Tag Archives: Travel

Even the “rich” can’t afford retirement.

Investment Approach

Registered Investment Advisors (RIAs) deal with people at all wealth levels but most are upper income even if they are not billionaires.  There is a retirement crisis and it’s not just hitting the working class.

The typical median wage earner making $50,000 a year and retiring at 67 can expect Social Security to pay him and his wife about $2400 per month.  To maintain their previous spending levels this leaves a gap of about $1000 a month that has to be made up from savings. But many of these middle income people have not saved for their retirement.  Which means working longer or reducing their lifestyle.

This problem is also hitting the higher income people.  How well is the person earning over $200,000 a year going to do in retirement?  The issues that even these so-called “rich” face are the same:  increased longevity, medical care, debts and an expensive lifestyle are all issues that have to be considered.

“The $200,000+ executive expects a fine house, two cars, two holidays a year, private schools, to pay for his kid’s university tuition, and so it goes on. And this is not to mention the tax bill he’s paying on his earned income. A bunch of all this was really debt-funded, so effectively the executive spent chunks of his retirement money during his working days.”

When high income people are working, they usually don’t watch their pennies or budget.  But once retired, that salary stops.  That’s when savings are required to bridge the gap between their lifestyle and income from Social Security and (if they’re lucky) pension payments.  At that point the need for advance planning becomes important.

Before the retirement date is set, the affluent need to create a retirement plan.  He or she needs to know what their basic income needs are; the cost of utilities, food, clothing, insurance, transportation and other basic needs.  Once the basics are determined, they can plan for their “wants.”  This includes things such as replacing cars, the cost of vacation travel, charitable gifts, club dues, and all the other expenses that are lifestyle issues.  Finally, there are “wishes” which may include a vacation home, a boat, a wedding, a legacy.  The list can be a long one but it should be part of a financial plan.

If the plan tells us that the chances of success are low, we can move out our retirement date, increase our savings rate or reduce our retirement spending plans.

This kind of planning will reduce the anxiety that is typically associated with the retirement decision making.

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It’s about making people’s lives better

It’s not just about money.

In most people’s minds the term “financial advisor” has all the emphasis on “financial” and very little about “advisor.” We disagree. We think of ourselves as advisors to the family, helping guide families with a whole range of issues. Some don’t have anything to do with investing.

We have gone car shopping for a client who didn’t want to deal with car salesmen. We have helped people choose the right retirement community.  We help educate young people about investing to make sure they get a good start in life.  We explore vacation destinations for our clients. We review our clients’ estate plans and beneficiary designations to make sure that they are in line with their wishes. We wrote a book designed to help people provide critical information to their heirs before they pass on (Before I Go).

And, of course, we have provided peace of mind to clients who worried about running out of money in their retirement years. This allowed them to do the things they wanted such as travel, spend time with their grandchildren or just relax with a good book.

We do more than manage portfolios. We assist the people who come to us for advice with the deeply personal things in their lives. Making people’s lives better is our goal.

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Preparing for the unexpected.

What happens if you have to live on less income because you lost your job or your spouse died? The economy has not been kind to many people and job loss can happen before we’re ready to retire. That’s when a financial advisor can help.

It can be tough to find a good paying job if you’re within a decade of retirement age.  Companies are reluctant to hire you.  You may be wondering what you should do when you realize that the best path is early retirement. Where can you cut back? How should your money be invested for an extra-long retirement? These are all questions that you should not tackle on your own because the wrong decision at this age can haunt you a few years down the road.

If the major breadwinner in your family dies how will the survivor cope? One 61-year-old woman left work to care for her dying husband. After his death she could not return to work but had a lot of decisions to make. Decisions about social security, insurance, where to cut back (fewer trips, sell the motorcycle and the RV), as well as decisions about her investments.

Each case is unique, but a financial advisor should be more than a money manager. He should advise his clients about all aspects of their lives that impact their financial well-being. Ideally you will have developed a good relationship with a financial advisor before an unfortunate event occurs. But if you have not, this is definitely the time to find one.

 

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Retirement Insecurity and What to do about it.

Would you care to guess what percentage of men age 51 years or older, making over $75,000 per year, who feel very confident about maintaining their current lifestyle in retirement?

According to the Journal of Financial Planning (July 2014) the number is less than half:

43% to be exact.

Women of the same age and the same income are even less secure:

Only 32% feel very confident that they can maintain their lifestyle in retirement.

If you are in the majority who are unsure about being able to retire and not cut back, isn’t it time you got a financial physical? Check out our website.  Give us a call. It won’t cost you anything. We won’t try to sell you anything (we hate that when we’re on the receiving end of a sales pitch).

After looking at these statistics, it may explain why we have such a large number of women clients as well as retirees. Retirement should be a time to enjoy life, to do the things you never had the time to do before. It’s not the time to worry about money.

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The value of an RIA (Registered Investment Advisor) as your financial advisor.

The value of having a financial advisor may not be what you think, unless you have the right kind of advisor. People don’t hire an advisor to beat the market, or to plan tax strategies. People hire an advisor to free them from worrying about their money and allow them to do what they want to do. Here’s an example from another advisor:

I had an appointment scheduled [with a couple], but the wife showed up first. Her husband was coming from work, and he had gotten stuck in traffic. The wife and I began talking casually as we waited for her husband to arrive. She started telling me some of the ways that working with a financial advisor had helped their family. She and her husband had taken several vacations as a couple and also gone on some trips with their kids. These were things they wouldn’t necessarily have felt comfortable doing before, because they would’ve considered them extravagant. Previously, they couldn’t have taken these trips without spending the whole time worrying about whether or not they could afford them. But thanks to our work together, they had felt free to do so — and they had made some really valuable memories.

