Financial Planner for Santa Barbara & Los Angeles
RETIREMENT GOALS THROUGH ONGOING FINANCIAL PLANNING SERVICES
The precarious balance between your financial plan and investment plan requires periodic analysis and revisions. Your investment returns and current lifestyle costs are interrelated and must be reviewed to accomplish your retirement goals. Insofar as advising clients in a fiduciary capacity on their portfolio and financial needs are central to our services, we also find ourselves serving as a helpful (& supportive) hand during periods of transitional stress, which may include divorce, passing of a spouse/parent or unexpected life events like health issues and early retirement.
Most investment advisors are not portfolio managers. For all intents and purposes, a large body of financial advisors profess the success of a buy-and-hold investment strategy and do not actively manage your assets. However, if you are retired or are near retirement, a well thought out portfolio adjustment plan and sell discipline becomes all the more important. Your nest egg is likely a great source of your retirement livelihood and your financial advisor has based “average annual” returns on much longer time-horizons that are positive for the rest of your retirement - this is complacency management (not active) and is pure speculation. Upon retirement you will likely begin taking income from your retirement portfolio based on your needs and what your adviser believes to be prudent. This “reverse dollar-cost averaging” often occurs when you no longer have the luxury of a long-term investment horizon.
They may offer you cooked and misleading facts, such as “if you miss the 10 best days of the stock market over 30 years you would actually have negative returns.” This is true; however, it is a one-sided argument, and fails to consider “what if I miss the 10 worst days?” One study shows missing the 10 worst days more than triples a buy and hold strategy, however both arguments are flawed and misleading. The most important risk in your portfolio is time, particularly the decay of opportunities of greater total return or recovery from losses as you move toward the golden years.
We have found that following the delivery of a financial plan* often times many of the recommendations do not get implemented for one reason or another. Sometimes recommendations do get implemented, albeit incorrectly. Financial planning can be extremely complex, and because of the severe negative consequences that can result, it is imperative that certain recommendations get implemented correctly. Many clients retain our firm after the delivery of their financial plan to ensure that our recommendations get implemented correctly and to monitor the appropriateness of their plan in light of changes in the financial markets, tax code or their personal or financial situation.
Financial planning without ongoing monitoring and adjusting is like running a marathon once and believing that you are going to be in great shape for the rest of your life.
This service maintains your financial fitness via:
· Annual updates to your financial plan*
· Close tracking of every detail of your personal financial situation
· In-depth reports and task list
· Taking you through the investment process (2-3 meetings to teach you about investing)
· Periodically checking your asset allocation to ensure that it is within the limits
· Access to Web-based retirement planning tools
· Implementation of the recommendations within days after engagement
· Answers to all of your financial planning-related questions
· Important articles, research and commentary about personal finance via e-mail
Projected income sources
-Social Security — Get estimates of your retirement, disability, and survivors benefits. Additionally, you can use Social Security to get your earnings record and the estimated Social Security and Medicare taxes you’ve paid.
-Pensions — Possible inheritances.
-We’ll see if you’re saving enough with retirement scenario calculations.
-Value of real estate, personal property, antiques, art, jewelry, gold, collectibles, business interests, etc.
-Annuities (We do not sell annuities but will neutrally evaluate these products & the prospects of 10% yearly withdrawals, etc.).
-Life insurance values, if any.
-Income from investments and retirement funds including, stocks, bonds, trusts, real estate.
Deciding when and where to retire is one of the most important decisions of our lives. Alternatively, if you're already retired, you should continue to reassess your situation and be ready to adapt to changing conditions as well as your changing aspirations. There are many considerations in which professionals are best equipped in helping plot the best course, such as assist you with defining what you want to do in retirement (are you still going to work part-time?), determine retirement income, evaluate long-term care costs, take inventory of your assets, figure out your health insurance, consider downsizing home or relocating to retirement community, make a plan, etc.
Top retiree regret? Not doing it sooner. So what can investors do to improve the odds of retiring earlier? Invest more, sooner and max out your contributions to the tax deferred accounts (annually), avoid high credit card balances, invest your money wisely with reasonable returns, don't take unnecessary investment risks, have suitable mortgage terms (if any), budget your savings (don't borrow from your future with high luxury expenses), plan early for child educations costs (529s, Educational Accounts) and make a financial roadmap with a financial advisor - become educated and guided along the retirement pathway.
