Tag: Retirement

Retirement Job Opportunities According to ChatGPT

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Retirement is exciting for many, but some people want to remain active and connected to the workforce or their communities. I was curious about the opportunities for active retirees, so I asked ChaptGPT, and here is what it (he/she/they) recommended.

There are many great job options for active retirees, depending on their skills, interest, and availability. Here are some ideas:

  1. Consultant. If you have years of experience in a particular field, you can become a consultant and provide guidance to others in your area of expertise.
  2. Freelancer: Many retirees choose to become freelancers and work on projects they enjoy. This could include writing, graphic design, or consulting.
  3. Tour Guide: If you enjoy traveling and have a passion for sharing your knowledge with others, becoming a tour guide may be a good option for you.
  4. Fitness Instructor: If you are physically active and have experience in fitness, you could become a fitness instructor and teach classes.
  5. Retail Salesperson: Retail stores often need part-time workers to assist with customer service, restocking, and sales. This can be a great option for retirees who enjoy interacting with people.
  6. Tutor: If you have a background in education or a particular subject area, you could become a tutor and help students with their studies.
  7. Dog Walker or Pet Sitter: If you love animals, you could become a dog walker or pet sitter and help pet owners care for their furry friends.
  8. Event Coordinator: If you enjoy planning and organizing events, becoming an event coordinator may be a good fit for you.
  9. Volunteer: many retirees choose to volunteer their time and skills to organizations that align with their values and interests.

Overall, the best job for an active retiree will depend on their individual preferences and circumstances. It’s important to find a job that allows you to enjoy your retirement while also providing a sense of purpose and fulfillment.

ChatGPT has spoken!

I am completely operational, and all my circuits are functioning perfectly. ~ HAL, 2001 A Space Odyssey

March 23, 2023

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 your asset level.

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. Prices and yields are for today only and are subject to change without notice.

Are You Ready To Retire?

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Are you ready to enjoy your golden years? Retirement is a goal for most investors, especially those who have faithfully contributed to their 401(k) plan for three or four decades. Is it time to cash in your chips and go all in on retirement?

A successful retirement requires years of planning and covers three main topics: Where will you live? What will you do? How will you pay for it? Let’s explore each subject.

Where to live?

A key component of retirement is where to live. Do you want to retire in your hometown or move to an exotic location? I love the beach, and living in Laguna Beach, La Jolla, or Maui ranks high on my list, but I also love the mountains, so Estes Park and Colorado Springs are strong contenders. I love sunshine, which removes the Pacific Northwest and the United Kingdom. I want access to restaurants, entertainment, sporting events, hospitals, and airports, eliminating most rural areas. After you decide on your retirement destination, will you supersize your home or downsize it so it’s economically affordable? Of course, if you invest well, you can own multiple homes. According to the Department of Labor, housing accounts for approximately 32 percent of expenditures for those aged 65 and over.[1]

List your top three retirement destinations.

  1. _________________________________________________________________________
  2. _________________________________________________________________________
  3. _________________________________________________________________________

What will you do?

What will you do in retirement? Do you want an active retirement or one of leisure? I plan to hike, bike, ski, fish, dive into a good book, and watch movies. I also plan to volunteer and serve others. Having hobbies is paramount in retirement and will keep you active and focused. Another possibility is to turn your hobby into a revenue-generating machine by selling your goods through Shopify or Etsy. Hobbies can improve your health, and according to WebMD, they reduce stress, promote mental health, and improve relationships.[2]

List your top three hobbies.

  1. _________________________________________________________________________
  2. _________________________________________________________________________
  3. _________________________________________________________________________

How will you pay for it?

After you decide where to live and what to do, how will you pay for it? If you plan well, then your resources should be able to support your lifestyle. Before you send the retirement email to your boss and colleagues, take an inventory of your assets. What do you own – stocks, bonds, mutual funds? In addition to your investments, will you receive a pension? And don’t forget Social Security because it will be a primary ingredient of your retirement income. How much income can you expect in retirement? If your investment portfolio is $1,000,000, expect an annual income stream of $40,000; if your Social Security is $30,000 per year, your projected retirement income is $70,000 before taxes. Keeping tabs on your expenses is a must in retirement, and controlling your spending can prolong your retirement assets. Of course, the opposite is also true. If you spend with reckless abandon, you could run out of money.

