Author: brianl

Brian was recently interviewed by a reporter from a large national publication about the extraordinarily long bull market run we’ve seen — and whether investors should be bracing for a drop. Part of their exchange is below:

REPORTER: Are your clients worried?

BRIAN: No, they know that our stock market takes two steps forward and one step back and then repeats. We plan accordingly.

REPORTER: What are you advising your clients to do?

BRIAN: There’s no doubt that this bull market is getting long in the tooth. I’m currently advising clients to dial back the risk a little bit. For example, if a new client walks in the door tomorrow and their risk tolerance points to a 60% stock allocation, I’m probably going to recommend a 50-55% allocation to stocks instead.

REPORTER: It seems the folks most at risk are those who might need the money soon — for retirement, to pay for college, etc. What sort of advice can you provide to folks who may be tempted to make changes?

BRIAN: This is true. One disciplined way to de-risk is to decrease the stock exposure in your portfolio by X% for each Y% the stock market increases. If investors don’t want to go that route but feel the need to do something, they can help ensure that their risk exposure doesn’t increase by doing things like not reinvesting the dividends that their stock holdings generate.

REPORTER: Who should make changes — and how can you gauge whether you should make any changes?

BRIAN: The closer you are to needing the invested funds, the more seriously you should look at taking steps to cap and/or reduce your risk levels. In other words, your time horizon should play a critical role in this type of decision-making. 

REPORTER: Are there any questions investors should ask themselves?

BRIAN: How close am I to needing the money I have invested in the stock market? What’s my Plan B if the market takes a dive? Can I really live with Plan B?

REPORTER: How can retirees or pre-retirees protect themselves?

BRIAN: Speak with your financial advisor about doing a risk review. If you don’t have a financial advisor, get one. This is more important than ever since such a small percentage of employees are covered by defined benefit retirement plans these days.    

Are you on track for a comfortable retirement? Get a good idea by using our retirement assessment tool here. If you have any questions about your results, please don’t hesitate to get in touch!

Planning to pay for a college education or two? Unsure whether you’re saving enough? Check out our new education assessment tool here to find out.

Are you a last-minute filer? If so, this link is for you!

Trimming college costs up front can help families avoid excessive college borrowing and the burdensome student loan payments that come with it. Here are some ideas:

Pick a college with a lower net price.

You can use a college’s net price calculator (available on every college’s website) to estimate what your net price (out-of-pocket cost) will be at individual colleges. A net price calculator does this by estimating how much grant aid a student is likely to receive based on a family’s financial and personal information. Colleges differ on their aid generosity, so after entering identical information in different calculators, you may find that College A’s net price is $35,000 per year while College B’s net price is $22,000. By establishing an ideal net price range, your child can target schools that hit your affordable zone.

Investigate in-state universities.

Research in-state options and encourage your child to apply to at least one in-state school. In-state schools generally offer the lowest sticker price (though not necessarily the lowest net price) and may offer scholarships to state residents.

Research colleges that offer generous merit aid.

All colleges are not created equal in terms of how much institutional aid they offer. Spend time researching colleges that offer generous merit aid to students whose academic profile your child matches.

Graduate early.

Earn college credit in high school by taking AP/IB classes and then graduate a semester or two early. Or look at colleges that specifically offer three-year accelerated degree programs.

Seek out free room and board.

There are two ways to do this: The first is to live at home (though transportation costs might eat into your savings), and the second way is to become a resident assistant (RA) on campus, a job that typically offers free room and board.

Work during college.

Working during college and contributing modest amounts to tuition along the way — say $1,500 to $3,000 a year — can help students avoid another $6,000 to $12,000 in loans.

Combine traditional and online courses.

Does the college offer online classes? If so, you may be able to earn some credits at a lower cost over the summer or during breaks.

Broadridge Investor Communication Solutions, Inc. Copyright 2017

Planning for retirement is so much more than making sure you have enough money to afford the lifestyle you want to have. If you’re getting ready to retire in the next few years, you should sit down and think about what your days will be like and how you’ll spend your time in retirement. The truth is, retirement is different for everyone and it’s important to take some time to envision what life will be like beyond the workplace.

