Do You Need A New Company Retirement Plan?

According to one study, nearly half the American population worry they won’t have enough money to retire.[1] People dream of their golden years strolling the beach, hiking a mountain trail, or visiting loved ones. Few people want to work forever.

New year, new plan? Is it time to upgrade your company’s 401(k) plan? As an owner, you wear many hats, including fiduciary. As a fiduciary, you need a written summary plan description, record-keeping system, and documents to provide your employees.[2] You must also act in your employees’ best interests, follow your plan documents, diversify the plan assets, and pay reasonable expenses.[3] You can help your employees retire in style by offering a competitive 401(k).

Moving a 401(k) plan from one provider to the next requires effort, so you don’t want to do it often. Let’s review a few reasons why it makes sense to improve your plan.

  1. High Fees. Fees are like termites, and if you don’t eradicate them, they will eventually eat your home. It’s imperative to review your service provider fees, fund expenses, and administrative costs. A benchmarking study can help you determine if they are in line with the industry or not.
  2. Poor Performance. Do you have a subpar fund lineup? If your plan includes expensive mutual funds, variable annuities, or stable value funds, a new low-cost investment lineup could pay dividends and benefit your employees.
  3. No Service. If your service provider is slow to return your phone calls or emails, a change is warranted. Life is too short, so don’t waste your time on others who treat you poorly.
  4. Lack of Education. Does your current advisor provide educational workshops? Do they help your employees with financial or retirement planning? Will they meet with your employees in person or Zoom? If your broker, advisor, or agent is not helping your employees grow their wealth, it’s time to work with someone who will.
  5. Lack of Technology. Was your plan established years ago? Does it include auto-enrollment, financial wellness programs, or web access? Do you have a cool app? A dated plan may lack benefits common to newer ones.

Here are a few resources to assist you in your journey to find the best plan for you and your employees.

  1. US Department of Labor: https://www.dol.gov/agencies/ebsa/key-topics/retirement/401k-plans
  2. Understanding Fees: https://www.dol.gov/sites/dolgov/files/EBSA/about-ebsa/our-activities/resource-center/publications/understanding-retirement-plan-fees-and-expenses.pdf
  3. 401(k) Plans: https://www.dol.gov/sites/dolgov/files/EBSA/about-ebsa/our-activities/resource-center/publications/401k-plans-for-small-businesses.pdf
  4. Fee Disclosure Form: https://www.dol.gov/sites/dolgov/files/EBSA/employers-and-advisers/plan-administration-and-compliance/fiduciary-responsibilities/401k-plan-fee-disclosure-tool.pdf
  5. Selecting a Service Provider: https://www.dol.gov/sites/dolgov/files/EBSA/about-ebsa/our-activities/resource-center/fact-sheets/tips-for-selecting-and-monitoring-service-providers.pdf

For most people, a 401(k) plan will be their most significant asset, possibly larger than their home, so offering one that helps them create wealth is prudent.  

For many people, being asked to solve their own retirement savings problems is like being asked to build their own cars. ~ Richard Thaler

January 20, 2022

Bill Parrott, CFP®, is the President and CEO of Parrott Wealth Management located in Austin, Texas. Parrott Wealth Management is a fee-only, fiduciary, registered investment advisor firm. Our goal is to remove complexity, confusion, and worry from the investment and financial planning process so our clients can pursue a life of purpose. Our firm does not have an asset or fee minimum, and we work with anybody who needs financial help regardless of age, income, or asset level. PWM’s custodian is TD Ameritrade, and our annual fee starts at .5% of your assets and drops depending on the level of your assets.

Note: Investments are not guaranteed and do involve risk. Your returns may differ from those posted in this blog. PWM is not a tax advisor, nor do we give tax advice. Please consult your tax advisor for items that are specific to your situation. Options involve risk and aren’t suitable for every investor.


[1] https://www.forbes.com/advisor/retirement/top-retirement-worries/

[2] https://www.dol.gov/sites/dolgov/files/EBSA/about-ebsa/our-activities/resource-center/publications/meeting-your-fiduciary-responsibilities.pdf

[3] Ibid

Crank Up Your 401(k)!

January is an excellent time to crank up your 401(k) plan, and it probably needs a refresh after a year of gains, dividends, interest payments, and contributions. Here are a few suggestions to help you get started.