I was surprised to hear all that, partly because I hadn’t known about these vacations, and also because the client seemed to value something in the advisory relationship that was different from what I would typically think of as being [my role].

If you think of a financial advisor as a stockbroker who’s going to sell you investments, you have the wrong idea. Registered Investment Advisors, like Korving & Company, act as the family’s “Chief Investment Officer.”  We provide people peace of mind about their finances, so that they can spend more time on the things in life that bring them the most happiness.

Check our new Korving & Company website and learn more about us.

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Fundamental Sources of Retirement Income

Traditional sources for retirement income—such as Social Security and defined benefit plans—are less certain to satisfy retirement needs than they were in the past. The rising cost of living, a diminishing number of defined benefit plans and a social security system that requires reform in order to pay benefits for younger workers in the distant future are worrisome. As a result, it’s increasingly more important for investors to work closely with their advisors to create a comprehensive plan that will enable them to meet their income needs during retirement.

The traditional sources of retirement income include:

  • Employee sponsored retirement accounts
  • Pension plans
  • Social Security
  • Employment
  • IRAs
  • Fixed income securities
  • Dividends
  • Annuities

How much is enough?

Running out of money in retirement is a concern for many investors. It’s a challenge to calculate exactly how much they’ll need, given that many factors—from investment returns, healthcare costs and inflation to Social Security’s future and individual life spans—are nearly impossible to predict.  What is certain is that individuals are living longer. In fact, at least one member of a 65-year-old couple has a high probability of living into his or her 90s, 35 years beyond what has historically been considered a “normal” retirement age in the United States.

Experts often estimate retirees will need 75 to 85% of their pre-tax, pre-retirement income.  But often there will be no reduction at all in the cost of living in retirement due to medical bills and the desire and the time for travel.

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Private Jet Flying – now by the seat.

Have you daydreamed about at least taking a ride in a private jet?  In the beginning, unless you were flying somewhere on a company plane, the only way you were going to ride on a private jet was to buy one.  If you are one of the ultra-rich, like Oprah Winfrey, that was your only option.  Since that was out of the reach of even the common multi-millionaire, the industry developed the shared lease program where you bought a number of hours of flying time on a jet you shared with others, the plane being owned by the leasing company, like Net Jets.  But that still costs hundreds of thousands of dollars.  The newest concept is the “per-seat charter” where you share the ride with others who have bought their seats on the same ride.

As a per-seat traveler, you give up the luxury of having the cabin to yourself, the control of specifying when you want to take off and, in some cases, what airports you want to use. But you still avoid hassles ranging from security lines to the delays and cancellations that come with airline travel. And per-seat savings over traditional charter can be considerable. BlackJet guarantees a seat on a Los Angeles–New York flight for $3,500, its highest fare. Xojet, which helped bring transparent, point-to-point pricing to the charter industry, charges $25,300 or more for that route. And per-seat providers pledge to maintain the quality level associated with charter.

If you’re among those who have always wanted to have the experience, let us know.  We provide a great many concierge services for our clients.

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Top Retirement Destinations Overseas

Financial Planning made a list of the top retirement destinations overseas:

Clients often dream of retiring overseas for a change of scenery and lifestyle. Here’s what a handful of RIAs have to say about some of the most popular overseas retirement destinations among their clients.

  • Costa Rica
  • Panama
  • South of France
  • Mexico
  • Bermuda
  • Hawaii
  • Staying Local [Florida]

But those who actually do go to another country are still rare.  It means giving up your neighbors, friends and close relatives.   Says one advisor:

Many clients talk about this, but few actually do it. I always advise to do a trial run and move just for a few months. Most get disillusioned. They usually choose tropical places, but living in those places is very different than vacationing. Car repairs, groceries, etc. are harder in a second language. Costa Rica does seem really popular these days, but clients quickly get disillusioned with infrastructure.”

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If a Million Bucks Doesn’t Make You Rich, What Does?

There’s an intriguing article in Financial Advisor magazine asking if you are rich if you’re a millionaire.  I guess it depends.  But you can run through a million dollars pretty darn quick, as lottery winners and sports stars have found out.

  • Most three-bedroom homes in Manhattan currently cost at least $1 million
  • A top-of-the-line BMW or Mercedes costs over $100,000.
  • A weeklong trip for two from Chicago to Hong Kong goes for about $5,000 — before shopping — according to Expedia.

If a 40-year-old couple were to buy that kind of home, get new luxury cars once a decade and take two such trips annually, they would shell out nearly $4 million over the course of the next 40 years. Before inflation. Presuming they died at 80.Here’s a simpler way to look at it: A quality yacht can easily cost $10 million. So if your clients can’t afford to set sail in style, maybe they aren’t that rich.There was a time when $1 million felt like $10 million does today. That was in 1947, according to the U.S. Bureau of Labor Statistics’ online inflation calculator. In 1976 it felt like $4 million. As recently as 1987 it felt like $2 million.

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Raffles Singapore

Raffles Hotel Singapore

1887 – Raffles Hotel Singapore opens, offering 10 rooms in an old bungalow-style building overlooking the beach and the South China Sea. It soon becomes – and remains – the most fabled hotel in the Far East, with a guest list that reads like a Who’s Who.

The hotel’s legendary Long Bar is where the famous cocktail, the “Singapore Sling” was created in 1915. Other exclusive drinks added to the menu include “personality cocktails” inspired by Somerset Maugham and James Michener, writers who stayed at the Raffles. The playwright, novelist and actor, Noel Coward was a guest at Raffles several times beginning in 1931. However, the hotel’s literary tradition is believed to date back to 1888, when Joseph Conrad was a guest, and Rudyard Kipling dined there. The Writers Bar in the hotel’s lobby honors these writers. During the 1950s, Hollywood stars, Ava Gardner and Elizabeth Taylor were Raffles guests.

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