 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:
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.
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.
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 Have you ever wondered what happens to your wealth after you pass away? It’s not an easy topic to broach, because let’s be honest - who likes thinking about their own mortality? In fact, only 40% of Americans have a will or an estate plan in place to guide what happens to their money when they die. This unfortunate reality often causes unnecessary stress and problems for family after you pass away. Without a will or an estate plan in place, your wealth will likely enter probate - a lengthy legal process of dividing up your assets after you pass away. However, because this process is long and drawn out, it puts a significant amount of extra emotional stress on your surviving family members. Additionally, without an estate plan, your funds go wherever the state decides they go - which may or may not be to your preferred kin. Still, estate planning is often mistaken for a long and confusing process. People aren’t ever fully sure what happens to their money (or their debts) when they pass away, and it can deter them from engaging in the estate planning process. We can clear up any confusion now - want to know what happens to your money when you die? Let’s dive right in! DebtsWhen you die, your estate is responsible for your debts. In some cases, they may be passed on to a co-signor or next of kin. If you and your spouse are joint account holders, or you have a co-signer on a loan, they’re responsible for your debt when you pass away. However, if you were the sole owner of the account in question and you don’t have a co-signer, one of two things happen:
CashBank accounts are closed after you pass away, and the funds are distributed according to your will. If there isn’t a will in place, ownership of the account is transferred to next of kin or your estate administrator. Investment AccountsIf you’re invested in stock, the ownership of your stock is transferred to the beneficiary you selected during your lifetime. If you didn’t select a beneficiary, the stock may be distributed according to your will. Alternatively, your state’s laws may dictate who receives your stock if there is no will or designated beneficiary in place. AssetsOver the course of your lifetime, you may have accumulated a number of different assets. Let’s go over what’s usually done with each of them: Your Car The lender of your car loan can repossess your vehicle whenever the payments stop - even if you pass away. However, if you own your car in full, or use a portion of your estate to pay off your vehicle, you can pass on your car the same way you’d pass on liquid assets through your will. Your Home or Property If you still have a mortgage or property loan when you pass away, your heirs have several options to choose from:
Your Business Do you own a small business? You have a few options for how you’d like your affairs to be handled when you pass away:
Your “Stuff” Most “stuff” is only passed on if it holds sentimental or monetary value. For example, a favorite childhood book you used to read to your grandkids may be given to them in your will. Or a family heirloom may be passed on to the next generation. However, you can also stipulate whether you want your belongings sold in order to pay off your debts or to distribute the profits among your beneficiaries. The Importance of Estate PlanningAt the end of the day, the majority of your money and other assets are going to be passed on through a will. If you avoid setting up your estate plan, you’re putting your loved ones at risk of not being financially taken care of after you pass away. Speaking with a financial planner and an estate planning attorney to put together an estate plan that meets your unique needs can take a lot of the pressure off of you to execute the process correctly and efficiently. Have questions? Schedule a consultation today! We’d love to walk you through the estate planning process, and refer you to some stellar estate planning attorneys in the area.
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.  Whether we realize it or not, our lives are often structured in an incredibly “goal oriented” way. At work, we push ourselves: to reach the next promotion, pay raise, or a new and exciting level in our business. At home, we have financial goals: building an emergency fund, padding our retirement savings nest egg, and sticking to a budget. We also have goals throughout our personal lives: we want to get married, have kids, enjoy time with family, take our dream vacation, celebrate our grandkids, and maintain a positive relationship with our spouse or partner. Even if we’re good at living in the moment, most of us are working toward something almost every moment of our lives. That’s a good thing! That kind of drive is what pushes us to be our best selves, and results in long, fulfilling lives. Unfortunately, during retirement, a lot of those traditional goals that have guided us until now fall by the wayside. We’re left with laid-back days and endless downtime. While this may sound like the dream, it can cause some pretty serious cognitive dissonance. So much so that many retirees start thinking: Well, what now? The Shift to Retirement: Setting New Goals Defining your retirement lifestyle is key, and it should be done before you enter retirement. Sitting down and mapping out what you want to do during the day-to-day and some bigger, more meaningful retirement goals can help to set new goal posts as you make this lifestyle transition. It’s often easiest to start with your “bigger” goals during retirement. A few examples I’ve seen from clients and other new retirees are: Traveling to Europe Spending 6 months on a newly-purchased boat Taking a dream trip to a famous, exclusive golf course Bringing your entire family (grandkids and all) on a once-in-a-lifetime cruise Selling your house in the suburbs to move to a smaller home in the country/mountains/by the beach, surrounded by nature and the things you love Remodel your home with a big bunk bedroom and a pool for the grandkids Start a business (or invest in a family member’s business that you’ve always been passionate about supporting) Go back to school These goals are larger than life. They’re the things you’ve