  1. Increase your annual contribution amount if you’re not adding the maximum amount to your plan. If you’re contributing 10% of your pay, consider increasing it to 12%. For example, if your annual salary is $50,000, an extra 2% is $1,000 per year, which could grow to more than $57,000 in twenty years. Also, the additional $1,000 annual contribution equates to about $40 per pay period.
  2. Max out your contributions. The maximum amount is $20,500. If you turn fifty in 2022 (at any time), you can add another $6,500.
  3. Increase your allocation to stocks. If your current stock allocation is 60%, consider raising it to 70% or 80%. The extra stock exposure can give your investments a boost to the tune of about 1% to 2% per year. Also, you’ll have the opportunity to buy in all types of market conditions since you’re contributing to your plan every pay period.
  4. Rebalance your account. The market performed well last year, and your asset allocation is probably out of whack if you did nothing. For example, if you started last year with 60% stocks and 40% bonds, it could now be 70% stocks and 30% bonds. January is an excellent time to rebalance and adjust your investments.
  5. Consider a target-date fund if you don’t want to hassle with specific investments or rebalancing your accounts. Target-date funds are all-in-one funds, so all you have to do is pick the year you’re retiring and move your assets to that one holding. For example, if you’re retiring in 2030, then choose the 2030 target-date fund. Simple.
  6. Update your beneficiary designations. Did you incur a life event last year? Did you get married or have a child? Did you lose a loved one or get divorced? If so, then change your beneficiary designation to reflect your current status.

Retirement comes at you fast, so make sure you’re doing all you can today to ensure your golden years are truly golden.

Retirement is not the end of the road. It is the beginning of the open highway. ~ Anonymous

January 12, 2022

Bill Parrott, CFP®, is the President and CEO of Parrott Wealth Management located in Austin, Texas. Parrott Wealth Management is a fee-only, fiduciary, registered investment advisor firm. Our goal is to remove complexity, confusion, and worry from the investment and financial planning process so our clients can pursue a life of purpose. Our firm does not have an asset or fee minimum, and we work with anybody who needs financial help regardless of age, income, or asset level. PWM’s custodian is TD Ameritrade, and our annual fee starts at .5% of your assets and drops depending on the level of your assets.

Note: Investments are not guaranteed and do involve risk. Your returns may differ from those posted in this blog. PWM is not a tax advisor, nor do we give tax advice. Please consult your tax advisor for items that are specific to your situation. Options involve risk and aren’t suitable for every investor.

New Year’s Opportunity

Ready. Set. Go. The New Year is approaching fast, and it’s time for investors to map out a course for success. 2021 was another banner year for stocks as the S&P 500 soared more than 25 percent despite political unrest, the Omicron Variant, escalating inflation, and rising interest rates. The market also incurred several declines of 4 percent or more, but your accounts probably performed well if you remained invested.

As we approach 2022, it’s time to review and adjust your financial plan and investment holdings. To help you succeed, here are some ideas you can incorporate.

  • Rebalance. If you entered 2021 with an allocation of 60% stocks and 40% bonds, it is now 67% stocks and 33% bonds – more aggressive than your original profile. Rebalance your portfolio back to its initial allocation to mitigate your risk.
  • Budget. January is an ideal time to review last year’s spending. Are there areas in your budget where you can reduce spending? Can you increase savings? A well-structured budget gives you the freedom to spend with confidence. You can control your spending and savings – two critical components for creating wealth.
  • Plan. Is 2022 the year to build your financial plan? A financial plan will guide your financial future by quantifying your hopes, dreams, and fears. It will also align your goals with your investments to boost your planning.
  • Give. If you own a home and stocks, your wealth likely jumped substantially in 2021. Unfortunately, those who didn’t own assets were left behind. To help those in need, consider a philanthropic strategy. In addition to doing a good deed, It could reduce your taxable income. A donor-advised fund and charitable remainder trust are two popular giving vehicles.
  • Increase. The 401(k) contribution jumps to $20,500 next year. An easy way to invest and build wealth is through your company retirement plan. In addition to the regular contribution, you can deposit another $6,500 to your account if you’re fifty or older. If you can’t maximize your contribution, aim for 10% of your income.
  • Automate. Do you struggle with investing or saving money? If so, automate your investment contributions – set it, and forget it! If you’re unsure how much money you can save, start by automatically moving a certain amount to your savings account each month. If you don’t miss the money, keep it going. However, you can access your savings account without fees or penalties if you need money.

A new year is full of hope, and hope springs eternal. January allows you to build on your momentum or start over. Regardless of your starting point, spend time plotting your financial future. A few hours of planning today will pay huge dividends tomorrow.

