 Did you know that many people struggle with anxiety, depression, and frustration after they take the leap into retirement? It’s true. We spend such a large portion of our lives working to live “the good life” during retirement, that we forget to plan what “the good life” actually looks like and aren’t sure how to spend our time when we get there. Many financial planners will focus exclusively on your portfolio. They’ll help you plan your retirement finances down to the cent. However, a large majority of financial planners stop there. They don’t help you to plan your lifestyle, or to construct a retirement savings plan that’s based in your goals and spending values. At Wisely Advised, we do things a little bit differently. We believe that retirement planning is, at its core, lifestyle planning. That’s why we help our clients through a process of identifying their values and retirement lifestyle goals, and then we work together to construct a comprehensive financial plan and investment strategy that lines up with those things. Finding Fulfillment As a RetireeAs a new retiree, you’re experiencing a colossal life change. You’re essentially going from having the majority of your day pre-planned to having no structure in your day-to-day - and that can be really difficult. Yet 6 out of every 10 full time workers say they’re confident that they can live the retirement they want. Unfortunately, because we’re so focused on the dollars and cents of retirement planning, we lose site of planning what we want to do once we actually hit the retirement milestone. This can cause a rapid shift in personal satisfaction, emotional fulfillment, and mental health. You may feel like your life and actions have lost a significant portion of meaning, especially if you were finding the majority of your emotional fulfillment from your job before retirement. In this new season of your life, it’s important to find new ways to feel emotionally fulfilled. This might mean finding new social circles, volunteering somewhere local, exercising your sense of adventure through travel, or exploring an activity you’ve always been passionate about but haven’t had much time for - like art, or fishing. Saving According to Your Goals and ValuesThe best way to plan for a fulfilling retirement is to determine what your values are, and how you can line your goals as a retiree up with that value set. For example, if you value adventure, you may make it a goal to travel somewhere new each year that you’re retired. If you value family, you may make it a goal to spend more time with your kids and grandkids. As you start to build a retirement savings plan, it’s important to take these goals and values into account. Saving for your current living expenses as someone who is employee full time may or may not cut it when you hit retirement and want to travel, spend time with family, or pick up a hobby that has associated costs. On the other side of the coin, you may find that you’re able to significantly cut back some expenses if you’re planning to drastically change your lifestyle. You may be able to downsize your home and pay it off in full if you’re planning to travel more. Alternatively, you might be able to cut the costs associated with a long, expensive commute if you stop going in to the office or metro area where you work every day and instead choose to get involved with your local community instead. Building a financial plan and a budget where your spending decisions are rooted in the lifestyle you want can help to put you on the path to a fulfilling retirement. At Wisely Advised, we can help you create the plan that works best for you. Together, we’ll uncover your unique set of values, set goals that create a lifestyle gameplan for your years as a retiree, and build a financial plan that prioritizes saving enough to achieve those goals. Ready to learn more? Contact Wisely Advised today. We’d love to help you get started planning your retirement lifestyle! Tony Velasquez is the Founder and Managing Director of Wisely Advised an Illinois Registered Investment Advisor. Wisely Advised provides comprehensive financial planning and investment advisory services to both individual and business clients. You can learn more about Tony and his firm here.
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 All too often our life situation changes and we find ourselves with a sudden influx of cash. We get a raise or a promotion. We change jobs. We inherit a small portion of a relative’s estate. We pay off a big loan that was weighing us down. These life events free up our cash flow, and they trick us into thinking we “deserve” to spend the newfound money in our budget on non-essentials. Have you fallen into the lifestyle inflation trap? If so, you’re not alone. It’s common no matter what your profession is, or what period of life you’re in. Luckily, there’s a few simple steps you can take to avoid lifestyle inflation, and set yourself up for long-term financial success. What is Lifestyle Inflation?In short, lifestyle inflation is spending more than you make, or spending more than you responsibly should. This overspending may seem reasonable in the moment, but over time it can drive you into debt, or make it harder to reach your long term savings goals. People typically fall into lifestyle inflation when they start to earn more, or find extra money in their budget as a result of a one-time cash payout or getting rid of a recurring bill. For example, if you’ve spent a long career working your way up the corporate ladder, and are rewarded with a huge promotion a few years before your retirement - your income could jump significantly. It’s tough to resist spending the extra money you suddenly having in, especially if you’ve lived a relatively frugal lifestyle up to this point. The Emotional Baggage of Lifestyle InflationAs with all things financial, lifestyle inflation is bigger than just bad spending decisions. Those decisions are typically rooted in a deeply held belief that we deserve to live the life we want. There’s nothing inherently wrong with this idea, and at Wisely Advised we help our clients create a financial plan that supports the life of their dreams. However, overspending in relation to how much income you’re actually bringing in isn’t living the life you “deserve” - it’s living beyond your means to purchase things that you want, but don’t necessarily need right now. You may feel as though you’ve put in the time and effort to earn your raise or promotion. The sweat equity you’ve poured into your career is finally being recognized, and you feel like you deserve a payout. Unfortunately, this line of thinking often results in a spend-spiral. Once you start living beyond your means, it’s tough to cut back. The SolutionIf you feel like you’re getting pulled in by lifestyle inflation, your first step should be to take an honest look at your finances. Track all of your spending over a one or two week period, and work to uncover trends. A common area that people overspend is eating out, or getting drinks with friends. You may also find that “big ticket” purchases are eating up your budget. Even if you pay for an expensive new car outright, it still may be too expensive for your budget.