always pictured your retired-self doing by the time you retire. It’s important to have these big goals because they give you something to look forward to and work toward. However, what we often fail to account for are the smaller goals that keep us motivated each day. A trip to Europe or a huge home remodel project may be a big part of your life during retirement, but they’re not going to take up space every single morning when you wake up and don’t have your usual routine and work schedule to stick to. That’s why I also encourage retirees to focus on smaller, bite-sized goals, as well. These goals aren’t intended to help you achieve life-changing experiences, but they do help you to live your days as a retiree in an exciting, fulfilling way. A few examples I love are: Going to the gym for a minimum of 30 minutes a day Learning a new hobby like painting, pottery, or yoga Taking a class on a topic that interests you at a local community college Hosting a potluck dinner with friends one night a week Taking your spouse or partner out on a date once a week Trying a handful of new recipes a month These goals might not seem very exciting at first glance, but they’ll keep you motivated to get out of bed and move forward with confidence and purpose each day. Feeling Stuck? You’re not alone. Many retirees struggle with goal setting, and that’s because it’s not easy to transition from a life of pre-determined career and personal goals to one where you’re no longer saving toward anything, you don’t have a career ladder to climb, and many of your personal goals have been checked off the metaphorical to do list. This is where working with a financial planner who helps you think through both the dollars and cents of your retirement as well as your lifestyle can be incredibly helpful.
Want to learn more? Schedule a call 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.  Many people have heard that a balanced portfolio is a key to investing success. But very few people actually know what it means to have a “balanced” portfolio - let alone what rebalancing looks like. One way to ensure a balanced portfolio is to look at your asset allocation.
What is Asset Allocation?Asset allocation is the process of divvying up your investment portfolio across multiple asset categories. Typically, this means you’re invested in several of the following:
What types of assets your portfolio contains will largely depend on your time horizon (or how long you have until you’ll need the funds from your investments to make a large purchase or to retire), and your risk tolerance. There’s no “perfect” formula for asset allocation - it’s different for every individual investor and their unique financial goals and needs. However, most people will organize their asset allocation based on their retirement timeline. In general, the further away from retirement you are, the more likely it is that you can take on “riskier” investments. As you get closer to retirement, you rebalance your portfolio to avoid risk, as you’ll need those funds sooner rather than later. How Do You Rebalance?Finding the “right” balance in your portfolio is no easy task. Truth be told, there likely isn’t one ideal allocation formula for your assets. The way you’ve allocated your assets is going to change over time as your risk tolerance and investment timeline shifts. This is where rebalancing your portfolio can come in handy. No investment strategy is ever set in stone. Rebalancing your portfolio periodically can help you to ensure that no one asset class is notably outweighing another. As your portfolio evolves, your investments are going to grow at different rates. Before long, you may have over-weighted asset categories taking up a lot of space in your portfolio, which could put you at unnecessary risk. When you rebalance, you’re looking to accomplish a few things:
To rebalance your portfolio, you follow three easy steps:
Keep in mind that your “ideal” asset allocation is based both on your timeline (i.e. how long until you have to retire, or how long until you’ll need the funds from your investments), and how much risk you can emotionally take on. If you’re finding that taking on “riskier” investments is making you sick to your stomach and that you’re constantly having to remind yourself to avoid making a rushed decision based on a market correction, you might be better suited to a more conservative asset allocation - even if you have many years before you need the money from your portfolio for retirement. And that’s okay! Arranging your portfolio in a way that won’t drive you crazy is just as important as lining up your investment timelines. How Often Should You Rebalance?Rebalancing your portfolio should be an annual to do - don’t try to do it more often than that! Unless you need your investments in a very short period of time and are watching the market like a hawk before you start to withdraw, you shouldn’t be constantly adjusting your asset allocation. If you are, you’re less likely to reap the benefits of long-term investing strategies. Don’t DIYAsset allocation is incredibly important as you move toward retirement. If you let your assets go unbalanced for too long, they could end up hurting your portfolio, and sending you off-course and away from your financial goals. If you balance them too often because you’re worried about “timing” the market, you could have an equally adverse effect on your portfolio’s potential growth. Your best bet is going to be working with a financial planner who can help you automate your portfolio rebalancing and keep you on track to meet your retirement goals. Want to learn more? Schedule your consultation with Wisely Advised 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.  Carrying debt into retirement can make your finances as a retiree challenging. In fact, most people work to pay off any debt they’re still holding well before they enter full-time retirement. Usually, people look to pay off the usual suspects first:
However, most pre-retirees who are going through this debt pay-off process miss something critical: their mortgage. A Mortgage Is Still Debt We’re often sold this concept that a mortgage isn’t technically “bad” debt. Home ownership comes with so many upsides, that we forget that it still comes with a huge amount of debt that weighs on our finances and deters us from meeting other money-related goals before retirement. Your home may provide you a safe and comfortable space to live out the entirety of your retirement. You may feel like it’s a fantastic piece of your financial portfolio because you’re gaining equity as a homeowner and investing in real estate. You may even be planning to leave your home to your children in your estate plan because it’s worth a significant sum. While all of this might be true, none of it matters if you struggle to pay your mortgage bill each month throughout retirement. What Does It Mean To Be “House Poor”? Too many retirees are “house poor”. This means they’ve spent a significant portion of their savings on a home through a down payment, and continue to spend the majority of their monthly income on a mortgage payment, homeowner’s insurance, utilities, maintenance, and property taxes. They have very little left over to put toward retirement savings, or facilitating lifestyle goals during retirement like travel or pursuing a new hobby. At the end of the day, this may not sound all bad. If you love where you live, it’s okay that you spend a little bit of extra money on it each month, right? In some cases this might be true. But if you’re heading into retirement, this strategy likely won’t work for you. Retirees need to free up as much of their cash flow as possible to create a reliable income throughout their retirement. Your income during retirement typically consists of three parts:
While you can partly count on a reliable pension, the total amount you’ve saved when you retire, or an estimated Social Security payment each month, these income streams can still be variable. A dip in the market, or a change in Social Security or your unique pension program could mean a notable dip in your monthly retirement income – and it’s not always fully in your control. However, having a home that’s been fully paid off before you enter retirement is a decision you have control over. So, what should you do? You Have Options If you still owe money on your home, you have a few options as you move toward retirement. First and foremost, if you love your home and it meets your retirement lifestyle needs, you can look to pay it off before you retire. Many pre-retirees are relatively close to paying down their mortgage, and with a little bit of extra focus and budgeting, paying it off in full is easily achievable. However, there are some cases where paying off your mortgage in full before you retire isn’t a possibility. This is typically due to one of two reasons:
There are solutions for both of these options. If your mortgage is too big before you retire, it might be time to reevaluate your living space. Even if you love your home, if it’s going to have a long-term negative impact on your financial health throughout retirement, it’s not worth staying in. You could consider selling your high-mortgage home and downsizing to something more manageable. If you don’t have very long until retirement and are worried you won’t be able to pay your mortgage off in full before you make the transition, you might want to consider delaying retirement. Delaying retirement has several benefits including continuing to grow your retirement savings by taking advantage of employer match programs through your workplace retirement savings plan. By delaying retirement, you might be able to pay off your mortgage, then retire with significantly more cash flow than you would have otherwise. Deciding how you want to handle your home during retirement can be a financial and emotional challenge. Working with a financial planner can help! Together, we can put together a strategy for your retirement income – including what to do with your existing mortgage. Interested in learning more? Schedule a consultation with 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.  Technology has transformed the financial industry-- from the practice of investing to the strategy of saving, and flexibility of spending, technology’s hand is present in the many ways that we interact with money. One of the ways we see this most often is through the process of automation. A technique and system for operating, automation uses electronic devices to streamline a process without the need for human interference. Automatic investing is when you arrange to have a fixed amount of money come out of your paycheck or bank account every month and contribute to a predetermined account. This process finds many of its benefits in the personal finance realm. For example, you can select to automate your credit card payments each month so that you never miss a payment. This can also be done for a myriad of other expenses like rent, utilities, loans, mortgage, car payments, etc. With automation, hitting your goals becomes so much easier. Why? Because it is really easy to manually miss a credit card payment or forget to contribute to your 401(k) account. You have deadlines, errands, family, a swirl of distractions which increases the likelihood for human error. By automating the payment, you never touch the money. Along with adding to your investment each month, the payoff is wonderfully favorable. By utilizing the gift of automation in your financial planning, it allows for good, sound financial decisions without the ‘human’ element. How can this practice be applied? At the OfficeIt’s wise for employees to automate workplace retirement or savings plan contributions each pay period. This way, you do not have to take money out of your account to put into your retirement plan or health savings plan that your employer offers. If you don’t see the money, you won’t think about spending it. Automating your contribution to your investments will decrease the likelihood for extraneous or discretionary spending habits. You won’t miss the money because it is going toward your future financial needs. This method of savings, called systematic investing, focuses on investing small but consistent amounts over a long period of time. Spending more time in the market by consistently growing your portfolio through wise investments means growing your wealth faster as a result of compound interest. Whether these funds are coming from your paycheck and being deposited into your workplace retirement plan, like a 401(k), or are coming from your regular checking or savings account into a separate retirement or investing account, knowing that you’ll be able to account on slow and steady growth to reach your savings goals often comes as a welcome relief. Most retirement plans have high tax penalties should the money be removed for a different purpose, therefore many people leave these accounts alone and just let them grow. The steady growth each month, leaves these accounts in quite healthy states when they do need to be used. With each payment automatically taken out of your paycheck, you will also be able to budget your expenses off of your current paycheck already knowing that your retirement account is being added to in the background. These automated payments can be used for many workplace benefits:
Keep in mind that if you elect to put money into any of the accounts that your employer offers, it is a good idea to have the money taken out of your paycheck. This action alleviates the stress and time of calculating and adding the appropriate amounts to the coordinating accounts each month. In the Home Automating your financial obligations can also be applied to other investments outside of your workplace. You and your financial planner can work out a plan for automating contributions to different investments you may have. Examples could be:
By automating contributions to your accounts, you are eliminating the possibility for human error and ensuring that you are putting in money each month to the accounts you wish to grow. Automating your financial contributions to different investment accounts is a great way to promote good, sound, and practical financial decisions. Embrace the technology, and let it transform the way you handle your finances! 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.  The biggest mistake that people make when saving for retirement is simple: they get in the game too late. That’s not to say that if you’re close to retirement without much saved yet you’re out of luck - there are several strategies you can implement to get started. However, investors make it infinitely easier on themselves to hit their retirement savings goals when they start saving earlier in their career. More time in the market tends to mean greater returns thanks to compound interest.
Understanding Compound InterestMany people are confused by compound interest. So, what is it exactly? The complicated definition is that compound interest is interest calculated on the initial principal of your investment, in addition to any interest accumulated in previous periods. However, I prefer to use a simple analogy to make the benefits of compound interest more clear. Compound interest is 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. When you set the snowball down and give it a push down the hill, it slowly starts to grow in size. With every revolution of the snowball, it grows. Toward the bottom of the hill, the snowball starts growing faster and faster. As the snowball picks up snow, it’s total surface area gets bigger. That means the bigger the snowball, the more snow it can pick up as it continues to roll. The snowball isn’t going to grow at a consistent pace. It’s going to get exponentially bigger with each revolution. In this scenario, your money is the snowball. It may not seem like much when you begin to contribute, but it will continue to grow over time. When your interest starts earning interest for many years, you’re much more likely to successfully hit your retirement savings goal. Time in the Market MattersMany financial planners suggest that time in the market often matters more than the actual amount invested. Let’s look at an example of why this might be true. Liz invests $5,000 from ages 18-28. At the end of the decade, she has $50,000 in her retirement savings account. Then, Liz gets sidetracked with other financial obligations like starting a family, purchasing a home, and getting serious about paying down her student loan debt. Although she really should be contributing to retirement every year, she stops. Joe invests $5,000 a year as well, but he’s getting a bit of a later start. He starts investing at age 28 and continues his annual $5,000 investments until he retires at age 58. He’s been investing for 30 years - way to go, Joe! Now, let’s look at Liz and Joe’s respective retirement savings when it comes time for their retirement. Joe has successfully expanded his savings to just under $541,000 (assuming a 7% return). Liz, on the other hand, has expanded her savings to closer to $605,000 (again, assuming a 7% return). Liz has spent more time in the market, even though she didn’t invest as much as Joe, and as a result her funds have had a longer time to take advantage of compound interest. Contribute Early and OftenI understand that it’s not possible to turn back time. If we could all be 18 again, I’m sure that there are many things we’d do differently, including starting to put money toward our retirement. However, you can take charge of your current financial situation. By starting to contribute more to your retirement now, you’ll be able to take advantage of more time in the market, and reap the benefits of compound interest as you near retirement. Want to learn more? Contact me at Wisely Advised today, I’d love to go over how compound interest can benefit you in your retirement savings strategy. 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.  Most retirees will, at some point, enroll in Medicare to cover health care expenses during retirement. Unfortunately, Medicare isn’t all that easy to understand if you don’t have experience with it! So, let’s simplify things and go over the basics. Medicare is made up of four parts: A, B, C (or Medical Advantage), and D. Each piece covers a different kind of medical expense. Medicare Part A and B are what we know as Traditional Medicare. Medicare Part C and D are optional, but may be a helpful supplement to your retirement health care strategy. Medicare Part A: Hospital Coverage Medicare Part A is hospital insurance coverage. It includes coverage for hospital care, skilled nursing facilities, nursing home care, hospice, and home health care services. Individuals may qualify for Medicare Part A with no monthly premium if:
Medicare Part B: Medically Necessary Services Medicare Part B covers both medically necessary services, as well as traditional preventative care. This includes:
Medicare Part C: Medicare Advantage |
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. Archives
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