A financial advisor can help you clarify your intended lifestyle during retirement – not just your budget. Here are four things to consider when planning for retirement:

How will you spend your time?

It’s common to think of retirees spending their days fishing and golfing. However, when you plan for retirement, it’s time to think about what you really want to do from day to day. How do you want to spend your time?

Maybe you’ll work part-time, maybe you’ll spend time volunteering, or maybe you’ll pick up a new hobby. However you ultimately choose to spend your time, it’s important to plan for those activities if they cost money or even generate income.

Can you afford to maintain your current lifestyle?

It’s no secret that retirement requires a lifestyle adjustment – your outlook on both time and money will change and this needs to be taken into account. Financial capital will support the life you want to have during retirement, not the other way around. That’s why the money conversations need to start with your lifestyle.

According to MarketWatch it’s important to take time to prepare for issues that are nonfinancial: “Most people think of retirement in strictly financial terms, focusing on facts and numbers. A successful retirement has very little to do with the things most people think about. Money is only a means to an end, not an end in and of itself. (Retirement is the) time in life where you get to do what you want to do, rather than what you have to do.”

Will you maintain your living arrangements?

Will you downsize in retirement? Maybe it’s not yet on your radar, but it’s important to think about your future living arrangements. For some people, selling their home and moving to a smaller space is no big deal. For others, it’s hard to leave the home where you’ve lived for several decades and where you raised your family.

Since your income will change during retirement, it’s important to talk with a financial advisor about your plans and discuss what’s realistic – and affordable. If you do wish to stay in your current home or if you intend to relocate, it’s important to plan for the change.

Planning to travel?

People often have grand plans for retirement that include expensive activities like travelling the world. If travelling during retirement is on your list of things to do, be sure to speak with your financial advisor about the scope of the travel you have planned. It’s important to research costs, plan for unexpected expenses, and possibly even purchase travel insurance. Once the approximate costs are tallied and you’ve set a budget, you can then choose the most tax-efficient way to fund your travels.

If you’re planning to retire within the next five to seven years, it’s time to start thinking beyond the money. Contact me and let’s talk about how you can maximize your retirement lifestyle.

 

Brian Littlejohn is the Founder and CEO of Sherwood Investment Management, a fee-only financial advisor firm in Sonoma County, California. Brian is a CERTIFIED FINANCIAL PLANNER(TM) professional who specializes in investment management. He holds a MBA and a Master’s Degree in Financial Analysis. He has over a decade of experience helping clients achieve their financial goals and occasionally teaches investing and financial planning courses as an adjunct professor.

Did you achieve your financial goals in 2017? If you found yourself short on cash flow last year or didn’t reach the savings milestones that you hoped for then it may be time to set some new financial goals for the New Year.

Here are four ways to help set financial goals for 2018:

Prioritize for the short and long term.

Many people have short-term (within 2 years) and long-term (over 5 years) goals; the key to achieving all of them is to prioritize. The amount of money, time, and effort you dedicate to each goal depends on their importance a.k.a. their priority.

According to Investopedia “Setting goals is an important step toward becoming financially secure. If you aren’t working toward anything specific, you’re likely to spend more than you should. Setting short-term financial goals can give you the confidence boost and foundational knowledge you need to achieve larger goals that will take more time.”

Be realistic about all goals.

Setting, working toward, and achieving financial goals is a strong motivator for bigger accomplishments, but only if the goals are realistic. It can be extremely disappointing to want something that you don’t achieve.

When setting financial goals, be realistic about the time horizon, monthly budget allocation and affordability. It’s also important to set mini-goals and check in on your progress regularly. These actions will help determine if you’re on track to achieving your goal or if the plan of action needs to be adjusted.

Seek professional advice.

When it comes to your personal finances, goals are not always easy to achieve – that’s where the advice of a professional can become part of the plan. A financial advisor can help set realistic money management goals as well as create a plan to help you achieve them in a reasonable amount of time.