Once you evaluate your spending, try to determine why you’re spending in those specific areas of your life. What value do you gain from them? Using our above example, if you’re spending too much on dinners out with friends and family, you likely value time spent together and experiences over “stuff.” Try to think of new, less expensive (or free) ways to still spend time with people you love and enjoy to fulfill that part of your value set without spending money there. This can help to drastically reduce your lifestyle inflation. Finally, if you’re still struggling, it may be time to think about what your funds should be used for. It’s not uncommon to spend frivolously after your cash flow increases, but if you’re financially savvy and nearing retirement, you likely know what your money should be used for. Speaking with a financial planner about how you can put your money to good use as you save for retirement can help you to feel ahead of the game, and ultimately resist the temptation of lifestyle inflation. Tony Velasquez is the Founder and Managing Director of Wisely Advised an Illinois Registered Investment Advisor. Wisely Advised provides comprehensive financial planning and investment advisory services to both individual and business clients. You can learn more about Tony and his firm here. As I mentioned in my previous blog, The Benefits of Compound Interest, you can compare compound interest to a snowball rolling downhill. When you’re standing at the top of the hill, and you smash together two fistfulls of snow to make a snowball, it seems very small. But when you set the snowball down and give it a push down the hill, it slowly starts to grow in size. What does that actually look like in real life though? To help you better understand, I have created a series of documents that lay out how you can expect your money to grow with the power of compound interest. Because so many people feel overwhelmed with investing and thinking about their retirement, I am going to start with a smaller amount, one that is very doable for most people looking to start saving for retirement. Let's see how what kind of growth we can expect for a monthly investment of $50.  Looking for a printable PDF version? CLICK HERE.
Plus, stay tuned for the next blog in this series where we will dive in deeper to the power of compound interest and see how some serious investing now can create a big payoff later.
It was an absolutely unorganized garage mess. As the garage door squeaked open I realized it’s definitely time to clean out the garage and probably a good opportunity to get rid of some things that we no longer need or use. Standing there I couldn’t help but smile because of a phone call I had earlier that week.
Paper, Paper, Everywhere With tax season well under way I had a long time client call me to get some forms their CPA requested from them. We had a very nice conversation that eventually led to the client asking me if it was really necessary for them to keep all of their trade confirmations and monthly statements they have been receiving. My response was “Well, how many statements and trade confirmations do you have?” She then said, “Every statement and confirmation I’ve ever been sent in the mail over the last nine years of working with you” Wow! Was my initial thought, but then I thought about my own garage and it all made sense. We often have a hard time letting go of “stuff”, yes the “stuff” that we just set in a corner and say we’ll get around to taking care of at a later date. Then before we know it that “stuff” we couldn’t get rid of creates a bigger mess that needs to be cleaned up. Important documents and statements are no different than the junk - I mean “stuff” we keep in our garages, attics, or basements. It’s Ok To Cut The Clutter I assured this client that it was ok to properly dispose of her old statements and trade confirmations; she would no longer need them. She was quite resistant to this idea at first. Then I told her that by working with my firm she had access to a user profile that stored each and every form online indefinitely. That’s right, she didn’t have to get all that paper in the mail. I explained that there was no need to allow all of this paper to take up any more space in her house and more importantly her mind. After a few minutes on the phone with our custodian TD Ameritrade Institutional we had her all set up to view her accounts online as well as view every form and statement that has ever been sent to her. I could hear the relief in her voice when we finished our call. What To Keep vs. Throw Away So with the thought of spring cleaning on my mind let me lay out a few documents that you should keep and others that you should feel comfortable shredding or disposing of properly. Things To Keep:
Things To Throw Away:
Similar to TD Ameritrade most financial institutions have now made it relatively easy to go online and login to your account. Doing so allows you to download any and all correspondence that they would have sent you in the mail, plus its stored online for you digitally. Yes, this is your golden opportunity to reduce the amount of junk mail coming to your house. Do yourself a favor and sign up or enroll in electronic statements and confirmations from all of your financial service providers. Just think - you’ll finally be able to take back that corner in the kitchen where you stack all of that unnecessary paper. So now that you have a good idea of what to keep vs. what to throw away and you’re planning on signing up for electronic delivery of your financial statements I hope you’ll take the opportunity to go through that “stuff” you’ve been saving and find a final resting place for it, like the shredder. After all - it is time for a good spring-cleaning. As for me, I’ll be in the backyard trying to straighten up my own mess, the garage. Tony Velasquez is the Founder and Managing Director of Wisely Advised an Illinois Registered Investment Advisor. Wisely Advised provides comprehensive financial planning and investment advisory services to both individual and business clients. You can learn more about Tony and his firm here.