Now let's discuss retirement income withdrawal rates. The problem with basing withdrawals on current portfolio values is that, if the portfolio declines in value from one year to the next, withdrawals will drop by the same percentage. For example, with a $500,000 portfolio and a 5% withdrawal rate, a 20% drop in the portfolio will reduce annual withdrawals from $25,000 to $20,000. Modern financial retirement approaches have recognized the need to smooth withdrawals when employing adjustable strategies and have come up with a variety of different methods.
For example, Guyton/Klinger rules set outer boundaries for withdrawals based on two rules: the “prosperity rule” and the “capital preservation rule.” The “prosperity rule” increases withdrawals by 10% in any year that the current withdrawal rate falls to 20% less than its initial level. The “capital preservation rule” applies during the first 15 years of retirement and cuts withdrawals by 10% if the current withdrawal rate rises to be more than 20% above its initial level. Within these boundaries, the decision rules take away the annual planned inflation adjustment if the prior year’s investment return was negative and the withdrawal rate based on the current portfolio level is higher than the initial withdrawal rate. Otherwise withdrawals increase with inflation each year as under the 4% (or X %) rule.
The only new clients we are currently accepting are those who are interested in hiring us to provide ongoing financial advisory services.
Contact us for a complimentary consultation: (805) 965-7955 | Email: [email protected]
*Not all clients require comprehensive financial plans as the considerations for such plans are partly determined by current financial assets, future economic standing and the degree of each individual’s existing planning of their own financial affairs. Also, some clients decide to forgo a detailed financial plan and prefer an overview of assets, income, expenses, health & insurance policies to determine their prospective financial stability and retirement timeline.
Financial Planners & Retirement Advisors serving San Luis Obispo County, Santa Barbara County, Ventura County, Los Angeles County & Orange County
Disclaimer: The website provides general information regarding our business along with access to additional investment related information. Material presented on this website is believed to be from reliable sources and is meant for informational purposes only. The intent is to provide helpful information, which should NOT be construed as investment advice. We do not guarantee its accuracy, nor completeness, and it is not intended to be the primary basis for investment decisions. We do not make personal investment recommendations to people or entities except to those who have engaged us expressly for the purpose of providing professional investment advisory services. Montecito Capital Management Group’s ADV filing is available online at http://www.adviserinfo.sec.gov and current FORM ADV Part 2, which describes the services offered, fees charged and detailed company information, among other things, is available upon request free of charge. We are limited in our fiduciary capacity by the firm's non-discretionary client relationship, whereby the client dictates the investment parameters and contractually agrees to accept sole responsibility for their choices.
The precarious balance between your financial plan and investment plan requires periodic analysis and revisions. Your investment returns and current lifestyle costs are interrelated and must be reviewed to accomplish your retirement goals. Insofar as advising clients in a fiduciary capacity on their portfolio and financial needs are central to our services, we also find ourselves serving as a helpful (& supportive) hand during periods of transitional stress, which may include divorce, passing of a spouse/parent or unexpected life events like health issues and early retirement.
Most investment advisors are not portfolio managers. For all intents and purposes, a large body of financial advisors profess the success of a buy-and-hold investment strategy and do not actively manage your assets. However, if you are retired or are near retirement, a well thought out portfolio adjustment plan and sell discipline becomes all the more important. Your nest egg is likely a great source of your retirement livelihood and your financial advisor has based “average annual” returns on much longer time-horizons that are positive for the rest of your retirement - this is complacency management (not active) and is pure speculation. Upon retirement you will likely begin taking income from your retirement portfolio based on your needs and what your adviser believes to be prudent. This “reverse dollar-cost averaging” often occurs when you no longer have the luxury of a long-term investment horizon.
They may offer you cooked and misleading facts, such as “if you miss the 10 best days of the stock market over 30 years you would actually have negative returns.” This is true; however, it is a one-sided argument, and fails to consider “what if I miss the 10 worst days?” One study shows missing the 10 worst days more than triples a buy and hold strategy, however both arguments are flawed and misleading. The most important risk in your portfolio is time, particularly the decay of opportunities of greater total return or recovery from losses as you move toward the golden years.
We have found that following the delivery of a financial plan* often times many of the recommendations do not get implemented for one reason or another. Sometimes recommendations do get implemented, albeit incorrectly. Financial planning can be extremely complex, and because of the severe negative consequences that can result, it is imperative that certain recommendations get implemented correctly. Many clients retain our firm after the delivery of their financial plan to ensure that our recommendations get implemented correctly and to monitor the appropriateness of their plan in light of changes in the financial markets, tax code or their personal or financial situation.
Financial planning without ongoing monitoring and adjusting is like running a marathon once and believing that you are going to be in great shape for the rest of your life.