Be at war with your vices, at peace with your neighbors, and let every new year find you a better person. ~ Benjamin Franklin

December 16, 2021

Bill Parrott, CFP®, is the President and CEO of Parrott Wealth Management located in Austin, Texas. Parrott Wealth Management is a fee-only, fiduciary, registered investment advisor firm. Our goal is to remove complexity, confusion, and worry from the investment and financial planning process so our clients can pursue a life of purpose. Our firm does not have an asset or fee minimum, and we work with anybody who needs financial help regardless of age, income, or asset level. PWM’s custodian is TD Ameritrade, and our annual fee starts at .5% of your assets and drops depending on the level of your assets.

Note: Investments are not guaranteed and do involve risk. Your returns may differ from those posted in this blog. PWM is not a tax advisor, nor do we give tax advice. Please consult your tax advisor for items that are specific to your situation. Options involve risk and aren’t suitable for every investor. New Year’s Eve prediction: Baylor 28 – Ole Miss 17.

Everybody Loves a Parade!

The 133rd Rose Parade will ring in the new year, a rite of passage for many.  I grew up watching the Rose Parade with my friends. We arrived at the parade route around 4:00 or 5:00 the night before to stake our claim to spend the night to get choice seating and then spend the next twelve to sixteen hours enjoying the craziness on Colorado Boulevard.  

It wasn’t until years later that I realized the Rose Parade doesn’t happen without proper planning. It takes years for it all to come together, and volunteer members must choose themes, bands, and grand marshalls years in advance.  And I’m sure the Tournament of Roses Parade Committee is already planning the 2023 Rose Parade. 

Profitable investing requires proper planning. As we march toward the new year, here are a few ideas to help you enjoy investment success.

  • Plan. In January, you have an opportunity to start fresh, out with the old and in with the new. The beginning of the year is an ideal time to plan your investments, and a financial plan can help you improve your results, organize your financial life, quantify your goals, and set a course for your future.
  • Help. A parade doesn’t run itself. The Tournament of Roses has thirty-one committees doing countless activities, and committee members focus on their specific duty while keeping an eye on the result. Members contribute more than 80,000 hours of their time to ensure the parade is successful. Do you need help with your investments? Planning? Taxes? If so, consider hiring a team of financial professionals.
  • Diversify. Bands, floats, and horses make for an entertaining parade. Diversification is vital for the parade’s success because it has something for everyone.  A diversified portfolio allows you to participate in multiple markets while owning thousands of securities like stocks, bonds, and cash.
  • Time. The parade covers five and a half miles, meandering through Pasadena, and the stroll allows spectators to get a good look at the participants. Your investment horizon may cover several years, and a patient, a long-term investor, will be rewarded.
  • Vision.  The first Rose Parade occurred in 1890, and the founders had a dream, and it has benefited generations of parade-goers. Will your investment portfolio benefit generations? 

I almost forgot. In addition to the parade, there is also a football game.

Happy New Year!

A rose by any other name would smell as sweet. ~ Shakespeare

December 11, 2021

Bill Parrott, CFP®, is the President and CEO of Parrott Wealth Management located in Austin, Texas. Parrott Wealth Management is a fee-only, fiduciary, registered investment advisor firm. Our goal is to remove complexity, confusion, and worry from the investment and financial planning process so our clients can pursue a life of purpose. Our firm does not have an asset or fee minimum, and we work with anybody who needs financial help regardless of age, income, or asset level. PWM’s custodian is TD Ameritrade, and our annual fee starts at .5% of your assets and drops depending on the level of your assets.

Note: Investments are not guaranteed and do involve risk. Your returns may differ from those posted in this blog. PWM is not a tax advisor, nor do we give tax advice. Please consult your tax advisor for items that are specific to your situation. Options involve risk and aren’t suitable for every investor.

Puzzle Pieces

My family and I like to put together a puzzle or two during the holiday season. When my daughter was young, the puzzles were simple and easy to manage. As she grew older, they became more complex and took several days to finish. Obviously, a puzzle with twenty pieces is easier to handle than one with thousands.

YCHARTS tracks more than 28,000 companies. Can you imagine assembling a 28,000-piece puzzle? When building your investment portfolio, how do you pick the best stocks from 28,000 publicly traded companies? And how many companies should you own to diversify your portfolio?  10? 25? 100? 400?  A study by the American Association of Individual Investors suggests owning more than 400 stocks. Owning 400 stocks can reduce your diversifiable risk by 95%.[1] Dimensional Fund Advisors recommends holding 11,000 companies.[2]

How can you achieve diversification?  