What is a Trust? The media offers us many images for what a trust is and the type of person that has access to such a fund. The movies portray a young, immature teen galavanting around the country without a care in the world. But you can’t believe everything you see on TV, right? Trusts are not reserved for a certain group of people, they can be used as a catalyst for your estate plan and the legacy you leave behind. A trust is a legal document that allows an individual to create a direct line of inheritance for their assets. This means that you can set up a trust to house your assets and, at a select point, transfer those assets to your chosen beneficiaries. Let’s talk about what people typically put in a trust. You can fund your trust using a traditional checking or savings account, real estate, business interest, money owed to you through your business, life insurance benefits, and brokerage accounts. You can’t (and probably shouldn’t - even if it was an option) fund your trust with your workplace retirement plan (like a 401(k)), or a Health Savings Account. Because these types of accounts are specifically going to be used for your own retirement, even if you could use them to fund your trust, it’s in your best interest to maintain full control over these accounts and keep them in your name with your beneficiary designations kept up to date. People may say that three’s a crowd, but in a trust, there are often three parties involved: Grantor: The person who establishes the fund and supplies the assets. Trustee: You may think this refers to the person who obtains the assets, but in fact, a trustee is a person who controls the trust until the beneficiary becomes of age. Beneficiary: The person or people who receive the inheritance or assets within the trust. It works like this: Let’s say Kelli and I set up a trust for our sons Jorge and Theodore. I can elect my brother-in-law Kevin to be the trustee for the account. Jorge and Theodore won’t have direct access to the assets in the trust, and Kevin has control over when Jorge and Theo can receive the assets or until they reach the age I’ve designated in the trust. |
 | Deadlines are an integral part of our working lives. They dictate when you need to get that presentation done, finish your article, present your research, etc. They also decide when we have to file our taxes. Every April the IRS readies themselves for an influx of eager, hesitant, frustrated, nervous, and excited filers. Before April 15th arrives, is there anything else you can do to prepare? In fact, there is: through your IRA. |
The rules stipulate that you are able to contribute funds to your IRA for the previous year up to next year’s filing deadline. That means that if you didn’t contribute money to your IRA in 2018, you can still make 2018 IRA contributions up until April of 2019.
This deadline cushion may take you back to the time you begged a teacher for an extension on a paper, and this offer is even better! The IRS gives you a 4-month extension (a buffer your teacher would probably never go for) to beef up your IRAs.
But how does this work and when is it a good idea for you?
This deadline cushion may take you back to the time you begged a teacher for an extension on a paper, and this offer is even better! The IRS gives you a 4-month extension (a buffer your teacher would probably never go for) to beef up your IRAs.
But how does this work and when is it a good idea for you?
The Assignment
Just to refresh your memory, an IRA is a tax-advantaged retirement account owned, operated, and contributed to by you. IRAs are outside of traditional workplace retirement contribution accounts. While there are many types of IRAs the two main types are:
It is important to know that all IRA’s have contribution limits. For 2018, $5,500 per year can be contributed to an IRA per individual ($6,500 if over 50).
So why would an extended deadline be helpful for your IRA?
- Traditional IRA
- The funds you contribute are tax-deductible and are only taxed upon withdrawal.
- Roth IRA
- The funds you contribute are not tax-deductible, which won’t help you on your overall taxable income but will help you come time to withdrawal as the money will not be taxed at that time.
- Roth IRAs have additional restrictions such as income limits for contributing
It is important to know that all IRA’s have contribution limits. For 2018, $5,500 per year can be contributed to an IRA per individual ($6,500 if over 50).
So why would an extended deadline be helpful for your IRA?
The Extension
It isn’t every day that you can say the IRS did something that was helpful to you. Perhaps this exception to the rule was a way to get them voted best teacher of the year and I’d like to share with you how it could be quite helpful for you.
By using this extension, you may be able to reduce your tax liability for 2018 even if you already filed your taxes
You can do this simply by contributing more money to your IRAs. Since a Traditional IRA is tax-deductible, every dollar that you put in is able to be written off. This could put you in a tricky situation depending on the timing of your tax return. If you contribute for the 2018 year in March and you already filed for your tax return, you would have to fill out an amended tax return. If you have not, then you simply have to note this contribution on your tax files.
One of the primary benefits of a traditional IRA is that it lowers your taxable income. This fact can also make you eligible for other tax benefits like healthcare and childcare tax credit.
Contributions to both a Traditional and Roth IRA can make you eligible for saver’s credit through the IRS which could get you up to $2,000 if filing single and $4,000 if married and filing jointly. If you want more information on saver’s credit, check out the IRS page.