This service maintains your financial fitness via:
· Annual updates to your financial plan*
· Close tracking of every detail of your personal financial situation
· In-depth reports and task list
· Taking you through the investment process (2-3 meetings to teach you about investing)
· Periodically checking your asset allocation to ensure that it is within the limits
· Access to Web-based retirement planning tools
· Implementation of the recommendations within days after engagement
· Answers to all of your financial planning-related questions
· Important articles, research and commentary about personal finance via e-mail
Projected income sources
-Social Security — Get estimates of your retirement, disability, and survivors benefits. Additionally, you can use Social Security to get your earnings record and the estimated Social Security and Medicare taxes you’ve paid.
-Pensions — Possible inheritances.
-We’ll see if you’re saving enough with retirement scenario calculations.
-Value of real estate, personal property, antiques, art, jewelry, gold, collectibles, business interests, etc.
-Annuities (We do not sell annuities but will neutrally evaluate these products & the prospects of 10% yearly withdrawals, etc.).
-Life insurance values, if any.
-Income from investments and retirement funds including, stocks, bonds, trusts, real estate.
Deciding when and where to retire is one of the most important decisions of our lives. Alternatively, if you're already retired, you should continue to reassess your situation and be ready to adapt to changing conditions as well as your changing aspirations. There are many considerations in which professionals are best equipped in helping plot the best course, such as assist you with defining what you want to do in retirement (are you still going to work part-time?), determine retirement income, evaluate long-term care costs, take inventory of your assets, figure out your health insurance, consider downsizing home or relocating to retirement community, make a plan, etc.
Top retiree regret? Not doing it sooner. So what can investors do to improve the odds of retiring earlier? Invest more, sooner and max out your contributions to the tax deferred accounts (annually), avoid high credit card balances, invest your money wisely with reasonable returns, don't take unnecessary investment risks, have suitable mortgage terms (if any), budget your savings (don't borrow from your future with high luxury expenses), plan early for child educations costs (529s, Educational Accounts) and make a financial roadmap with a financial advisor - become educated and guided along the retirement pathway.
Now let's discuss retirement income withdrawal rates. The problem with basing withdrawals on current portfolio values is that, if the portfolio declines in value from one year to the next, withdrawals will drop by the same percentage. For example, with a $500,000 portfolio and a 5% withdrawal rate, a 20% drop in the portfolio will reduce annual withdrawals from $25,000 to $20,000. Modern financial retirement approaches have recognized the need to smooth withdrawals when employing adjustable strategies and have come up with a variety of different methods.
For example, Guyton/Klinger rules set outer boundaries for withdrawals based on two rules: the “prosperity rule” and the “capital preservation rule.” The “prosperity rule” increases withdrawals by 10% in any year that the current withdrawal rate falls to 20% less than its initial level. The “capital preservation rule” applies during the first 15 years of retirement and cuts withdrawals by 10% if the current withdrawal rate rises to be more than 20% above its initial level. Within these boundaries, the decision rules take away the annual planned inflation adjustment if the prior year’s investment return was negative and the withdrawal rate based on the current portfolio level is higher than the initial withdrawal rate. Otherwise withdrawals increase with inflation each year as under the 4% (or X %) rule.
The only new clients we are currently accepting are those who are interested in hiring us to provide ongoing financial advisory services.
Contact us for a complimentary consultation: (805) 965-7955 | Email: [email protected]
*Not all clients require comprehensive financial plans as the considerations for such plans are partly determined by current financial assets, future economic standing and the degree of each individual’s existing planning of their own financial affairs. Also, some clients decide to forgo a detailed financial plan and prefer an overview of assets, income, expenses, health & insurance policies to determine their prospective financial stability and retirement timeline.
Financial Planners & Retirement Advisors serving San Luis Obispo County, Santa Barbara County, Ventura County, Los Angeles County & Orange County
Disclaimer: The website provides general information regarding our business along with access to additional investment related information. Material presented on this website is believed to be from reliable sources and is meant for informational purposes only. The intent is to provide helpful information, which should NOT be construed as investment advice. We do not guarantee its accuracy, nor completeness, and it is not intended to be the primary basis for investment decisions. We do not make personal investment recommendations to people or entities except to those who have engaged us expressly for the purpose of providing professional investment advisory services. Montecito Capital Management Group’s ADV filing is available online at http://www.adviserinfo.sec.gov and current FORM ADV Part 2, which describes the services offered, fees charged and detailed company information, among other things, is available upon request free of charge. We are limited in our fiduciary capacity by the firm's non-discretionary client relationship, whereby the client dictates the investment parameters and contractually agrees to accept sole responsibility for their choices.