  1. Buy several stocks. You can, of course, buy as many stocks as you want. Jim Cramer suggests owning between five and ten companies and committing an hour of research per week for each one you own.[3]  If you own 20 companies, expect to dedicate 20 hours per week to review your holdings.
  2. Purchase index funds. A portfolio of index funds will hold hundreds, if not thousands, of companies. An advantage to owning index funds is achieving diversification at a low cost. If you purchase four, five, or ten index funds, you can simplify your financial life because it’s much easier to follow a few funds when compared to tracking hundreds of companies.

Life is a puzzle, and there are many roads to financial success, so travel one that makes sense for you and your family.

It’s not about the pieces; it’s how they fit together. ~ Anonymous.

November 15, 2021

Bill Parrott, CFP®, is the President and CEO of Parrott Wealth Management in Austin, Texas. Parrott Wealth Management is a fee-only, fiduciary, registered investment advisor firm. Our goal is to remove complexity, confusion, and worry from the investment and financial planning process so our clients can pursue a life of purpose. Our firm does not have an asset or fee minimum, and we work with anybody who needs financial help regardless of age, income, or asset level. PWM’s custodian is TD Ameritrade, and our annual fee starts at .5% of your assets and drops depending on the level of your assets.

Note: Investments are not guaranteed and do involve risk. Your returns may differ from those posted in this blog. PWM is not a tax advisor, nor do we give tax advice. Please consult your tax advisor for items that are specific to your situation. Options involve risk and aren’t suitable for every investor.


[1] http://www.aaii.com/journal/article/how-many-stocks-do-you-need-to-be-diversified-.touch, AAII Journal by Daniel J. Burnside, July 2004

[2] https://my.dimensional.com/insight/purely_academic/23691/, Effective Diversification and the Number of Stocks by Jim Davis, 9/26/2008.

[3] http://www.cnbc.com/id/100765791, Lee Brodie, 10/7/2014, Stocks, How Many is too Many?

Marathons and Retirement Planning

My first marathon was a total disaster. I finished the race exhausted, dehydrated, and sunburned. After years of running shorter races, I was ready to conquer the 1991 Los Angeles Marathon, and on race day, I thought I was prepared for the 26.2-mile journey. I was young, naïve, and in shape, and my strategy was to run as fast as possible for as long as possible. In short, I had no plan.  

I avoided all water stations until late in the race – too late because I was already parched and sunburned. At mile twenty, a young boy gave me a giant bottle of Gatorade, and his gift gave me enough fuel to get to the next aid station. However, it was useless because I couldn’t drink enough water to quench my thirst. I finished the race, made it home, licked my wounds, and reflected on the events of the day. 

If I was going to run marathons, I needed a better strategy. As the years went on, I read books on running and applied what I learned. As a result, my race experiences went up, and my race times went down.  I ran the 2011 Boston Marathon, and in 2015 I set a personal best in San Diego. My plan worked.

What do running marathons and planning for retirement have in common? Let’s find out.

  1. Plan. Your retirement plan will guide your steps and help you quantify your hopes, dreams, and fears. It will align your investment holdings to your goals, so they’re both working for your benefit, and it will give you a baseline of your current financial situation.
  2. Think long-term. A marathon is 26.2 miles, so don’t worry about what’s happening during the first few miles. Likewise, don’t worry about short-term market moves if you’re going to retire in 10, 20, or 30 years.
  3. Be consistent. Establish a monthly investment program and save as much money as possible. Over time, your monthly contributions will add up. For example, if you save $500 per month, it could be worth more than $1.1 million after thirty years. When I ran marathons, my goal was to run the race one mile at a time at an 8-minute pace. I never focused on the entire 26 miles on race day.
  4. Buy quality. A pair of high-quality, lightweight running shoes makes all the difference in the world. Similarly, your assets should be high-quality with low fees – control your costs and diversify your investments.
  5. Set your pace. A large marathon may have more than thirty thousand runners, so don’t worry when you get passed because each runner has their own goal. Instead, focus on your goals and pace. Your retirement plan will help you establish your retirement pace.
  6. Refuel and check-in. Smart runners take advantage of aid stations to hydrate and refuel. Once your retirement plan is up and running, check it often to ensure you’re still on pace to achieve your goals and adjust it as needed.
  7. Hire a coach. Your running results will improve if you run with a coach. A financial coach or trusted advisor can help support and guide you during your retirement journey.  
  8. Go fast. Stocks purchased for the long haul will allow your assets to grow faster than safe investments like bonds or cash.
  9. Celebrate. Finishing a marathon is a significant accomplishment, so celebrate your success. Equally, when you have saved your money and invested successfully for decades, and you can retire on your terms, take a victory lap – you have won the retirement race!