It is very possible that come March you realized that you forgot to make your contribution to your IRA in 2018. Luckily for you, it is still not too late! Even if you simply forgot to contribute, adding money into your account now is a great way to keep your retirement savings plan on track. The IRS will penalize you for being late on other things, but you scraped by with a get-out-of-jail-free card, use it!
Compound interest has a close relationship with time. The longer you allow an account to gain interest, the more profit you will be able to make. Compound interest may sound scary, but it really is just interest on top of interest. You may be surprised at how much your account can grow simply because of this savings phenomenon.
- Did someone say tax breaks?
By using this extension, you may be able to reduce your tax liability for 2018 even if you already filed your taxes
You can do this simply by contributing more money to your IRAs. Since a Traditional IRA is tax-deductible, every dollar that you put in is able to be written off. This could put you in a tricky situation depending on the timing of your tax return. If you contribute for the 2018 year in March and you already filed for your tax return, you would have to fill out an amended tax return. If you have not, then you simply have to note this contribution on your tax files.
One of the primary benefits of a traditional IRA is that it lowers your taxable income. This fact can also make you eligible for other tax benefits like healthcare and childcare tax credit.
Contributions to both a Traditional and Roth IRA can make you eligible for saver’s credit through the IRS which could get you up to $2,000 if filing single and $4,000 if married and filing jointly. If you want more information on saver’s credit, check out the IRS page.
- Human Error
It is very possible that come March you realized that you forgot to make your contribution to your IRA in 2018. Luckily for you, it is still not too late! Even if you simply forgot to contribute, adding money into your account now is a great way to keep your retirement savings plan on track. The IRS will penalize you for being late on other things, but you scraped by with a get-out-of-jail-free card, use it!
- Compound Interest is your best friend
Compound interest has a close relationship with time. The longer you allow an account to gain interest, the more profit you will be able to make. Compound interest may sound scary, but it really is just interest on top of interest. You may be surprised at how much your account can grow simply because of this savings phenomenon.
The Final Grade
Growing your retirement savings accounts is always a good thing. With compound interest on your side, contributing to your IRA before the April deadline may be a great way for you to boost your savings and keep your savings momentum going.
Note: To see an example of how compound interest works in practice, click here to view a PDF that showcases how 20 years of maxing out your IRA with a 7% investment return could look for an investor.
Want to learn more? Contact us today. With the April tax deadline creeping up, we’d love to help you organize your IRA contributions before it’s too late!
Remember, the last date to file your taxes is April 15, 2019. Stay ahead of the curve and make your contributions while you can!
Tony Velasquez is the Founder and Managing Director of Wisely Advised an Illinois Registered Investment Advisor. Wisely Advised provides comprehensive financial planning and investment advisory services to both individual and business clients. You can learn more about Tony and his firm here.
Note: To see an example of how compound interest works in practice, click here to view a PDF that showcases how 20 years of maxing out your IRA with a 7% investment return could look for an investor.
Want to learn more? Contact us today. With the April tax deadline creeping up, we’d love to help you organize your IRA contributions before it’s too late!
Remember, the last date to file your taxes is April 15, 2019. Stay ahead of the curve and make your contributions while you can!
Tony Velasquez is the Founder and Managing Director of Wisely Advised an Illinois Registered Investment Advisor. Wisely Advised provides comprehensive financial planning and investment advisory services to both individual and business clients. You can learn more about Tony and his firm here.
For many people, giving to others is part of their nature. This might mean volunteering, giving your time to help others or support a cause you care about or donating money to organizations that are near and dear to your heart.
If charitable giving is part of your pre-retirement budget, odds are you plan to keep it that way during retirement! However, few retirees plan for charitable giving in a way that leaves them feeling like they’ve successfully supported causes they care about while still being tax-efficient.
Before retirement, you have a few options available to you. You might participate in something called “charitable lumping” where you save money for a year, or multiple years, at a time - then contribute it to charity in one year in order to take a larger tax deduction come filing season, or maybe you give to a donor-advised fund (more on this in a second). However, when you retire, you have a few additional options available to you when it comes to organizing your charitable donations.
Let’s explore what options you have for donating to charity in a tax-efficient way during retirement, and how you can make sure that charitable giving gets incorporated into your retirement budget.
Donor Advised Funds
Donor-advised funds are often used by people before retirement. A donor-advised fund is a pretty cool concept: it allows you to contribute small amounts at a time to the fund. Your contributions to the fund mature over time, and then you’re able to distribute larger sums to your favorite charitable organizations.
Donor-advised funds also give you a tax benefit, which can be helpful for people who are itemizing their taxes some years when their income and deductions make sense to do so, but take the standard deduction in other years. However, when you retire, your tax situation changes a little bit. You have required minimum distributions, and income from pensions, that are taxable - but your income isn’t going to dramatically change year-to-year like it may have before retirement.
