Are you rich?

Are you rich? It depends, of course, on where you live. In Malawi, the per capita income is $357, Uganda $631, Haiti $766, United States $59,939, and Luxembourg $105,280.

According to the Pew Research Center, 70% of the world’s population, about 5 billion people, live on less than $10 per day.[1] What can you buy for $10? A few low-budget items on Amazon are Super Glue, Uno, Frisbee, and a jumbo muffin pan. If you lived on $10 per day, would you buy a jumbo muffin pan?

How can you help the less fortunate? How can you assist the 70%? Here are a few ideas on how to give.

  • Develop a philanthropic plan. It will focus your charitable efforts on causes and groups you support. It will assist you in determining the most efficient way to distribute your assets. To maximize your giving strategy, incorporate it inside your financial plan.
  • Open a Donor Advised Fund (DAF). A DAF allows you to contribute significant dollars today and distribute the funds to your charities over time. In addition, you can manage the assets inside your DAF to grow the assets and potentially give more money away.
  • Use the Qualified Charitable Deduction (QCD). If you’re 70 or older, the IRS allows you to send up to $100,000 to charities you support from your IRA. The QCD satisfies your required minimum distribution, but you don’t have to report it as income.
  • Donate appreciated assets. If you own taxable assets with unrealized gains, consider donating them to nonprofit organizations. The organization receives your gift, and they can sell it without any tax consequences while you receive the deduction and avoid a capital gains tax.
  • Cash is earning nothing, so you might as well donate it to others. It will benefit your charities, and you will receive a tax deduction.
  • Give as a family. If you have children, involve them in the giving process. Give your children a seat at the table so they can experience the joy of helping others.

I must warn you, however, once you start giving, you won’t be able to stop. You can’t calculate the ROI on your philanthropic activity, but donating money to others will pay huge dividends.

The best definition of wealth I heard was from a fraternity brother.  He said, “I’m a rich man. I’m not rich monetarily but rich with friends, family, and faith.”

We are approaching the giving season, so examine your balance sheet to see how you can best help those in need.

“And the King will say, ‘I tell you the truth, when you did it to one of the least of these my brothers and sisters, you were doing it to me!’ ~ Matthew 25:40

October 19, 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.pewresearch.org/fact-tank/2015/09/23/seven-in-ten-people-globally-live-on-10-or-less-per-day/

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.

Captain Ahab or Captain Phillips?

Herman Melville’s Moby Dick is an excellent book filled with colorful characters and suspense. Captain Ahab wanted revenge on Moby Dick for biting off his leg. When I finished reading Moby Dick, I thought it was a fantastic story. My other thought was that Captain Ahab didn’t have a plan to capture the whale. His only goal was to kill Moby Dick at any cost. In the end, the entire crew of the Pequod died because of Captain Ahab’s mindless pursuit. If he had a plan, his results might have been different.  

Captain Phillips, on the other hand, was a man with a plan. Captain Phillips is a movie about the hijacking of the Maersk Alabama. The film was excellent and, like Moby Dick, full of vibrant characters and suspense. Captain Phillips regularly ran drills to make sure his crew was always prepared. As a result, when trouble arrived, his team was ready. Captain Phillips saved his ship, his staff, and ultimately himself because of his plan.

Do you identify with Captain Ahab or Captain Phillips regarding your financial and investment planning? Do you hop in a boat without a goal, or do you set a course that delivers you to your destination? Most investors act like Captain Ahab because they don’t have a plan, and they’re constantly chasing something – a rumor, stock tip, return or yield. If you have a plan, as did  Captain Phillips, your odds of success rise. 

I recommend you spend time planning your financial future to end up more like Captain Phillips and less like Captain Ahab. A well-prepared investor is more apt to follow their plan through all types of market conditions.

Confidence is going after Moby Dick in a rowboat and taking the tartare sauce with you.” Zig Ziglar

October 11, 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.

A $2,000,000 Fee?

In the mid-90’s I received a call from a client asking me to invest a lot of money. I asked him how much money, but he was reluctant to answer because of the large sum. He was the sole beneficiary of his uncle’s estate. He was delighted but nervous to be in a position to receive a substantial inheritance. When the money arrived, we parked it in a six-month T-Bill until we developed a plan.   

