Thursday
Sep112014

Elder Care Planning: Assisted Living

 In last month's post we talked about how most older adults would prefer to age in their own homes (age in place). This is often possible for a lifetime, but for some, physical and/or cognitive decline makes it necessary to look at housing options that provide care on-site. According to the recent Legg Mason study on Aging Clients, the national average cost to live in an assisted living community is $3,500 to $5,000 a month.

As we meet with our clients, we find that there are several reasons why looking for an assisted living community makes more sense than trying to age in place. These reasons can be reviewed looking at the 4 "C's": Comfort, Convenience, Companionship and Care.

Comfort in Knowing Care is Available

An older couple may find that they can no longer safely assist each other.  One person may require more assistance than the other, but caregiving can be extremely difficult and can often put the healthier spouse at risk for harm.  Or a widowed client, without family able to help, may find that bringing care into the home becomes too cost-prohibitive as the need for more hours of assistance escalates.  Just knowing that a qualified care provider is available within the community at all times can provide comfort in the way of peace of mind.

Convenience of Resources

Assisted Living communities, while they are not "home," can provide conveniences not available to those who choose to age in place.  Meals are provided, so it is no longer necessary to cook.  Care providers are available on-site.  And things like transportation and organized trips are readily available.

Companionship Right Outside the Door

One of the biggest challenges for older adults can be socialization and companionship.  An assisted living community allows individuals the space to be by themselves, when and if they desire. But when having a conversation with someone is desired, it is literally right outside the door. Community rooms, small gathering areas, and organized social activities are readily available, providing a way to stay engaged and connected.

Care is Always There

The ability to make a call and have a care provider available in a moment's notice can be invaluable for older adults, especially those who are alone.  Knowing that help is near can also ease the burden of worry.

If you or someone you know thinks they may need to look at an assisted living community in the future, I recommend (as always) planning ahead.  Begin by researching assisted living communities that will fit your specific needs:

  • Vicinity to your home community and/or to family members
  • Services provided by the community fit your needs
  • Comfort level with the community and the types of residents

Include your family members in the discussion – consider potential challenges, resources and options. And last, but not least, take a look at cost.  Discussing the financial impact of future housing decisions with your financial planner is important and can help ensure financial independence for a lifetime.

Sandra Adams, CFP® is a Partner and Financial Planner at Center for Financial Planning, Inc. Sandy specializes in Elder Care Financial Planning and is a frequent speaker on related topics. In 2012-2014 Sandy has been named to the Five Star Wealth Managers list in Detroit Hour magazine. In addition to her frequent contributions to Money Centered, she is regularly quoted in national media publications such as The Wall Street Journal, Research Magazine and Journal of Financial Planning.


Five Star Award is based on advisor being credentialed as an investment advisory representative (IAR), a FINRA registered representative, a CPA or a licensed attorney, including education and professional designations, actively employed in the industry for five years, favorable regulatory and complaint history review, fulfillment of firm review based on internal firm standards, accepting new clients, one- and five-year client retention rates, non-institutional discretionary and/or non-discretionary client assets administered, number of client households served.

Any opinions are those of Center for Financial Planning, Inc. and not necessarily those of Raymond James. C14-028648

Tuesday
Sep092014

Richard Marston on Investing for a Lifetime

 What does a financial planning geek do for fun? He visits the Wharton School of the University of Pennsylvania for a day of lectures! The first part of the day was spent hearing from Professor Richard C. Marston. Professor Marston is the James R.F. Guy Professor at Wharton, a graduate of Yale, MIT, and Oxford (on the east coast they would call him “wicked smart”). Moreover, he has taught asset allocation for over twenty years and in 2011 wrote the book Portfolio Design: A Modern Approach to Asset Allocation (Wiley, 2011). Needless to say, it was a thought-provoking and worthwhile day.

In two lectures -- the first taken from his new book, Investing for a Lifetime” Managing Wealth for the “New Normal” and the second titled “Investing with a Fifteen Year Perspective: Past and Future” – Marston shared what he believes to be some “best practices” in savings and investing. He talked about choosing an asset allocation focusing on stocks when you are still years from retirement. You then gradually shift towards a 50/50 portfolio while saving 15%-20% of income during the accumulation period. And once you reach retirement, he discussed spending 4% of accumulated wealth. My sense is that these are consistent messages that our clients have heard from us over the years. 

During one of the wicked smart professor’s lectures, he shared that as he gets older, he has a greater appreciation for the role that investor and advisor behavior plays in ultimate investment success.  For example, he believes in using active managers. He also believes that selecting the right investments is important (and he is paid by several family offices to do so), but behavior such as letting fear or greed control actions plays a critical role as well.