What are your top three sources of retirement income?

  1. _________________________________________________________________________
  2. _________________________________________________________________________
  3. _________________________________________________________________________

Retirement is an exciting time, but do you need to wait until your sixty-five? No. If your assets support your lifestyle, you can retire anytime; no need to wait until your employer offers you a gold watch, but how do you know you won’t run out of money? A financial plan can tell you if you’re on track to leave the workforce. It quantifies your hopes, dreams, and fears and will project your future spending based on your current assets, spending limits, and financial goals.

A person retiring at age 40 needs more growth assets than one retiring at 75 – age matters. Owning stocks allows your money to combat inflation, and inflation will destroy your purchasing power if you leave your money parked in cash or T-Bills. Do not retire your assets when you retire because stocks can help you enjoy a fruitful retirement, despite their recent performance.

If you’re not ready to fully retire, consider taking a few months off as a trial run. Rent a home in a different city, cruise the seven seas or volunteer in a national park. Give it a try; you can always return to your nine-to-five job.

Beware the hobby that eats. ~ Benjamin Franklin

August 22, 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 you 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. We have waived our financial planning fee for the remainder of the year, so your cost is $0.00.

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. Ideally, I will own homes in Colorado and California to enjoy surf, sand, and snow.

[1] https://www.bls.gov/opub/btn/archive/housing-expenditures.pdf

[2] https://www.webmd.com/balance/health-benefits-of-hobbies, Venkat S.R. and reviewed by Poonam Sachdev, 5/23/2022

Shocked

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My former Jeep needed an engine repair that cost more than $6,000 to fix! It was a budget buster and a shock to my financial system. Thankfully, my emergency fund kept me from selling assets or using my credit card. Have you experienced an unexpected financial shock like a medical expense, a new roof, or appliance repair? It’s gut-wrenching.

Most budgets are very detailed and do not allow for any margin of error. They account for expenses down to the penny, so if an unexpected expense occurs, it destroys the budget. It causes financial harm and stress, especially if no emergency fund exists. If you’re working, you may absorb the expense over time through your salary or income, but what if you’re retired? What if you’re living on a strict retirement budget or fixed income? Let’s explore a few budget-busting items.

  • Medical expenses can derail any budget, but as retirees age, the chance of an unexpected medical expense rises substantially. According to Fidelity, a retired couple may spend more than  $315,000 to cover health care expenses.[1]
  • Long-term care assistance. Spending more than $1 million for long-term care coverage or assisted living is possible. According to Genworth, a private room at a nursing home facility currently costs more than $9,000 per month and could jump above $21,000 in 30 years.[2]
  • Home repairs are another budget buster. Maintaining or repairing your home could cost between 1% to 5% of the home’s value. If you live in a million-dollar home, expect to spend $10,000 to $50,000 annually for the upkeep.
  • Taxes will put a dent in your budget. The $10,000 limit on state and local taxes hit individuals hard, especially those in California or New York. Texas residents have high property taxes, and incurring a $10,000 bill is common. Changes to tax policy are a risk for retirees.
  • Increased rent is a concern for retirees. According to Redfin, rent for Austin residents soared by 46% from 2021 to 2022, and the average asking rent price is $2,531.[3] If your rent increases, you may be forced to move to a smaller apartment or different part of town.
  • Inflation is a tax for retirees living on a fixed income. Inflation recently touched 9.1%, and prices at grocery stores and gas stations continue to rise. Butter soared 26%, cereal increased 13.8%, and ice cream rose 12.5% over the past year.
  • Owning a pet is expensive. In addition to feeding your dog or cat daily, there are healthcare expenses, boarding fees, and insurance costs.

