a big part in your retirement plans, you might opt for an inexpensive condo near the airport (with no plants or pets), at least until the wanderlust subsides. If and when it does, you can reconsider the housing question again.
  • General preferences. Otherwise, consider the classic criteria for choosing retirement location. These include climate, cultural and recreational opportunities, access to medical care and other lifestyle issues.

What will you do?
How you plan to spend your time in retirement will largely determine how much income you’ll need. One way to look at this is to ask if your anticipated activities will add to the expense side or the income side of your retirement budget.

  • Expense-generating activities. The classic life of leisure can be expensive! Unless you plan to spend your days reading, walking and visiting with friends, you may be facing higher than-anticipated costs for travel, hobbies, and entertainment. Even classic low-cost activities such as gardening have associated expenses. This is not to say you shouldn’t enjoy yourself during retirement; it’s just that these expenses will have to be factored into the budget.
  • Income-generating activities. If you like to work, why not make that one of your primary activities during retirement? It’ll save money on hobbies and entertainment and generate income to boot. Even volunteer work pays off if it keeps you from engaging in expensive activities. If one of your goals is to start a business in retirement, hopefully it will count as an income generating activity. But you may need to prepare for several years of start-up expenses before the business becomes profitable.

How well will you live?
Living well is in the mind of the beholder. As you contemplate retirement, consider how you will live your life.

  • The simple life. Some retirees look forward to scaling back in retirement in order to reduce expenses and have what they would deem a very rich life. Grow your own vegetables. Prepare meals at home. Ride your bike. Take long walks. Read good books. You can do a lot with a little. Whether it arises from lifestyle choice or financial need, the simple life holds appeal for many.
  • The high life. On the other hand, some retirees who have been chained to an office for several decades may see retirement as their chance to live it up. Backed by a healthy retirement account and the income to support their chosen lifestyle, they may eat out more, take more vacations, explore expensive hobbies and generally live their dream. If you can afford the high life, more power to you.

How long do you expect to live?
This is the million-dollar question that, if answerable, would make retirement planning so much easier. Unfortunately, people are often misled by tables that show the median life expectancy. It has virtually no bearing on any individual’s true life expectancy. The safe route is to plan for retirement income to last to age 95 or 100.

What surprises does life hold in store? What unexpected events might you anticipate as you move through life?

  • Your health. Your genes, your health history and your lifestyle may provide some clues as to how your health will hold up as you grow older, but this is always a wild card in retirement planning. Fortunately, Medicare and supplemental insurance can take care of the major costs. Ironically, the healthier you are, the more likely you are to need long-term care later in life as the frailties that come with natural aging prevent you from performing activities of daily living such as bathing and dressing. It is often the oldest of the old who need the custodial care at the end of life. Medicare does not pay for this.
  • Your family. You never know when a family member might need your help. If your parents are still living, one or both might need personal or financial support as they age. And your children aren’t immune to life’s surprises either. A job loss, divorce, or health shock could send them to you for help just when you think your life is on an even keel. On the bright side, another grandchild or three could demand resources from you in a good way, depending on how generous you want to be.
  • The economy. Some say the financial crisis of 2008 was predictable; others say they never saw it coming. The lesson that came out of it is that anything can happen, including events beyond our wildest imagination. Adaptability is the key to managing life and money in the 21st Century. Pay attention and be ready to respond.

At HFG Wealth Management, we embrace a holistic method of financial planning known as Financial Life Planning™. We believe this is a financially effective and personally rewarding approach to creating a practical, lasting financial plan. As financial professionals using the life planning approach, our purpose is to assist individuals and families in creating a long-term vision that is consistent with their core values. At HFG we recognize that life events and life transitions can impact your financial responsibilities and your vision of the future. We are here to provide you with tips and strategies to get you started and help you reach your financial and life goals at every stage. For more information, please visit www.hfgwm.com or call 832.585.0110.

Get Ready for Seven Serious Life Transitions Ahead

September 27, 2016
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change-aheadIt can be dangerous to generalize about the baby-boom generation, but there are seven key events that nearly everyone will face as they move through the last third of their lives. Unlike earlier, happier events such as getting married, having children, and moving up the career ladder, some of these events may be anticipated with dread. For this reason many boomers may put off facing them. But lack of preparation can make a bad situation even worse. (more…)

Comprehensive Financial Planning: What It Is, Why It Matters

January 4, 2016
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Just what is “comprehensive financial planning?” As you invest and save for retirement, you will no doubt hear or read about it, but what does that phrase really mean? Just what does comprehensive financial planning entail, and why do knowledgeable investors request this kind of approach? While the phrase may seem ambiguous to some, it can be simply defined as building wealth through a process, not a product. Your approach to building wealth should be built around your goals & values.

Comprehensive financial planning is holistic. It is about more than “money.” A comprehensive financial plan is not only built around your goals, but also around your core values. What matters most to you in life? How does your wealth relate to that? What should your wealth help you accomplish? What could it accomplish for others?