My client’s uncle did not have an estate plan, and, as a result, he wrote a $2,000,000 check to pay the estate tax! It was the most significant check he had ever written, and it went to pay taxes.

After he paid the IRS, we established a plan so his beneficiaries would not worry about paying an estate tax when he and his wife passed away.  I referred him to an attorney who established several trusts to protect their assets. I assembled a portfolio of California tax-free municipal bonds and high-quality dividend-paying stocks. When they passed, their heirs did not pay any taxes.

Why a $2,000,000 fee?  After he wrote his check to the IRS, he asked me what the fee would be to set up the investment accounts and family trusts. I said it would be less than $2,000,000. He chuckled at my comment because he knew his plan would protect his family for generations.

Next year, under the American Families Plan tax proposal, the estate tax exemption may drop to $5.85 million per person, or $11.7 million per couple – a 50% reduction from current levels. If your net worth is near $6 million, please call your estate planning attorney or financial advisor to ensure your assets are titled correctly. A little planning can go a long way, potentially spanning generations.

The only difference between death and taxes is that death doesn’t get worse every time Congress meets. ~ Will Rogers

October 7, 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.

There Will be Blood!

There Will be Blood is a 2007 movie starring Daniel Day-Lewis, based on Upton Sinclair’s book Oil! Mr. Sinclair published his book in 1927, and it dealt with the struggles of greed and fear in the early days of the oil industry in Southern California. I am sure that if Mr. Sinclair were writing his book today, 94 years later, the storyline would be similar.

The recent price increase in oil is one reason for the stock market’s volatility. Investors are concerned that rising oil prices will hurt stocks. Below is a comparison of a few significant increases in the price of oil and the S&P 500 since 1946.[1]  

  • From May 1973 to April 1980, the price of oil increased by 501%. The S&P fell 4.5%.
  • From May 1986 to September 1990, the price of oil increased by 211%. The S&P climbed 37%.
  • From June 1998 to May 2008, the price of oil increased by 576%. The S&P rose 29%.
  • From February 2016 to February 2019, the price of oil increased by 87%. The S&P jumped 45%.
  • From April 2020 to September 2021, the price of oil increased by 273%. The S&P soared 83%.

In these examples, the average increase for oil was 329%, while the S&P 500 rose 38%. Since 1973, oil has increased 241% or 2.5% per year. Inflation over the same period averaged 3.8% per year. The S&P 500, however, is up more than 4,000% – averaging 8.2% per year.

What to do today?  I recommend focusing on a long-term time horizon and investing in a balanced portfolio of low-cost index funds based on your financial goals.

Follow your plan, think long-term, diversify your assets, invest often, rebalance your accounts, and good things will happen.

As a reminder, the stock market has always recovered. It might take one week, one month, or one year but it has always bounced back. If you need evidence, please look at the following years: 1907, 1915, 1929, 1930, 1931, 1932, 1934, 1937, 1939, 1940, 1941, 1946, 1953, 1957, 1962, 1966, 1969, 1973, 1974, 1977, 1981, 1990, 2000, 2001, 2002, 2008, 2018, and 2020.

Therefore, do not worry about tomorrow, for tomorrow will worry about itself. Each day has enough trouble of its own. ~ Matthew 6:34.

October 6, 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.macrotrends.net/1369/crude-oil-price-history-chart

We Can’t Win!

When my daughter was in the first grade, I had the honor of coaching her soccer team.  These little Mustangs consisted of a band of young ladies, most of whom were playing an organized sport for the first time in their lives. Our league did not keep score because the primary goal was to introduce the girls to soccer. Before our first game, one of the girls said to me, “if we don’t keep score, we can’t win.” She was right.  

Most investors don’t keep score, so they don’t know if they’re winning or losing the investment game. In addition, they don’t know what game they’re playing or the road they’re traveling. As the Cheshire cat said to Alice in Alice in Wonderland, if you don’t know where you’re going, it doesn’t matter which road you take. 

How do you know if you are winning the investment game or on track to reach your goals? Here are a few ideas that can help you keep score and increase your odds of winning.