An advisor can also help create investment strategies for your financial goals that align with your risk tolerance and time horizon. According to Marketwatch “Median annual returns for 401(k) holders who got professional help were 3.32 percentage points higher than returns for people who invested on their own.”

Don’t just save. Invest wisely.

A major benefit of seeking professional financial advice is the advisor’s investment knowledge and industry expertise. Of course, the option to invest on your own is an option, but when it comes to money, paying for service from an expert is definitely worth the cost.

A financial advisor doesn’t just help you find extra disposable income to save; they help you invest wisely so your money grows over time. The more your money grows, the faster you’ll achieve your goals.

If you have specific financial goals for 2018, contact me today and let’s create a plan to achieve them!

 

Brian Littlejohn is the Founder and CEO of Sherwood Investment Management, a fee-only financial advisor firm in Sonoma County, California. Brian is a CERTIFIED FINANCIAL PLANNER(TM) professional who specializes in investment management. He holds a MBA and a Master’s Degree in Financial Analysis. He has over a decade of experience helping clients achieve their financial goals and occasionally teaches investing and financial planning courses as an adjunct professor.

The New Year is often a time when people evaluate their lives to see if they’re where they want to be with their careers, with their health, and with their money. As you receive your end of the year account statements, now is the time to book an appointment with your financial advisor, revisit your investment strategy, set new goals, and check in on your retirement plan.

Are you still comfortable with the investment strategy?

This is the first question to ask yourself (and your financial advisor) when planning for retirement. Are you comfortable with the level of risk you’re taking in your retirement portfolio? The general rule of thumb is the longer your time horizon, the more investment risk you can afford to take. However, there is always an exception to every rule.

Although past performance is not an indication of potential future returns, looking at how your portfolio fluctuated over the past year can usually help determine if you’re comfortable with the level of risk being taken. I say “usually” because last year was somewhat of an anomaly in terms of the amount of risk or volatility that the U.S. stock market exhibited. Volatility will no doubt return to our markets; it’s just a matter of when.

Can you afford to increase contributions?

When it comes to saving for retirement, the more you can save, the merrier. The New Year is a perfect time to revisit your budget and determine if you can afford to increase the amount you contribute to your retirement accounts.

Increasing your contributions may allow you to retire earlier than planned. It might also allow you to spend at a higher level during retirement. Think two yearly trips to Hawaii instead of one.  Use this Vanguard retirement calculator to see how long your nest egg will last and how much your investments could grow over the years.

Are you on track for a set retirement date?

Setting a target date is a big part of checking in on your retirement plan. The question to ask your financial advisor is will your current and future savings allow you to retire on the date you hope for with the income you desire. If the answer is no, then your goals may need to be adjusted – and an advisor can help.

What are the sources of retirement income?

The second major component of creating a retirement plan (after setting a realistic target date) is determining where your retirement income will come from. The truth is, not all of your income during retirement will need to come from personal savings.

There are additional sources that will bolster your retirement income such as government assistance with Social Security as well as contributions from employer savings plans. If you’re not yet contributing to a company savings plan, talk to your employer and ask if the option is available. Very often employers match employee contributions and this helps your retirement savings grow.

If retirement planning is on your list of New Year’s resolutions, contact me today to discuss if you’re on track with your retirement goals.

Brian Littlejohn is the Founder and CEO of Sherwood Investment Management, a fee-only financial advisor firm in Sonoma County, California. Brian is a CERTIFIED FINANCIAL PLANNER(TM) professional who specializes in investment management. He holds a MBA and a Master’s Degree in Financial Analysis. He has over a decade of experience helping clients achieve their financial goals and occasionally teaches investing and financial planning courses as an adjunct professor.

 

With all the other expenses that life brings – such as a mortgage payment, education savings for the kids and the cost of living – retirement savings may not be at the top of your priority list. However, the truth is that everyone should be planning for retirement because we all want to retire someday.