Comprehensive financial planning considers the entirety of your financial life. Your assets, your liabilities, your taxes, your income, your business – these aspects of your financial life are never isolated from each other. Occasionally or frequently, they interrelate. Comprehensive financial planning recognizes this interrelation and takes a systematic, integrated approach toward improving your financial situation.

Comprehensive financial planning is long-range. It presents a strategy for the accumulation, maintenance and eventual distribution of your wealth, in a written plan to be implemented and fine-tuned over time.

What makes this kind of planning so necessary? If you aim to build and preserve wealth, you must play “defense” as well as “offense.” We have seen it is best to carefully plan to minimize taxes and debts, and adjust wealth accumulation and wealth preservation tactics in accordance with personal risk tolerance and changing market climates.

Basing decisions on a plan prevents destructive behaviors when markets turn unstable. Impulsive decision-making is what leads many investors to buy high and sell low. Buying and selling in reaction to short-term volatility is a day trading mentality. On the whole, investors lose ground by buying and selling too actively. The Boston-based investment research firm Dalbar found that from 1994-2013, the average retail investor earned 5% a year compared to the 9% average return for U.S. equities – and chasing the return would be a major reason for that difference. A comprehensive financial plan, and its long-range vision, helps to discourage this sort of behavior.  

A comprehensive financial plan is a collaboration & results in an ongoing relationship. Since the plan is goal-based and values-rooted, both the investor and the financial professional involved have spent considerable time on its articulation. There are shared responsibilities between them. Trust strengthens as they live up to and follow through on those responsibilities. That continuing engagement promotes commitment and a view of success.

Think of a comprehensive financial plan as your compass. Accordingly, as you craft and refine the plan, it can serve as your navigator on the journey toward your goals. The plan provides not only direction, but also an integrated strategy to try and better your overall financial life over time. As the years go by, this approach may do more than “make money” for you, it may help you to build and retain lifelong wealth.

At HFG Wealth Management, we embrace a holistic method of financial planning known as Financial Life Planning™. We believe this is a financially effective and personally rewarding approach to creating a practical, lasting financial plan. As financial professionals using the life planning approach, our purpose is to assist individuals and families in creating a long-term vision that is consistent with their core values. At HFG we recognize that life events and life transitions can impact your financial responsibilities and your vision of the future. We are here to provide you with tips and strategies to get you started and help you reach your financial and life goals at every stage. For more information, please visit www.hfgwm.com or call 832.585.0110.

 

 

 

Teaching Your Heirs to Value Wealth

October 5, 2015
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Values can help determine goals & a clear purpose.
family-wealthSome families are reluctant to talk to their kids about family wealth and are even afraid what they may do with it. In a 2015 national survey, 44% of families having at least $1 million in investable assets said that they had not yet told their children about their future inheritance. Another 27% said they had refrained from mentioning it until their children were 30 or older.   It can be awkward to talk about such matters, but these parents likely postponed discussing this topic for another reason: they wanted their kids to grow up with a strong work ethic instead of a “wealth ethic.”

If a child grows up knowing he or she can expect a sizable inheritance, that child may look at family wealth like water from a free-flowing spigot with no drought in sight. It may be relied upon if nothing works out; it may be tapped to further whims born of boredom. The perception that family wealth is a fallback rather than a responsibility can contribute to the erosion of family assets. Factor in a parental reluctance to say “no” often enough, throw in an addiction or a penchant for racking up debt and the stage is set for wealth to dissipate. How might a family plan to prevent this

Create a family mission statement. To truly share in the commitment to sustaining family wealth, you and your heirs can create a family mission statement, preferably with the input or guidance of a financial services professional or estate planning attorney. Introducing the idea of a mission statement to the next generation may seem pretentious, but it is actually a good way to encourage those to think about the value of the wealth their family has amassed and their role in the intention.

This mission statement can be as brief or as extensive as you wish. It should articulate certain shared viewpoints. What values matter most to your family? What is the purpose of your family’s wealth? How do you and your heirs envision the next decade or the next generation of the family business? What would you and your heirs like to accomplish, either together or individually? How do you want to be remembered? These questions (and others) may seem philosophical rather than financial, but they can actually drive the decisions made to sustain and enhance family wealth.

Feel no shame in exerting some control. A significant percentage of families seek to define a purpose for transferred wealth. In the survey, 32% of parents aged 55 or younger said they were going to specify what their heirs could use their inheritances for, and that was also true for 15% of parents aged 55-69 and 9% of parents aged 70 or older.

You may want to distribute inherited wealth in phases. A trust provides a great mechanism to do so; a certain percentage of trust principal can be conveyed at age X and then the rest of it Y years later, as carefully stated in the trust language. This is a way to avoid a classic mistake: giving too much money at once. In fact, a 2015 report notes that 46% of high net worth parents share that very concern.