Combating unexpected expenses is a full-time job requiring discipline and diligence. Regular maintenance, care, budgeting, etc., helps keep your budget in check. Here are a few suggestions to help you prepare for budget busters.

  • Build an emergency fund to cover three to six months of expenses. If your expenses are $10,000 per month, allocate $30,000 to $60,000 to the fund.
  • If you’re nearing retirement, consider an emergency fund to cover three years of living expenses. The extra savings can protect you against unexpected costs while maintaining your lifestyle if you retire when the market is down, like this year.
  • Protect yourself, your home, your cars, and your pets through insurance planning. The proper coverage can offset large or sudden expenses.
  • Consider long-term care insurance or annuities to avoid longevity risk.
  • To battle inflation, own stocks. Since 1990, the S&P 500 has trounced inflation by 2,000%.[4]
  • Work with your financial planner or CPA to develop a tax-efficient strategy for your retirement income distributions.
  • Include a line item in your budget to cover unexpected expenses. A suggested amount is 5% of your total budget. If your annual budget is $100,000, then the amount is $5,000.

Preparation and planning are paramount in limiting the shock and surprise of unexpected expenses. The best time to prepare for a flood is when the sun shines. Don’t wait for disaster to hit before you take action to fortify your financial foundation.

Beware of little expenses. A small leak will sink a great ship. ~ Benjamin Franklin

July 19, 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 you 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. We have waived our financial planning fee for the remainder of the year, so your cost is $0.00.

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. I sold my Jeep and bought a new Toyota 4Runner.

[1] https://www.fidelity.com/viewpoints/personal-finance/plan-for-rising-health-care-costs Fidelity Viewpoints, 5/25/2022

[2] https://www.genworth.com/aging-and-you/finances/cost-of-care.html

[3] https://www.redfin.com/news/redfin-rental-report-april-2022/, Tim Ellis, May 18, 2022

[4] YCHARTS – 1/1/1990 to July 18, 2022

Do You Suffer from Occupational Burnout?

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People are fried. After two years of COVID, the Ukraine War, unaffordable homes, and a stock market correction, people are sick and tired of being sick and tired. I’m a financial planner, not a therapist, but sometimes I feel more like Frasier Crane than Peter Lynch.

Talking to a financial planner is to bear your financial and emotional soul. It’s not easy for people to reveal their financial secrets or status. Since I started my firm in 2015, we have completed more than 140 financial plans reflecting hundreds of millions of dollars. The two questions people often ask are: When can I retire? Will I run out of money?

Because of COVID, we generated several standalone plans to help people who want to change jobs, move to the country, or travel the world. These people are tired of their daily grind and want to pursue their hobby or passion, and they want to close out the second half of their career with a purpose.

A financial plan can help you decide if you’re financially ready to leave your 9 to 5 job to pursue your dreams. Are you ready to start a new business? Do you want to work for a non-profit? Can you expand your hobby to generate income? Your plan can answer these questions and many more.

I have often said there are two sides to financial planning. On one side, it’s all about the numbers. Will your assets support your lifestyle when your retire or change careers? In this case, the numbers dictate your decision. It’s a binary answer – yes or no. On the other side is the emotional piece. Are you ready to leave your day job to pursue your dream? Do you have the self-control to leave a steady paycheck behind? Can you handle economic uncertainty? A well-constructed financial plan will mend these two sides together to give you the confidence to forge ahead.

If you’re unsure where to start, you can visit the Certified Financial Planners website to learn more about the profession and services. You can also search for a planner in your area. Here is a link to their website. https://www.cfp.net/

When I started my career three decades ago, I developed a rudimentary financial plan for a client. A few days after we finished it, she called to ask if she could afford a new car, and I told her she could buy two! The plan gave us confidence that her car purchase would not derail her financial future. And thirty years later, her account is still going strong.

If you want to try something new, give it a go. What do you have to lose? If you wish to fortify your odds of success, start with your financial plan. After all, you don’t want to lie on your death bed wondering what if.

I’m listening.