As a retiree, you can still use donor-advised funds - but in a different way. Many retirees choose to contribute to a donor-advised fund throughout their retirement, just as they would have contributed to a charitable organization or a donor-advised fund before retiring. Then, they make their favorite charitable organization the beneficiary of the fund. This is an estate planning move that can help you to build a legacy long after you pass away - while still incorporating giving into your retirement budget!
Donor-advised funds also give you a tax benefit, which can be helpful for people who are itemizing their taxes some years when their income and deductions make sense to do so, but take the standard deduction in other years. However, when you retire, your tax situation changes a little bit. You have required minimum distributions, and income from pensions, that are taxable - but your income isn’t going to dramatically change year-to-year like it may have before retirement.
As a retiree, you can still use donor-advised funds - but in a different way. Many retirees choose to contribute to a donor-advised fund throughout their retirement, just as they would have contributed to a charitable organization or a donor-advised fund before retiring. Then, they make their favorite charitable organization the beneficiary of the fund. This is an estate planning move that can help you to build a legacy long after you pass away - while still incorporating giving into your retirement budget!
Qualified Charitable Distributions
Another way you can give to charity during retirement while mitigating the impact of taxes on your retirement income is to give Qualified Charitable Distributions (QCDs) from your retirement accounts. A Qualified Charitable Distribution is a Required Minimum Distribution that, instead of taking yourself, you give directly from your retirement account to a charity of your choice.
QCDs count toward your total annual RMDs, and can help to offset the amount of taxes you have to pay on your accumulated savings. Currently, retirees can give up to $100,000 each year through QCDs. This strategy may make sense for people who have plenty of cash flow coming from a pension, non-tax-deferred retirement accounts, Social Security, and their tax-deferred retirement accounts - and can give a portion of their tax-deferred RMDs to charity without feeling like their budget is suddenly too tight.
QCDs count toward your total annual RMDs, and can help to offset the amount of taxes you have to pay on your accumulated savings. Currently, retirees can give up to $100,000 each year through QCDs. This strategy may make sense for people who have plenty of cash flow coming from a pension, non-tax-deferred retirement accounts, Social Security, and their tax-deferred retirement accounts - and can give a portion of their tax-deferred RMDs to charity without feeling like their budget is suddenly too tight.
Understand Your Budget
Whether you’ve decided to donate to a donor-advised fund, leverage QCDs, or just continue to contribute to charity directly during retirement - it’s important to understand your budget. Generally speaking, retirees spend notably less than they did when they were employed. Of course, you may find that your budget shifts somewhat - you may be spending more on travel, or gifts for your grandkids who you now get to see more often, and less on transportation or morning coffee on your way to work. But when you plan to spend less, you often plan to save less, too, by default.
A lot of retirement savings equations estimate that you should only need 70-80% of your pre-retirement income during retirement. However, if you plan to give to charity as a retiree, or donate a notable portion of your savings to charity as part of your estate plan, you need to make sure your budget (and your savings) can support your philanthropic goals. Under-saving, and expecting to be able to spend and donate in the same way you did before retiring could be a problem. It’s best to understand your budget going into retirement and incorporate charitable giving ahead of time.
A lot of retirement savings equations estimate that you should only need 70-80% of your pre-retirement income during retirement. However, if you plan to give to charity as a retiree, or donate a notable portion of your savings to charity as part of your estate plan, you need to make sure your budget (and your savings) can support your philanthropic goals. Under-saving, and expecting to be able to spend and donate in the same way you did before retiring could be a problem. It’s best to understand your budget going into retirement and incorporate charitable giving ahead of time.
Make a Plan
It’s been said that hope is not a strategy. Hoping to continue giving to charity in retirement doesn’t guarantee that, when push comes to shove, donating will be part of your regularly-scheduled financial routine. Making a plan ahead before you retire, or adjusting your plan after retirement to include charitable donations, can help you continue to support the causes and organizations you’re passionate about while still planning ahead for taxes, cash flow, and more.
Need help? Contact us today. We’d love to help walk you through how to build your retirement plan, and how to incorporate charitable giving into your strategy.
Tony Velasquez runs Wisely Advised, LLC a full-service Registered Investment Advisory Firm offering Financial Planning, Accounting and Investment Advisory services to individuals, families, and businesses.
Whether it's traveling, being at the beach, or at his family's ranch in Texas, Tony loves enjoying time with his family and friends.
Need help? Contact us today. We’d love to help walk you through how to build your retirement plan, and how to incorporate charitable giving into your strategy.
Tony Velasquez runs Wisely Advised, LLC a full-service Registered Investment Advisory Firm offering Financial Planning, Accounting and Investment Advisory services to individuals, families, and businesses.
Whether it's traveling, being at the beach, or at his family's ranch in Texas, Tony loves enjoying time with his family and friends.
Is your financial advisor fee-only?