According to Fidelity, Americans are living longer than ever before; this increases the importance of (and need for) retirement savings. According to one recent study, “a man who reaches age 65 today will live (on average) until age 84 and a 65-year-old woman will live to an average age of 86.” Will your current savings support a financially stable retirement?

Regardless of your age or income, you can afford to save for retirement. You just need to know where to look.

Here are four ways to maximize your retirement savings:

Participate in your employer’s retirement plan

The first place to start boosting your retirement savings is with your employer. If your employer offers a matching investment plan (i.e. dollar for dollar or similar) such as a 401(K) or a stock ownership plan, it’s a good idea to take advantage of this “free” money. Employer plans allow contributions to be directly deducted from your paycheck; this helps to ensure continued savings.

Open an IRA

If an employer savings plan isn’t available or if you’ve already maxed out your contributions, the next way to boost your retirement savings is to open an Individual Retirement Account (IRA). Investors have the option between a Traditional IRA or a Roth IRA and a financial advisor can help determine the best investment option for you.

Invest your bonus

There is no easier way to boost your retirement savings than with an unexpected windfall such as a bonus. Of course it’s always nice to have a little extra cash to spend on yourself, but investing in yourself for retirement is a smarter and more responsible financial choice.

Put your tax refund aside

When you invest money that you weren’t expecting – such as a tax refund – you won’t miss it. This makes investing your tax refund for retirement purposes an easy choice. Spending and saving wisely throughout the year with these tax tips can help boost your retirement savings with a tax refund come April.

If you want to start boosting your retirement savings, contact us today to learn how we can help.

 

Brian Littlejohn is the Founder and CEO of Sherwood Investment Management, a fee-only financial advisor firm in Sonoma County, California. Brian is a CERTIFIED FINANCIAL PLANNER(TM) professional who specializes in investment management. He holds a MBA and a Master’s Degree in Financial Analysis. He has over a decade of experience helping clients achieve their financial goals and occasionally teaches investing and financial planning courses as an adjunct professor.

The years leading up to your target retirement date are an important part of your financial plan. This is the time to determine how much income you’ll need during retirement, where that income will come from, and how much more you’ll need to save.

A financial advisor can recommend the best investment strategy for your savings as well as the most tax-efficient way to make withdrawals. It’s no surprise that the foundation of a good retirement plan starts with a budget – because the less you spend, the more you are able to save.

Here are four ways to set a budget before retirement:                             

Track daily and monthly spending

It’s a smart idea to track both your daily and monthly spending when setting a retirement budget. This will account for regular monthly expenses as well as daily splurges and unplanned purchases. Using software such as Mint or You Need a Budget can help make tracking your expenses easier.

Cut unnecessary expenses

Once you start tracking your spending, you’ll be able to identify unnecessary purchases and start to cut them out – or at least reduce them. Getting rid of a credit card or two may help in this regard. If you still have trouble, you may want to consider going to a cash-only system to get the job done.

Continue saving

After you free up some disposable income by tracking spending and cutting unnecessary expenses, you can start increasing your retirement savings. Setting up pre-authorized transfers into your retirement accounts ensures your savings are invested – and not spent elsewhere.

 Get professional advice

According to Marketwatch seeking professional financial advice can have a positive impact on your retirement budget as well as your investment accounts. Partnering with a financial advisor can help you keep track of your monthly expenses and keep you accountable for your retirement budget goals.

Your needs in retirement will differ from your pre-retirement budget needs…sometimes significantly. A financial advisor can help adjust your spending levels to help achieve your retirement goals.

To learn more about creating a budget before retirement or to start setting your retirement goals, contact us today. We are happy to start the conversation and help you make smart retirement plans.

 

Brian Littlejohn is the Founder and CEO of Sherwood Investment Management, a fee-only financial advisor firm in Sonoma County, California. Brian is a CERTIFIED FINANCIAL PLANNER(TM) professional who specializes in investment management. He holds a MBA and a Master’s Degree in Financial Analysis. He has over a decade of experience helping clients achieve their financial goals and occasionally teaches investing and financial planning courses as an adjunct professor.