A plan for running and retirement will keep you moving for years, so get out there and start planning!

“Don’t dream of winning; train for it!” ~ Mo Farah

November 2, 2021

Bill Parrott, CFP®, is the President and CEO of Parrott Wealth Management in Austin, Texas. Parrott Wealth Management is a fee-only, fiduciary, registered investment advisor firm. Our goal is to remove complexity, confusion, and worry from the investment and financial planning process so our clients can pursue a life of purpose. Our firm does not have an asset or fee minimum, and we work with anybody who needs financial help regardless of age, income, or asset level. PWM’s custodian is TD Ameritrade, and our annual fee starts at .5% of your assets and drops depending on the level of your assets.

Note: Investments are not guaranteed and do involve risk. Your returns may differ from those posted in this blog. PWM is not a tax advisor, nor do we give tax advice. Please consult your tax advisor for items that are specific to your situation. Options involve risk and aren’t suitable for every investor.

Year 2051

Thirty years is a long time. Thirty years ago, Operation Desert Storm liberated Kuwait, the New York Giants won Super Bowl XXV, and Dances with Wolves won the Academy Award for best picture.

Today, The 30-Year US Treasury yields 2.05%. It’s hard to imagine investing in a bond that matures in 2051, but some individuals will buy it for safety due to the recent stock market volatility. Safety is a relative term, of course. Bonds are safer than stocks in the short term, but it’s hard to beat a basket of great companies over time. 

According to YCharts, 1,660 companies yield more than 2.05%, including 138 that raised their dividend by 10% or more during the past year.    

I plucked five companies from this list, including Broadcom, Amgen, Texas Instruments, Best Buy, and T.Rowe Price.  If you invested $10,000 in each stock ten years ago, they would be worth $329,320 today – a gain of 558%! If you purchased a bond instead, your total return would have been about 20%.

If you invested $50,000 in these stocks today, your annual income would be $1,325, or $300 more than the 30-Year US Treasury. In addition, your potential gain from these stocks is substantially more than a bond.

I will always take my chances with a basket of great companies with a history of rising dividends. Companies with solid balance sheets and dependable cash flows are tough to defeat.

Do you know the only thing that gives me pleasure? It’s to see my dividends coming in. ~ John D. Rockefeller

October 18, 2021

Bill Parrott, CFP®, is the President and CEO of Parrott Wealth Management in Austin, Texas. Parrott Wealth Management is a fee-only, fiduciary, registered investment advisor firm. Our goal is to remove complexity, confusion, and worry from the investment and financial planning process so our clients can pursue a life of purpose. Our firm does not have an asset or fee minimum, and we work with anybody who needs financial help regardless of age, income, or asset level. PWM’s custodian is TD Ameritrade, and our annual fee starts at .5% of your assets and drops depending on the level of your assets.

Note: Investments are not guaranteed and do involve risk. Your returns may differ from those posted in this blog. PWM is not a tax advisor, nor do we give tax advice. Please consult your tax advisor for items that are specific to your situation. Options involve risk and aren’t suitable for every investor.

Do you remember March 24, 1980?

Do you remember March 24, 1980? I don’t. I was 15. I was probably concerned with three things. Was I going to the beach? Were the Dodgers going to win? Where were my friends and I going to eat lunch? I probably went to the beach, the Dodger’s undoubtedly won, and I most likely went to McDonald’s.

On March 24, 1980, the S&P 500 fell more than 3%, and I am sure the morning newspaper headlines were full of doom and gloom. The index would drop 17% in six weeks, but it finished the year up 26%.

If you bought the dip on that day and currently own the S&P 500, you’re up 4,230% – a  $10,000 investment is now worth $433,000.

I mentioned I probably ate lunch at McDonald’s. What if you bought the stock on that same day? If you gobbled up $10,000 worth of McDonald’s stock, your original investment is now worth $2.7 million, producing an average annual return of 14.5%!

I  believe in the buy-and-hold strategy because it’s impossible to time the markets. When markets drop, it allows you to invest in great companies at lower prices. It is similar to flying. The only way to get on an airplane is when it is on the ground. You lose if you are not on that plane when the pilot leaves the gate and roars down the runway.

However, I realize not everybody has the confidence to buy stocks during a market meltdown, so here are a few suggestions to help strengthen your portfolio.