If you’re sitting there scratching your head right now wondering - What the heck does fee-only mean? - you’re not alone. Most people don’t know what, exactly, a fee-only advisor is, and what that means for them. Let’s explore what being a fee-only financial advisor means, and why it’s important.
If you’re sitting there scratching your head right now wondering - What the heck does fee-only mean? - you’re not alone. Most people don’t know what, exactly, a fee-only advisor is, and what that means for them. Let’s explore what being a fee-only financial advisor means, and why it’s important.
What Is the Fee-Only Movement?
Financial advisors can be compensated in three different ways:
At Wisely Advised, we are a fee-only financial planning practice. This means that we’re only compensated by the fees our clients pay us. There are no commissions earned from selling financial or insurance products, and we never accept any “kickbacks” for our recommendations.
We offer financial planning, investment management, retirement planning, college education planning, and estate planning help - all for the fees paid by our clients. We believe that this allows us to maintain a client relationship that’s built on trust and honesty. The advice we give is always intended to be in your best interest - because we work for you and you alone.
However, not all financial advisors are the same. Commission-only advisors, for example, don’t necessarily charge fees for their financial planning services. Instead, they receive a commission from selling you insurance or financial products. Fee-based advisors strike a balance between fee-only and commission-only fee models. They have some financial planning fees, but may be selling insurance or financial products, as well.
- Fee-only.
- Fee-based.
- Commission-only.
At Wisely Advised, we are a fee-only financial planning practice. This means that we’re only compensated by the fees our clients pay us. There are no commissions earned from selling financial or insurance products, and we never accept any “kickbacks” for our recommendations.
We offer financial planning, investment management, retirement planning, college education planning, and estate planning help - all for the fees paid by our clients. We believe that this allows us to maintain a client relationship that’s built on trust and honesty. The advice we give is always intended to be in your best interest - because we work for you and you alone.
However, not all financial advisors are the same. Commission-only advisors, for example, don’t necessarily charge fees for their financial planning services. Instead, they receive a commission from selling you insurance or financial products. Fee-based advisors strike a balance between fee-only and commission-only fee models. They have some financial planning fees, but may be selling insurance or financial products, as well.
The Fiduciary Oath
As a fee-only financial advising practice, we abide by the fiduciary oath. This means that we are legally obligated to always act in our client’s best interest. The oath goes on to say that all advisors who are abiding by the fiduciary oath must go so far as to put our client’s best interest above our own.
That sounds great in practice, but what does it mean for you? Is working with a fiduciary, fee-only advisor really going to make or break your financial life?
In short - yes.
If an advisor is fee-based or commission-only, they’re receiving money for selling you, their client, a financial or insurance product. If they have the choice between making a commission off the sale of a financial product that’s going to perform well for you, or recommending the best possible option for your unique financial situation and goals - even if it won’t earn them a commission - there’s a chance that they’ll recommend the money-earning product. Even if it isn’t the best option for you.
This is the difference between the fiduciary oath and suitability. Fee-based and commission-only financial advisors can abide by suitability standards. They’re making recommendations that are suitable to you, but possibly not the best option available. Fee-only advisors don’t have these same conflicts of interest, so they’re able to uphold the fiduciary oath.
That sounds great in practice, but what does it mean for you? Is working with a fiduciary, fee-only advisor really going to make or break your financial life?
In short - yes.
If an advisor is fee-based or commission-only, they’re receiving money for selling you, their client, a financial or insurance product. If they have the choice between making a commission off the sale of a financial product that’s going to perform well for you, or recommending the best possible option for your unique financial situation and goals - even if it won’t earn them a commission - there’s a chance that they’ll recommend the money-earning product. Even if it isn’t the best option for you.
This is the difference between the fiduciary oath and suitability. Fee-based and commission-only financial advisors can abide by suitability standards. They’re making recommendations that are suitable to you, but possibly not the best option available. Fee-only advisors don’t have these same conflicts of interest, so they’re able to uphold the fiduciary oath.
Don’t Be Afraid to Ask!
When you interview a new advisor, it’s so important to ask about their fee structure. If they can’t definitively say that they’re fee-only, you may need to do some deeper digging to understand how they’re compensated. In the world of financial planning, there are many salespeople out there who aren’t looking out for your best interest. They’re not necessarily invested in helping you connect your money with your life, and guiding you to achieve your biggest financial goals and dreams.
Unfortunately, because this is true, it also means that advisors who aren’t fee-only likely aren’t going to come right out and say so. In these situations, it’s important to take charge an be your own advocate. And if you feel like you need help knowing what questions you should ask, I encourage you to reach out to the Wisely Advised team. We’d be happy to walk you through what questions are worth asking, what answers or red flags you should look for, and what being fee-only or fiduciary is all about.
Ready to learn more? Contact us today!
Tony Velasquez runs Wisely Advised, LLC a full-service Registered Investment Advisory Firm offering Financial Planning, Accounting and Investment Advisory services to individuals, families, and businesses.