It’s better to look ahead and prepare, than to look back and regret. ~ Jackie Joyner-Kersee

April 23, 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.

Ready To Retire Early?

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Early retirement sounds lovely. Sitting on the beach, hiking in the mountains, or traveling the world without care is tantalizing. When I was 25 and single, I created a rudimentary financial plan. Since I wasn’t married, didn’t own a home, or have any children or pets, I could retire early.

Dr. Laurence J. Kotlikoff, Professor of Economics at Boston University, said, “early retirement is one of the worst money mistakes.” He added, “We are, as a group, lousy savers, making early retirement unaffordable. Financially speaking, it’s generally far safer and far smarter to retire later.”[1]

To retire early requires significant resources or a spartan lifestyle. If you retire at 45, you could live for another 55 years, so you need to support yourself from savings and Social Security. How do you replace 55 years of income? Retiring at 45 requires about $2.5 million in assets if you spend $100,000 per year. Can you rely on Social Security to fund your retirement? According to Dr. Kotlikoff, the average Social Security benefit is $18,000 per year.[2]

Are you ready to retire early? Here are a few suggestions.

  • Save early and often. The more money you save, the better your chances of retiring early. Determine the amount you need to achieve your goal. If you’re 25 and want to retire at 50 with $2 million in the bank, you need to save about $2,000 per month.
  • Working. Working is not retiring, but you could travel the world and pick up odd jobs or part-time work. It is easier than ever to generate income in the new gig economy. If you have a laptop, you can work from anywhere.
  • Taxable accounts. Investing in a taxable account gives you access to your funds at any time. If you contribute all your money to a retirement account, you’re penalized 10% if you withdraw your money before age 59.5.
  • Healthcare. Medicare starts at age 65, so finding affordable healthcare is vital. Regardless of your retirement age, healthcare will be a significant expense.
  • Expenses. If your annual spending is $100,000 per year, you need about $2.5 million in assets to retire. If you reduce your costs to $75,000, your asset level drops to $1.875 million. To find your number multiply your expenses by 25. The lower your expenses are, the fewer assets you need to retire.
  • Hobbies. What will you do in retirement? Do you have any hobbies? Reading? Hiking? Golfing? Fishing? An active lifestyle is a crucial component of longevity. Sitting on your couch all day is not healthy and doesn’t sound too exciting.
  • Social Security. Forty quarters of credit or ten years’ worth of work is needed to receive full benefits. You can start receiving Social Security benefits at age 62, and the maximum age is 70. Your payment rises about 8% per year between ages 62 and 70. If your income is $18,000 at age 62, it could increase to $33,316 at age 70. You may need Social Security at age 62 if you lack savings.
  • Financial Plan. A financial plan can answer several questions about your pending retirement. Can you afford to retire early? Will your money last forty to fifty years? How much money do you need to save monthly to reach your goal? A plan is paramount.

Are you ready to retire? Give it a go if you have the assets, a plan, a compass, and good hiking shoes. You can always return to the workforce if needed. Happy retirement!

What’s Enough? What’s the answer? ~ Leon Cooperman

February 2, 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.cnbc.com/2022/02/01/why-early-retirement-is-one-of-the-worst-money-mistakes-youll-regret-says-harvard-economist.html, Laurence J. Kotlikoff, Contributor, CNBC February 1, 2022

[2] Ibid

Do You Need A New Company Retirement Plan?

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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)!

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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.

Steak Dinners and Retirement Planning

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Now that restaurants are open and people are vaccinated, I’ve received several invitations to attend retirement workshops at local restaurants. Recently, I received one for a retirement planning seminar at Flemings Prime Steakhouse to help me eliminate taxes in retirement. Sounds yummy.

The mailers are elaborate with beautiful pictures of steaks and lakes. The flyers even come with tickets attached. Most firms that hold these seminars aren’t offering retirement planning, but instead, they’re selling expensive annuities or whole life insurance policies.