  • Financial Plan. A financial plan will help you keep score and guide you towards your goals and assist you in quantifying your hopes, dreams, and fears. It will become your financial GPS, your investment cornerstone.
  • Investment Policy Statement. An IPS will address your investment selection, asset allocation, time horizon, and risk tolerance.
  • Quarterly Review. A quarterly review is a quick check-in to assess your account performance, investment income, and market conditions. 
  • Annual Review. The annual review is a deep dive into your financial plan and investment policy statement. Are you still on track to reach your goals? Do you need to amend your plan? The annual meeting is an excellent time to review every aspect of your financial life.

As a note, the girls kept the score at each game.

I’ve worked too hard and too long to let anything stand in the way of my goals. I will not let my teammates down, and I will not let myself down. ~ Mia Hamm

October 5, 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

Is It Time To Sell?

Is it time to sell?  September was a challenging month for the markets as the S&P 500 fell 3.7%, its worst loss since last September. The Dow Jones, NASDAQ, and most asset classes also declined last month.  The fear of the downside is growing, especially if you pay attention to posts, papers, and pundits. Concerns over rising interest rates, potential persistent inflation, and the government’s overhaul of the tax system sent many investors to the sidelines.   

Should you be a seller? Here is a list of seven reasons to sell stocks.

  1. You should sell if you need your money in one year or less. According to Dimensional Funds, the S&P 500 has averaged 10.1% per year since 1926, but it has also declined 25% of the time. Since 1998, The index has fallen five times – 2001 to 2002, 2008, and 2018. In March 2020, it fell 34%.[1]
  2. You should sell if you are going to buy something with the money invested in the stock market. For example, if you want to buy a home, car, or boat, sell stocks and move your funds to a cash account.
  3. You should sell if you have to pay for an event like a wedding or a college education. I sold stocks in my daughter’s account when she left for college. I liquidated about a quarter of her holdings and invested the proceeds in US Treasuries. I did not want to have 100% exposure to stocks with several pending tuition payments on the horizon.
  4. You should sell if you are retiring in 3 to 5 years. You don’t need to sell all your stock holdings, just enough to cover three years’ worth of household expenses. For example, if your annual household expenses are $100,000, make sure you have at least $300,000 in cash in your retirement or investment accounts.
  5. If you have a mortgage, credit card balance, auto, or student loans, consider selling stocks to reduce or eliminate your debt, especially if your debt level is high. A rule of thumb is that your total monthly debt payments should be less than 38% of your gross income.  For example, if your gross income is $10,000 per month, your total debt payments should be less than $3,800.
  6. You should sell if your account is 100% invested in stocks. An all-stock portfolio lost 53.1% during the Great Recession (2007 – 2009). If you allocated 30%  of your account to bonds, you could have reduced your risk by 27%. Since 1971, the S&P 500 averaged 11.01% per year, while the 70/30 portfolio returned 10.6% with a third less risk.[2] Adding bonds to your account did not hinder your returns, but it significantly reduced the volatility.
  7. You should sell if you don’t have a financial plan. Not having a financial plan is like driving a car without a steering wheel or sailing a ship without a rudder. How can you invest if you don’t know where you’re going? A financial plan can help guide your investments and make you a better investor.  

The markets are volatile, but volatility is not risk. Stocks are constantly rising and falling, but over time they produce great wealth. Bonds are safe with low risk, but they don’t grow. Since 2006, the S&P 500 has corrected several times, but it is still up 226%! In 2008 the index fell 52%. It dropped 15% in 2018, and in March 2020, it declined 34%. Short-term US Treasuries are the safest investment globally, and since 2006, they have not had any corrections or losses, but they are up a paltry 7.27%.  

If you don’t need money to purchase something or pay off debt and own a balanced portfolio, stay the course with stocks and buy the dip.

Happy Investing!

“October. This is one of the peculiarly dangerous months to speculate in stocks. The others are July, January, September, April, November, May, March, June, December, August, and February.” ~ Mark Twain  

October 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.


[1] YCharts

[2] Dimensional Fund Advisors Returns Web – 10/1/1971 to 09/30/2021.

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.

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.