Just how much is too much? Answers vary per family, of course. In the aforementioned survey, 46% of families said that they wanted to avoid handing down the kind of money that would dissuade their heirs from realizing their full potential in their lives and careers. By involving your kids in the discussion of where the family wealth will go when you are gone, you encourage their intellectual and emotional investment in its future. Pair values, defined goals, and clear purpose with financial and you will take a confident step toward making family wealth last longer.

At HFG Wealth Management, we embrace a holistic method of financial planning known as Financial Life Planning™. We believe this is a financially effective and personally rewarding approach to creating a practical, lasting financial plan. As financial professionals using the life planning approach, our purpose is to assist individuals and families in creating a long-term vision that is consistent with their core values. At HFG we recognize that life events and life transitions can impact your financial responsibilities and your vision of the future. We are here to provide you with tips and strategies to get you started and help you reach your financial and life goals at every stage. For more information, please visit www.hfgwm.com or call 832.585.0110.

What’s Your Investor Mindset?

September 8, 2015
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64% of Americans have no financial strategy at all. That’s right — no plan whatsoever to build wealth or to keep it. This finding comes from the National Consumer Survey on Personal Finance conducted by the Certified Financial Planner Board of Standards, Inc. Only 17% have a written financial plan that is updated regularly. Notably, 48% said they had benefited from having a written plan. So, congratulate yourself if you are in this group.

Why don’t more people have a financial plan? Some cited the expense of engaging a financial advisor; some said they get along just fine without a financial plan and others felt their finances weren’t complicated enough to warrant one. Others were hazy about financial services industry qualifications and 40% of respondents had no idea that there were professional credentials or designations for financial advisors. Investment and financial decisions are difficult to make for most people. Not only does it take a lot of time, the knowledge required can seem like learning a second language child’s play. There are basically three types of investor mindsets and you may have known or even been one of them.

Do-It-Yourself
The Do-It-Yourself investor believes that they possess the knowledge needed to actively manage their investments. They also have the time required to research among the thousands of investment opportunities, build an effective portfolio of securities and can monitor performance on a regular basis. They may do all of their own financial planning and manage their accounts through an online portal while paying transaction fees.

Collaborator
This type of investor likes to be involved in the investment decision-making process, however seeks the advice and expertise of a financial advisor to validate their decisions. Clients typically pay fees in the form of commissions on transactions or a fee based on the value of their assets that are wrapped into a single investment solution. Financial planning may be limited or non-existent and each investment decision must be approved in advance by the investor.

Delegator
Finally, there are investors who prefer to delegate. These investors don’t have the interest, time or desire to be involved in the day-to-day investment management decisions of their portfolios and are willing to delegate financial decision making to a trusted advisor. In addition, clients are typically offered a comprehensive set of financial planning that then drives the investment decisions. Clients typically pay a fee based on the value of the assets professionally managed.

Someone who is a delegator will usually work with an independent RIA (Registered Investment Advisor) who holds a Fiduciary duty to place the needs of the client first. Sometimes an investor may mistakenly believe that a broker/advisor they work with are similarly held to this higher Fiduciary standard. This could lead to trouble for a delegator since they typically don’t take an active role in the investment decision-making process or truly understand the investments being recommended.

Which Type of Investor Mindset Do You Possess?
Investing without a financial plan is an enormous risk; investing with a financial plan that hasn’t been reviewed in several years is also chancy. A relationship with a trusted financial advisor can help bring you up to date about what you need to do, and provide you with more clarity and confidence when it comes to the financial future. Merely having a financial plan on paper doesn’t guarantee that you will reach your goals. Yet a financial plan does give you an understanding of your current financial situation, identify where you want to be and provides a path toward closing any gaps and achieving your important financial objectives.

At HFG Wealth Management, we embrace a holistic method of financial planning known as Financial Life Planning™. We believe this is a financially effective and personally rewarding approach to creating a practical, lasting financial plan. As financial professionals using the life planning approach, our purpose is to assist individuals and families in creating a long-term vision that is consistent with their core values. At HFG we recognize that life events and life transitions can impact your financial responsibilities and your vision of the future. We are here to provide you with tips and strategies to get you started and help you reach your financial and life goals at every stage.

The Sandwich Generation: Juggling Family Responsibilities

July 17, 2015
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At a time when your career is reaching a peak and you are looking ahead to your own retirement, you may find yourself in the position of having to help your children with college expenses while at the same time looking after the needs of your aging parents. Squeezed in the middle, you’ve joined the ranks of the “sandwich generation.”

What challenges will you face?

Your parents faced some of the same challenges that you may be facing now: adjusting to a new life as empty nesters and getting reacquainted with each other as a couple. However, life has grown even more complicated in recent years. Here are some of the things you can expect to face as a member of the sandwich generation today: (more…)