Professor Marston’s recent work also focuses on determining a savings goal for retirement. A common rule of thumb is that investors must save 8 times their income before they retire.  So, if you earn $100k, then you need $800k saved at retirement.  Professor Marston was intrigued by the simplicity of the general rule and decided to put it through his own analysis. In the end, his analysis suggested that 8 times income is probably too low for most people.  His own conclusions, obviously depending on the exact assumptions, ranged from 11.5 to 18.4 times income. In his opinion, your savings goals will vary widely depending on two main factors:

  • If you are single: Your savings must be higher because a couple will receive more in social security benefits at the same earnings (consider it a marriage premium).
  • If you earn much more than $100k: Your savings rate needs to be higher because social security plays a lessor role in your retirement income.

As a quick aside, I was pleased to hear Professor Marston include and emphasize the importance of social security in the retirement planning analysis.  Without it, the savings rates above would need to be increased significantly.  I invite you to read our many previous posts on social security and let us know if we can help answer any questions.

On the flight home from the lectures, I read Professor Marston’s newest book Investing for a Lifetime (Wiley, 2014). It’s about making saving and investing understandable to the investor.  Probably the most important statement, that occurs early and often, is SAVING IS MORE DIFFICULT THAN INVESTING. Meeting your life goals, such as retirement, is much more dependent on our savings than getting another 1% from investment portfolios.  As I have written in the past, saving is much more than dollars and cents; it takes discipline and perseverance.

For our long-time clients, the book would provide a good refresher on many of the concepts we have discussed and encouraged over the years.  If you have a family member or friend starting their career or looking to take more control of their finances, Professor Marston has the ability to make the complex simple and I think his books would be a wonderful gift.

The second part of my Wharton School visit was spent hearing from Professor Christopher Geczy, Ph.D., another wicked smart guy.  I will leave that review for another post.  If you like Alpha, Beta, Correlation coefficient, Standard Deviation, R Squared, Systematic risk, and Idiosyncratic risk…well you are in for a treat!

Timothy Wyman, CFP®, JD is the Managing Partner and Financial Planner at Center for Financial Planning, Inc. and is a frequent contributor to national media including appearances on Good Morning America Weekend Edition and WDIV Channel 4 News and published articles including Forbes and The Wall Street Journal. A leader in his profession, Tim served on the National Board of Directors for the 28,000 member Financial Planning Association™ (FPA®), trained and mentored hundreds of CFP® practitioners and is a frequent speaker to organizations and businesses on various financial planning topics.


The information contained in this report does not purport to be a complete description of the securities, markets, or developments referred to in this material. The information has been obtained from sources considered to be reliable, but we do not guarantee that the foregoing material is accurate or complete. Any opinions are those of Center for Financial Planning Inc. and Richard C. Marston and not necessarily those of RJFS or Raymond James. Every investor’s situation is unique and you should consider your investment goals, risk tolerance and time horizon before making any investment. Investing involves risk and you may incur a profit or a loss regardless of strategy selected. Any information is not a complete summary or statement of all available data necessary for making an investment decision and does not constitute a recommendation. Asset allocation does not ensure a profit or guarantee against a loss. C14-026186

Thursday
Sep042014

Factoring the Cost of Living in a Post-Retirement Relocation

 Your retirement plan may involve a move. You could be moving some place warm so you don’t have to put up with the wonderful Michigan winters or perhaps moving to be closer to your kids and grandkids.  Whatever the motivation, there is always a financial component in the decision-making process.

Paying for what you want vs. what you need

The cost to live in other areas of the country can be higher or lower, but some people don’t know the specific figures you will probably pay after you make the move.  Is a dollar in Michigan the same as a dollar in California or Utah? A recent conversation with a client evaluating relocating placed focus on this specific issue. His thinking was that it didn’t matter where you lived, you can always find a way to spend money.  While I certainly have to agree with him on that point, I think the bigger point is that there is a difference between spending money on things you want versus spending money on things you need.

Comparing Expenses

Let’s take a look at the cost of different goods and services in the two cities. These figures were taken from www.costofliving.org and they are an average estimate taken from people who live in Salt Lake City and San Francisco. The list of goods and services has more than 75 commonly purchased or used items but we’ll look at just a sampling of expenses.

As you can see, everything in San Fran is more expensive except the T-Bone steak. Unfortunately, after you pay for your basic living expenses, you might not have any money left over for that T-Bone! According to the living expense calculator on www.costofliving.org someone living on $70,000 of net income in Livonia, Michigan would need approximately $120,000 net in San Francisco.  In Salt Lake City, that same person would only need $69,000 to maintain the same standard of living. 

If you think a move might be in your future, talk to your financial advisor to weigh the costs associated with the new location and make sure it fits within your retirement income goal.

Matthew Trujillo, CFP®, is a Certified Financial Planner™ at Center for Financial Planning, Inc. Matt currently assists Center planners and clients, and is a contributor to Money Centered.