These firms typically spend several thousand dollars to host one steak dinner. For example, to get an audience of 50 people, they’ll send 10,000 mailers. The mailing will cost about $5,000, and the dinner could add another $8,000. If they host their event at a hotel, it may add another $1,000 to the cost. So, all in, it may cost $14,000 or more to host an event.

Why do firms spend $14,000 per month to offer free retirement workshops? Because it’s profitable. If their guests purchase $1 million in annuities, the sales representatives may generate $50,000 or more in commissions! If they sell a few insurance policies, they’ll recoup their cost and make a substantial profit.

If you attend one of these gatherings, here are several questions to ask the speakers.

  • Are they fiduciaries?
  • What is their financial planning process?
  • Do they offer a free consultation?
  • Do they own the investments they’re recommending?
  • What is the total cost to buy the product they’re selling?
  • How do they get paid?
  • Is there a fee to redeem your investment if you need access to your money?
  • Are there alternatives or less expensive investments to the ones they’re recommending?
  • Do they work with multiple insurance carriers?

If you have questions about retirement or Social Security, meet with a Certified Financial Planner (CFP)® who charges a flat fee or hourly rate. CFPs are fiduciaries, and they are required by law to act in your best interest and disclose any conflicts of interest – not so with brokers or insurance agents. In addition, most CFPs offer free consultations before starting the planning process, and you are under no obligation to act on their recommendations.

The fall is seminar season, so be on guard for elaborate mailers offering “free” dinners. If you live in a high-income zip code and you’re over 50, you’re a prime target for these firms.

Caveat Emptor.

Beware of false prophets, who come to you in sheep’s clothing but inwardly are ravenous wolves. ~ Matthew 7:15

September 21, 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 Need A Pre-Retirement Budget?

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Creating a budget is about as fun as getting your wisdom teeth pulled. Budgeting is a painful task for most people, and most would instead do anything else besides figuring out where their money is going.  However, to ensure a successful retirement, it’s imperative to spend some time reviewing your spending habits.

According to the American Psychological Association, 72% of Americans say money is the number one reason for the cause of stress – usually the result of less money coming in versus money going out.[1] It’s possible to control the former but much easier to manage the latter. In the world of finance, you can regulate how much you spend and how much you save. Everything else is pretty much out of your hands.

The best way to budget for your retirement expenses is to review where you’ve spent your money. What financial footprints have you left? A deep dive into your spending habits from the past two to three years will help you paint a picture of where your future expenses may land. By identifying how you’ve spent your money, it will be easier to adjust your future spending. After your review, can you find expenses to prune or eliminate?  By reducing your overhead, you’ll be in a better position to save and plan for retirement. And, the lower your expenses, the less money you’ll need for retirement.

As you get closer to retirement, I recommend reviewing your budget each quarter to better understand your spending habits. It’s not uncommon to see a spike in spending before retirement due to several factors like buying a car or remodeling your kitchen, so don’t be alarmed with a short-term increase.

It’s prudent to add a black swan, or random event, category to your budget as there’s always an unforeseen spending expense during the year like a home repair or medical expense. A suggested amount for this category is 5% of your total budget. For example, if your annual spending is $100,000, a recommended amount for your black swan category is $5,000.

In retirement, housing will account for most of your annual expenses. According to the Consumer Expenditure Survey,[2] housing accounted for 32.8% of a person’s budget. Transportation came in second at 17%, food items were third at 13%, and healthcare items were fourth at 8.2%.  Housing is a considerable expense in retirement, even if you don’t have a mortgage. Utilities, property taxes, and repairs are ongoing costs that will always attack your budget. Since the late fifties, consumer spending has increased 6.5% per year.

What about the US savings rate? The annual savings rate averaged 6.22% over the same time – about the same level as personal spending.