Whether it's traveling, being at the beach, or at his family's ranch in Texas, Tony loves enjoying time with his family and friends.
Unfortunately, because this is true, it also means that advisors who aren’t fee-only likely aren’t going to come right out and say so. In these situations, it’s important to take charge an be your own advocate. And if you feel like you need help knowing what questions you should ask, I encourage you to reach out to the Wisely Advised team. We’d be happy to walk you through what questions are worth asking, what answers or red flags you should look for, and what being fee-only or fiduciary is all about.
Ready to learn more? Contact us today!
Tony Velasquez runs Wisely Advised, LLC a full-service Registered Investment Advisory Firm offering Financial Planning, Accounting and Investment Advisory services to individuals, families, and businesses.
Whether it's traveling, being at the beach, or at his family's ranch in Texas, Tony loves enjoying time with his family and friends.
At some point in our lives, we all have to face an incredibly challenging truth: our parents are aging, and they may or may not need our help. Regardless of what your relationship is like with parents, seeing them be unable to live a full and independent life can be incredibly difficult. Unfortunately, while you’re dealing with the emotional weight of caring for an aging parent, you’re also dealing with the stress of incorporating their care into your life.
Sometimes, our parents need financial support. This might mean that they need help with medical bills, sourcing and creating a payment plan for long-term memory care, or that they need to move in with you or one of your siblings as they become unable to care for themselves in the day-to-day.
It might also mean that they need a different kind of support that’s not financial at all - they may need your time, energy, and care. In some cases, reorganizing your schedule to care for your parent, or to help drive them to different medical appointments, or to guide them through the estate planning process with a trusted family advisor or estate planning attorney, is even more of a stressor than reorganizing your financial life to meet their needs.
Many of my clients have experienced the need to care for an aging parent at one time or another, and each of them have approached it in a unique way that was best for both their finances and both their emotional and physical health. With that being said, let’s look at how you can leverage your financial plan to offer both monetary and non-monetary support to a parent who needs it.
Financial Support
In some cases, your parent(s) might need some financial assistance as they grow older. This may be because they don’t have adequate retirement savings, or maybe they’ve encountered several hefty medical bills that have temporarily put them under water.
Whatever the situation may be, know this: financially supporting your aging parents is uncomfortable for everyone in the situation. You may feel awkward or frustrated by having to take on a sudden, possibly unexpected, expense. They likely feel awkward for needing their kids to take care of them - when for so many years as they raised you and supported you, it was the other way around.
As you work to come up with a solution that allows you to support them financially with minimal stress, guilt, or embarrassment, it can be helpful to do a few things:
- Take a hard look at everyone’s budget. Can you reasonably afford to support your parents financially? Is there something they or you can do to cut spending in other areas to make this support a reality (or to minimize how much support is actually needed)?
- Be honest. Having open and honest conversations both with your parents, and with any of your siblings, or other family members involved, is key. Don’t hide things from each other just because there’s a sense of embarrassment. Approaching financial conversations with an open mind and zero judgments will help you move through them with grace - and allow your parents to maintain their dignity.
- Check your goals first. It’s tempting to jump in and save the day when your parents are in trouble - but you need to make sure that helping them financially still fits into your goals. If you can adjust your budget, or your goals, to encompass helping aging parents, that’s great. But if the level of assistance they need would derail your retirement plans, or push you to a point of having to sell your home or make other, major financial decisions - it’s okay to reevaluate and decide exactly how much you can help without hurting yourself in the long-run.
In many cases, the non-financial support your aging parents may need can be more challenging than helping them financially. For example, having a newly-widowed parent need to move in with you because they can’t care for themselves and are dealing with health issues may be a very low level financial stressor.
They may have Social Security or a pension that covers medical bills, and if you have space in your home - this next step may seem like a no-brainer. However, having a parent move in with you can be an emotional challenge unlike any other you’ve experienced before. It could go well, but it could also put a strain on your relationship as they feel they’re relinquishing dignity and freedom, and you feel frustrated and overwhelmed.
As you work to provide non-financial support to your aging parents - whether that’s time spent, help organizing their affairs, or going above and beyond to care for them when they can’t care for themselves - is going to be hard. Don’t put extra pressure on yourself to do what you know will cause more harm than it will help them.
And if you’ve committed to providing them with the support and care they need, make sure that you’re leaving room in your finances and your life for the extra expenses required to care for both you and them. This may mean hiring a part-time caregiver to sit with your mother who has dementia and can’t be left alone while you run errands or grab lunch with a friend. It may mean making room in your budget to take regular family vacations that allow you (and them - if they’re capable of joining!) to get out of the house, relax, and blow off steam.
Take Care Of Yourself, TooWhatever situation you find yourself in, make sure you’re balancing caring for your parent(s) with taking care of yourself. Shouldering the emotional and financial pressure of caring for parents who can no longer care for themselves is exhausting. Making sure you’re keeping your finances and theirs straight - while still allowing yourself some breathing room to relax and engage in self-care is key.