  • If you need your money in one year or less, do not invest in stocks. Instead, keep your money in cash or savings account, US T-Bills, or certificates of deposit.
  • If you’re retiring in three to five years, keep three years’ worth of expenses in cash, US T-Bills, or certificates of deposit. For example, if your annual costs are $100,000, allocate $300,000 to cash or cash equivalents.
  • If you are concerned about the international turmoil, invest in small or mid-cap companies headquartered in the United States. Small companies typically do not have much international exposure.
  • Add dividend-paying stocks to your portfolio. According to YCharts, over 1,500 companies are yielding 2% or more. The current yield on the 30-Year US Treasury is 2.04%.
  • Asset allocation and diversification still work. A balanced portfolio of stocks, bonds, and cash will perform well over time. Since 1980, a balanced portfolio of 60% stocks, 40% bonds generated an average annual return of 11.4%.[1]
  • If your holding period is three to five years or more, let your stocks run.

Current markets are volatile and not fun, but this can be an opportunity for you to reexamine your investment and financial goals to make sure they align with your long-term financial plan.

Be on your guard, stand firm in the faith; be courageous; be strong. 1 Corinthians 16:13.

October 4, 2021

Bill Parrott, CFP®, is the President and CEO of Parrott Wealth Management in Austin, Texas. Parrott Wealth Management is a fee-only, fiduciary, registered investment advisor firm. Our goal is to remove complexity, confusion, and worry from the investment and financial planning process so our clients can pursue a life of purpose. Our firm does not have an asset or fee minimum, and we work with anybody who needs financial help regardless of age, income, or asset level. PWM’s custodian is TD Ameritrade, and our annual fee starts at .5% of your assets and drops depending on the level of your assets.

Note: Investments are not guaranteed and do involve risk. Your returns may differ from those posted in this blog. PWM is not a tax advisor, nor do we give tax advice. Please consult your tax advisor for items that are specific to your situation. Options involve risk and aren’t suitable for every investor.


[1] DFA Returns Web Tool – 1/1/1980 to 09/30/2021

Inflation: The Silent Wealth Killer

The United States Postal Service announced they are raising the price of a first-class stamp to 58 cents from 55 cents – and slowing down their delivery times, to boot. In 1975 it was possible to purchase ten stamps for a dollar; today, it will only buy one! The inflation rate for stamps since 1975 averaged 3.9% – in line with historical inflation rates. At this rate, a first-class stamp will cost $3.37 in 2067! Newman!

Inflation is the rate at which prices increase, and the Consumer Price Index (CPI) is how the United States Government measures it. Since 1914, inflation has averaged 3.22%, and at that rate, prices will double every twenty-two years. For example, a Tesla Model X could cost more than $160,000 in 2043. However, there have been several times when it spiked. From 1917 to 1920, it averaged 16.5% per year, and from 1970 to 1982, it averaged 7.7% annually. The current inflation rate is 5.25%.

If you drive a car or eat food, you probably notice prices tend to rise more than fall. Paying for childcare, healthcare, or college tuition has been a challenge as the inflation rate for these items has soared.   College tuition, for example, has increased 197% since 1996![1]

Hyperinflation occurs when inflation spirals out of control. The Weimer Republic of Germany experienced a bout of hyperinflation from 1918 to 1924. It peaked in November of 1923 when inflation climbed 29,525%! Venezuela is currently trapped by hyperinflation as prices have increased by 4,000%.[2]    Hyperinflation has primarily hit developing countries like Venezuela, Vietnam, Iraq, and Zimbabwe. Governments can also experience hyperinflation during times of war like the United States did during the Civil War.

However, a low inflation rate is healthy for our economy. Companies benefit from rising prices as the increase will flow to their bottom line.  When Pepsi raises their prices, they pass on the increase to you, the consumer. And the more you purchase, the more money they make.

Inflation is a metric not often tracked by investors. The stock market gets all the attention, but inflation may have more of an impact on your long-term wealth, especially if you don’t own stocks. Inflation can wipe out a generation of hard work without warning. If you rely on fixed-income investments like bonds or certificates of deposit, you will see the value of your assets eroded by inflation. According to Dimensional Fund Advisors, $1 invested in bonds was worth $1.49 after 94 years. Stocks, on the other hand, benefited from inflation. A $1 investment in the S&P 500 grew to $752![3] 

Another way to look at inflation is the loss of purchasing power. If inflation averages 3% per year, the dollar’s value will drop by 58% over 30 years; a dollar today will be worth 41 cents in 2051. If you park large amounts of cash in your bank account, it will lose value by doing nothing.

Your retirement may last 30 years or more, so make sure you allocate a healthy portion of your assets to stocks and resist the urge to retire your money as well. A portfolio of “safe” investments may leave you in dire straights toward the end of your retirement.