How does your spending compare to the national average? The numbers below represent how much consumers spend on various categories as a percentage of their income. For example, Americans spend 13% on food, so if your annual income is $100,000, you’ll pay $13,000 per year.[3] 

Housing = 32.8%

Transportation = 17%

Food = 13%

Healthcare = 8.2%

Entertainment = 4.9%

Apparel = 3%

Education = 2.3%

A spending budget will also help develop a plan for controlling your debt. What is a “good” level of debt? Your total debt payments should be less than 36% of your gross income. If your annual income is $100,000, your total debt payments should be less than $36,000 per year or $3,000 per month. If possible, try to eliminate all your debt before you leave the workforce for good.

Also, if you don’t know where your money is going, how do you know how much to save?  People who invest first, spend second will see their assets grow over time. How much money should you save? As much as you can! If you’re not sure, start with 10% of your gross income.

With technology, it has never been easier to create a budget through programs like Mint.com, PocketGuard, or Honeydue. After you determine where your money is going, you can turn your attention to planning a profitable retirement.

Happy Budgeting!

Budget: A mathematical confirmation of your suspicions. ~ A.A. Latimer

September 13, 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.apa.org/news/press/releases/2015/02/money-stress.aspx, accessed 8/14/16

[2] https://www.bls.gov/opub/reports/consumer-expenditures/2019/home.htm

[3] Ibid

Do You Want To Retire Early?

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Retiring in your forties or fifties to spend time on a beach or in the mountains sounds exciting, but it requires proper planning and financial assets. Of course, financial assets are crucial to a successful retirement, but, more importantly, you need to be emotionally prepared to retire.

Leaving the workforce may be complicated if you’ve been working for several years. If you’re contemplating early retirement, here are a few ideas to help you make a more informed decision.

  • Give retirement a practice run by taking extended vacations or sabbaticals. Disconnect from your office, turn off your phone and enjoy your time off. Visualize retirement.
  • Research possible retirement destinations, including your hometown. Create a spreadsheet of things vital to you and your family. Do the cities have what you want? Entertainment? Sports? Outdoor activities? Airports? Healthcare?
  • Visit cities where you might retire. Book a flight to Laguna Beach, Austin, Estes Park, Bend, or Martha’s Vineyard and give the town a tour. What do you like? How are the restaurants? Are the homes affordable? Is the city easy to navigate?
  • Is your new town politically aligned with your thinking? Is your state red or blue? Do you want to move to a town where you’re a blueberry in a cherry pie? Or vice versa?
  • What is the tax environment in your state? Does it have a state income tax? Moving from Texas to California or New York would cause your taxes to rise. Oregon has a steep estate tax; Wyoming does not.
  • How’s the weather? The heat in Texas is brutally hot, and the winters in Connecticut are wicked cold. Other than San Diego, not many cities have pleasant weather year-round.
  • Talk to your friends who are retired. Use them as a guiding light – a beacon. Ask them about their experiences. What would they change or do differently? How do they spend their days?
  • Do you have hobbies that will occupy your time and keep you physically and mentally sharp? Do you want to play pickleball by day or bridge by night?
  • Can you volunteer your time to help others? Non-profits, schools, and hospitals need volunteers and mentors. Dedicating a few hours a week to help others is good for the soul. Volunteering may also give you a purpose.
  • Is your identity wrapped up in your business? Does your career define who you are? If so, you need to practice divorcing yourself from your job because you’re no longer a banker, teacher, doctor, or police officer once you retire.
  • Do you have a tribe? Are you connected to people in your neighborhood? Friends and family are an essential part of your retirement team. If you move to a new city, you’ll need to develop friendships and connections by joining a church or other organizations. Don’t fly solo in retirement.
  • Write about your hopes, dreams, fears, and concerns. Keep a journal of your thoughts as you approach retirement. Document your journey. Committing your thoughts to paper is therapeutic, liberating, and emotionally rewarding.

Retiring requires a long emotional runway. It’s a journey. With proper planning and preparation, your odds of a successful retirement increase. On the other hand, if you quit cold turkey, it may be challenging to transition to a fruitful retirement. Also, if you retire from your vocation to start another job, you’re not retired; you just changed employers.

Early retirement is an important decision and requires a long emotional runway, so start planning today, so you can retire on your terms.

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

September 10, 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.