Any opinions are those of Center for Financial Planning, Inc. and not necessarily those of Raymond James. The information has been obtained from sources considered to be reliable, but Raymond James does not guarantee that the foregoing material is accurate or complete. C14-022592

Tuesday
Sep022014

The 50/50 strategy turns your next raise into lifelong savings

 Ever wonder how much you should be saving? We hear it from a lot of clients who want to make sure they’re putting away enough each paycheck towards retirement.  We typically suggest saving at least 10% of your before-tax income and for those approaching retirement within 10 – 15 years, we like to see that number closer to 20%.  Although we never like to make blanket statements in financial planning, those savings rates are typically what most should be striving for while still maintaining a balance to live a full life now.  But is there a better strategy that could be more efficient?

Give Your Savings a Raise

What do most people do when they get a raise?  Many people keep their savings rate the same but increase their standard of living.  Sure, the actual dollar amount is increasing because the savings percentage is now based on a larger salary; however, my argument would be that controlling your standard of living is what is most important, especially when approaching retirement.  So how do you keep your standard of living from getting out of control and far surpassing savings? 

Spend 50% of your raise and save the other 50% 

Let’s see how that strategy could impact our hypothetical client, Jack.  Jack is 30 years old and is earning $100,000/yr as a business consultant.  He is currently saving 10% towards his 401k ($10,000/yr).  Jack had a great year in 2013 and earned an 8% raise for 2014, increasing his base salary to $108,000.  Assuming Jack kept his savings rate of 10% the same, he would now be putting $10,800/yr into his 401k.  However, what if he took the “spend 50, save 50” approach?  After taxes and other payroll deductions, Jack actually realizes a “take home” raise of $5,000.  In the 50/50 strategy, Jack would tack on $2,500 to his annual 401k savings, increasing total annual contributions to $12,500 (from $10,000 prior to his raise).  By simply saving 50% of the money that didn’t exist the year prior, Jack has increased his total retirement savings to about 11.6% ($12,500/$108,000). He’s controlled how quickly his standard of living increases. 

As a young professional, I can certainly attest to the difficulty of looking down the retirement road to a goal that is 35+ years away.  However, committing to your goals and having a clear, simple strategy, such as the 50/50 savings approach, can help you reach the financial goals you set for yourself or family!

Nick Defenthaler, CFP® is a CERTIFIED FINANCIAL PLANNER™ at Center for Financial Planning, Inc. Nick currently assists Center planners and clients, and is a contributor to Money Centered and Center Connections.


Any opinions are those of Center for Financial Planning, Inc. and not necessarily those of RJFS or Raymond James. C14-025359

Thursday
Aug282014

Financial Lessons for College Students

 A college education holds the promise of a great career start for many students.  The excitement of choosing a college, getting accepted, and actually starting classes will eventually die down. Then your student is likely to encounter some financial lessons that won’t be taught in the classroom.  Lessons like:

  • How continuous spending can take a bank balance to zero and then the bank piles on additional service fees 
  • Or how spending on small things like getting a pizza or a school sweatshirt can quickly add up

Here are three time-tested financial tips to help students develop habits that will serve them well during college years and into their adult life.

Keep Track of Spending 

If you don’t know what you are spending, you don’t know what is left or what you can afford or not afford. The key is to create a spending plan for necessary purchases like food, gas, and cellphone service before spending on discretionary items. Take the guesswork out of budgeting by using an online tool like Mint.com to automatically categorize transactions.

Don’t Underestimate the Importance of Managing Debt

While credit cards are great for convenience and emergency situations, be wary of running up a balance that you cannot pay off every month.  Use the plastic cautiously.  Establishing good credit during college will make it easier to apply for a car loan, rent an apartment, or even purchase a first home. If student loans are needed to fund college expenses, take the time to read the fine print.  Don’t take more than you need today because piecing together student loans for 4 or more years can add up. Your student may not realize they are easily signing up for substantial payments for twenty years or more after graduation.

Think Twice before Lending Money to a Friend

Everyone has had an experience where a friend comes up short and says, “Can I borrow some money?  I promise I’ll pay you back!” Recognize that lending money is a risk, even if a friend is completely trustworthy.  Just because your friend is asking you don’t have to say yes. Many of life’s lessons your student will have to learn on their own, but if they think carefully before they lend, are cautious of debt, and track spending, they can avoid some common financial mistakes.

Laurie Renchik, CFP®, MBA is a Partner and Senior Financial Planner at Center for Financial Planning, Inc. In addition to working with women who are in the midst of a transition (career change, receiving an inheritance, losing a life partner, divorce or remarriage), Laurie works with clients who are planning for retirement. Laurie was named to the 2013 Five Star Wealth Managers list in Detroit Hour magazine, is a member of the Leadership Oakland Alumni Association and in addition to her frequent contributions to Money Centered, she manages and is a frequent contributor to Center Connections at The Center.


Five Star Award is based on advisor being credentialed as an investment advisory representative (IAR), a FINRA registered representative, a CPA or a licensed attorney, including education and professional designations, actively employed in the industry for five years, favorable regulatory and complaint history review, fulfillment of firm review based on internal firm standards, accepting new clients, one- and five-year client retention rates, non-institutional discretionary and/or non-discretionary client assets administered, number of client households served. A14-025160