Inflation is as violent as a mugger, as frightening as an armed robber and as deadly as a hit man. ~ Ronald Reagan

October 4, 2021

Bill Parrott, CFP®, is the President and CEO of Parrott Wealth Management in Austin, Texas. Parrott Wealth Management is a fee-only, fiduciary, registered investment advisor firm. Our goal is to remove complexity, confusion, and worry from the investment and financial planning process so our clients can pursue a life of purpose. Our firm does not have an asset or fee minimum, and we work with anybody who needs financial help regardless of age, income, or asset level. PWM’s custodian is TD Ameritrade, and our annual fee starts at .5% of your assets and drops depending on the level of your assets.

Note: Investments are not guaranteed and do involve risk. Your returns may differ from those posted in this blog. PWM is not a tax advisor, nor do we give tax advice. Please consult your tax advisor for items that are specific to your situation. Options involve risk and aren’t suitable for every investor.


[1] https://www.financialsamurai.com/the-inflation-interest-rate-paradox/, Posted by Financial Samurai, website accessed 3/7/2018.

[2] https://www.bloomberg.com/view/articles/2017-12-19/venezuela-is-living-a-hyperinflation-nightmare, by Noah Smith, December 19, 2017.

[3] DFA 2021 Matrix Book

The Realities of Retirement

There are several theories and unlimited opinions about retirement. Hot topics include distribution rates, Social Security start dates, and paying off your mortgage.

I’ve read dozens of books on retirement planning, but I’m moving from theory to reality for this blog, so I contacted three retired friends. Stuart is a long-time neighbor, and our daughters were classmates when they were younger. He recently retired after spending his entire career with Motorola and its successors. Richard is a friend from church, and he retired from his career as a human resource executive and consultant. Fluent in Spanish, Richard and his wife, Linda, moved to Mexico. Tim is my former college roommate, and he and his wife, Irene, retired to Wyoming after his successful career as a financial advisor and hers as an HR consultant.

All three individuals are unique with varied backgrounds, but they have several things in common. While working, each had a financial plan to help guide them towards retirement, they are debt-free, and none eat dinner before 5:00.

Stuart refers to his plan often, correcting his course as needed. He wants to stay on top of his plan. Richard also relies on his plan and his advisor. After a long career as a financial advisor, Tim does not refer to his plan as often as he used to because it’s still in his head, but he and Irene rely on a budget.

One of the first questions I asked them was how they knew it was the right time to retire. Richard said, “We have enough money. We are good.” He knew he was financially secure, but Linda needed some convincing beyond Richard’s optimism. She became comfortable about retiring after reviewing their plan data with their advisor. Richard also added, “God had a plan and would not let him fail.” Tim said, “I did not want to be the richest guy in the graveyard.”

Stuart had a target date in mind from an early age because his father retired at 57, and his father-in-law not long after. Stuart said his father is “comfortably off,” as is his father-in-law. He added, “They don’t live extravagant lifestyles, but they’re comfortable.” Stuart knew at a young age he probably could retire early because of the examples set by the men in his life. He also benefited from a pension plan that he could access at 60 without a penalty. He did not stay at his employer for the pension, but it was a deciding factor in retiring early. In preparing for an early exit, Stuart said it helps to “talk about it” with others to make sure you’re financially and emotionally ready to leave the workforce. More importantly, Stuart and his wife Audrey were “100% aligned on their approach and decision making throughout the planning process.”

Tim and Irene weren’t ready to retire before 55. “Between 50 and 55 were formative years for them,” Irene added. They set a retirement target age of 55 after meeting in their forties, realizing they had similar financial goals. They were both financially stable when they met.

It’s not uncommon for retirees to get more conservative in retirement, but each of these recent retirees kept a hefty allocation to stocks. Richard is not a risk-taker, so he reduced his stock exposure about ten years before retirement, relying on his financial plan and guidance from his advisor.  As for stocks, Tim, referring to Warren Buffett, said, “If it doesn’t have a board of directors or dividends, he’s not interested.”

Richard will start receiving Social Security benefits in December because “we aren’t guaranteed a tomorrow.” His Social Security benefit coupled with his pension payouts should cover their living expenses, allowing their investments to grow. Tim, Irene, and Stuart will delay their Social Security benefits for as long as possible. Most people use financial decisions to decide when to receive Social Security benefits, but Tim will rely on his health. As long as he is healthy, he will defer his payout. Richard encourages young people to start saving money early, so they don’t have to rely on Social Security benefits.