Talking to a financial planner can help you navigate this challenging time in your life. Together, they can help you and your parents to create a budget, prioritize self-care in your spending, organize your finances, and reevaluate or adjust long-term goals based on the amount of care you expect your parents to need in an ongoing capacity. Want to know more? Contact me today. I’d love to help you in any way I can.
Tony Velasquez runs Wisely Advised, LLC a full-service Registered Investment Advisory Firm offering Financial Planning, Accounting and Investment Advisory services to individuals, families, and businesses.
Whether it's traveling, being at the beach, or at his family's ranch in Texas, Tony loves enjoying time with his family and friends.
You’ve spent most of your working life saving for retirement. The assets you’ve acquired throughout the years are put in place in order for you to live the life you want after you are done working. But now that you are in retirement, what is the best plan to manage your assets? Let’s go over a handful of tools you’ll need in order to allocate your assets in a functional, practical, and fulfilling way.
What Is Asset Allocation?
We can’t talk about asset management without talking about the basics! Asset allocation is the foundation for all of your investing and asset management strategy. The process of allocating assets rests on the combination of places to store your money. There are three primary places:
- Stocks
- Investing in stocks offers the highest percentage of returns, but are inherently more volatile. Stocks also have the highest short-term fluctuation rate, meaning your risk tolerance becomes increasingly important. Finally, stocks are equity ownership - meaning you have some ownership in an organization.
- Bonds
- A safe and secure place for your money is in bonds. They offer a lower percentage of return than stocks but significantly higher than a traditional savings account. Bonds are a great way to invest your money with little risk, as they’re not fully reliant on an organization’s performance (like stock). Instead, they’re a loan that you issue to a company (or to the federal government) that is paid back to you with interest.
- Cash
- The most liquid option, saving in cash tends to be the most secure way to keep your money. With the heavy safety net, comes a significantly less return rate Traditional savings accounts are seeing interest rates of a dismal 0.1%-1.5%, which does not give your money a chance to grow.
Determining the appropriate combination for you will draw on your age and risk tolerance. There are benefits and detractors for each option and the percentage you settle on should be something that fits with your values and will be best for your retirement lifestyle.
Finding Your Ideal Mix
Asset allocation is a concept that is geared toward making the most of the money you have. Financial experts have devised a simple formula to help you gauge the percentage of assets that should be placed in stocks and which should go to fixed-income assets.
The principle message here is that stocks offer the greatest possibility for return but they are inherently more volatile than bonds and cash savings. This is where your risk tolerance comes in. Remember - everyone has a unique tolerance for risk. Working with a professional advisor can help to determine what your risk tolerance is, and to assess what that means for your investing strategy.
Keep Risk In Mind
Would you be ok if your portfolio dropped by 50%? What percentage of your retirement income comes from other assets like Social Security or a pension fund? It is important to assess your level of dependence on each stream of income to help you figure out what risks you are willing to take and which you are not.
Investments of all kind whether stocks or fixed-income (bonds) come with risks. But you can find each of these options in a higher risk or lower risk column depending on the nature of it. This means that you can choose the investment strategy that best aligns with your risk tolerance. I’ll give you a few examples.
- Dividend vs. non-dividend stocks
- Dividend stocks tend to be more mature and stable than their non-dividend counterparts. Non-dividend stocks are more unstable therefore carry higher risk and can procure a higher return.
- Bond options
- There is a huge difference in security between a US Treasury bond and a high-profile corporate bond. Even bonds can have a huge range of risk and return.
- There is a huge difference in security between a US Treasury bond and a high-profile corporate bond. Even bonds can have a huge range of risk and return.
Your retirement is what you make it, and your investments are not separate from that. The assets you have groomed throughout your working life are there to serve you well when you retire. With a sound asset allocation strategy, you will be able to make the most of what you have.
A key point here is that asset allocation is a strategy, one that is subject to change. If you are unhappy with the progress of your assets, make a change! Doing your research and staying up-to-date on the state of your investment portfolio gives you control of your assets. As you change, whether through risk tolerance or general need, your investments can change with you.
Asset allocation can be a tricky process. If you would like to talk through some strategies that will work for you, give us a call!
Tony Velasquez runs Wisely Advised, LLC a full-service Registered Investment Advisory Firm offering Financial Planning, Accounting and Investment Advisory services to individuals, families, and businesses.
Whether it's traveling, being at the beach, or at his family's ranch in Texas, Tony loves enjoying time with his family and friends.
MEET TONY
Tony Velasquez runs Wisely Advised, LLC a full-service Registered Investment Advisory Firm offering comprehensive financial planning and investment advisory services to individuals, families, and businesses.
Whether it's traveling, being at the beach, or at his family's ranch in Texas, Tony loves enjoying time with his family and friends.
Whether it's traveling, being at the beach, or at his family's ranch in Texas, Tony loves enjoying time with his family and friends.
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