How you spend your time in retirement is essential. No one wants to be bored. Stuart feels a sense of accomplishment daily by focusing on projects around the house. He also spends time playing golf with friends and his wife, Audrey. Stuart is also a music enthusiast and owns several guitars, and he may get the band back together at some point. He emphasizes health by walking the “loop” in our neighborhood – not an easy thing to do! Richard’s new hobby is cooking. In what he called a “role reversal,” he does most of the shopping and cooking. His go-to dish is chicken mixed with sausage, peppers, and potatoes. In addition to cooking, he and his wife volunteer with their new church. Tim and Irene are busy building a home in Wyoming. When they aren’t hammering nails, they’re fly-fishing or hiking. Richard has discovered streaming on Netflix.

Richard and Linda paid off their mortgage and other debt items before retirement, as did Tim and Irene. Stuart paid off his mortgage ten years before retirement. He paid it off early because “It is the most predictable return on your capital.” By paying off his mortgage, it freed up his cash flow for more important things.

None of them miss working. Richard’s previous jobs did not define him, and Stuart made a “clean break” from his employer. Stuart does not keep up with former colleagues or past work projects. He wants to focus on the future. Tim and Irene answered in unison with a definite “No!” Irene was worried about retiring because she worked so much and “had a lot of balls in the air,” but her transition has been much easier than expected.

The cost of healthcare is a concern for people retiring early. Stuart opted for COBRA; Tim and Irene have a high-deductible plan and health savings accounts. Richard is now eligible for Medicare, and he says, “It’s a sweet deal and not that expensive.”

Richard and Linda have a long-term care policy because it brings them peace; Linda has term life insurance. A few years ago, Stuart dropped his life insurance coverage; Tim and Irene did not own life insurance.

I asked Richard what advice he would give to his 30-year-old self, and he said he would have started saving earlier. He spent money because he could. He lacked discipline. Stuart recommended working with advisors to make sure you’re doing the right thing. Tim and Irene added that marrying the right spouse is paramount for financial success.  Stuart started working with an advisor in the UK as soon as possible, and he recommends others “take advantage of all the resources available to them like a CPA.” He relied on company and government resources often. Initially, his plan was “general in nature” but “sensible and foundational.”

Stuart’s vision of retirement matched up “almost perfectly” with the realities of retirement, and he has not experienced any surprises. His life “has continued along.” Richard’s retirement has exceeded his expectations.  Tim and Irene said their retirement has been better than expected. Richard added, “people probably need less money than they think.”

A popular strategy for individuals entering retirement is to convert their traditional IRA to a Roth. Stuart will convert his IRA to a Roth, but Tim and Richard will not.

Stuart said, “a key to his early retirement is relying on friends who also retired early.” His new community allows him to chat about retirement and other topics. When I asked him about his overall retirement experience, he said, “so far, so good.”

What can we learn from Stuart, Richard, Tim, and Irene?

  • Develop and follow a financial plan. A financial plan will give you the confidence to retire on your terms.
  • Pay off your debt before you retire. If you pay off your debt, you can spend the extra money on things important to you and your family.  
  • Find a hobby. Do you enjoy cooking? Hiking? Fishing? Playing music? A hobby is an excellent way to spend time and meet new friends.
  • Find your community, surround yourself with family and friends – don’t travel the retirement road alone.
  • Take care of yourself – exercise and eat well, get outside. Health is wealth.
  • Hire professional advisors to help you plan for your retirement. A successful team may include a financial planner, CPA, attorney, insurance agent, and mortgage broker.
  • You probably need less money than you think for a comfortable and secure retirement.
  • Be positive  – if you’re not already. When I talked with Stuart, Richard, Tim, and Irene, they oozed joy and happiness – all three were excited about their future. They weren’t concerned about the stock market dropping or other financial calamities.  

If you think you’re ready for retirement, give your advisor a call to crunch some numbers and discuss the process – you’re probably closer than you realize!

Stay young at heart, kind in spirit, and enjoy retirement living. ~ Dannielle Duckery

September 29, 2021

Bill Parrott, CFP®, is the President and CEO of Parrott Wealth Management in Austin, Texas. Parrott Wealth Management is a fee-only, fiduciary, registered investment advisor firm. Our goal is to remove complexity, confusion, and worry from the investment and financial planning process so our clients can pursue a life of purpose. Our firm does not have an asset or fee minimum, and we work with anybody who needs financial help regardless of age, income, or asset level. PWM’s custodian is TD Ameritrade, and our annual fee starts at .5% of your assets and drops depending on the level of your assets.

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