3 Things 9-1-25

 Thing One

Vanguard’s Three Questions

The Vanguard Group, a Registered Investment Advisor with over $7 trillion in assets under management asks three questions in determining whether their clients need a financial advisor:

How confident are you in reaching your financial goals?

(Retiring, budgeting, withdrawal strategies, reducing debt, etc.)

·      Highly confident?

·      Somewhat confident?

·      Not very confident?

How would you prefer to receive advice?

·      I’d prefer technology-based advice

·      I’d like to be able to speak with an advisor occasionally

·      I’d like a dedicated financial advisor

How much do you plan to invest initially?

·      $3,000 - $49,999

·      $50,000 - $499,999

·      $500,000 - $4,999,999

·      $5M and up

Depending on the combination of answers, they either suggest a technology-based advisor (an AI bot) or a real-life advisor.  There is no instance where they suggest no advisor is needed because they’ve concluded (and we agree) that most people do need one. 

If you conclude that you need an advisor of the real-life variety or you think you may know someone who does, please reach out or have them do so.  We’re ready to help.

Thing Two  

Five Things

The following sage advice comes from an article on kiplinger.com called “Five Things I Wish I’d Known Before I Retired”.  Please take the time to consider it all carefully and pass it on as appropriate.

“…1. The value of good, trustworthy financial advice.

Selecting a financial adviser is a pivotal decision, yet many choose based on a friend’s tip or stick with their workplace’s 401(k) representative. These advisers, while knowledgeable, may prioritize their company’s interests over your financial health and offer limited advice confined to your employer’s plan.

The wiser course? Hire an independent, fee-only financial adviser who offers comprehensive services, including critical tax and cash flow planning. Plus, this person has no ties to specific funds or investment products and will offer strategies aligned with your unique goals, potentially saving you significant amounts in unnecessary fees.

2. You don’t need a big income to start saving and investing.

A common roadblock many face is the belief that they don’t earn enough to start investing for retirement, or that a small amount doesn’t matter. This misconception can lead to missed opportunities that compound over time, just like the investments we forgo.

The truth is, waiting to save because you anticipate higher earnings in the future is a gamble on time you can’t afford. The power of compounding interest means that even small, consistent investments can snowball into significant sums over time. This is a certainty you can count on. For example, investing just $50 a month at a 7% annual return will grow to over $23,000 in 20 years. Now, imagine if you increase that amount as your income grows.

Furthermore, if you invest in a tax-advantaged account like a Roth IRA, which allows tax-free withdrawals in retirement, or a traditional IRA and 401(k), which invest pre-tax dollars, you’re effectively using tax savings to boost your retirement fund. In other words, money that would have gone to taxes is now working for you.

Let’s not forget the potential boost from employer matching in your 401(k), which is essentially free money. Even if your employer matches only 50% of your contributions up to a certain percentage of your salary, this can significantly increase the growth of your retirement savings.

3. How much catch-up contributions can be a game-changer.

…the IRS permits those 50 and older to contribute an additional $1,000 to an IRA on top of the standard $6,500 limit, a modest increase that can have a substantial impact over time.

For self-employed individuals over 50 with a SIMPLE IRA, there’s an even greater opportunity: You can contribute an extra $3,500 above the $15,500 limit. As for 401(k) contributions, you can not only max out at $22,500 but also add an additional $7,500, allowing for a total of $30,000 per year in pre-tax savings...If you start making the maximum catch-up contributions at age 50 and earn a 7% annual return, you could increase your retirement savings by about $97,000 by the time you turn 65.

4. There really is a right amount of insurance coverage.

One of the less talked about aspects of financial planning is the balance of having just the right amount of insurance — not too much and not too little — at each stage of your life…

…As retirement nears, you’ll likely be bombarded with pitches for life insurance and annuities. The biggest mistake you can make is letting the fear of insufficient retirement savings drive a decision to buy an annuity that’s complex and truly not appropriate. Insurance offerings are not investments. They are dense legal contracts where the critical information buried in the fine print is easily overlooked or misunderstood due to the complexity.

To navigate the insurance landscape, seek the counsel of an independent fee-only financial adviser (who doesn't sell insurance) to provide a comprehensive review of your family’s insurance needs. They can help you determine the precise level of protection you need, without the conflict of interest inherent in commission-based selling…

5. The importance of having your affairs in order at all ages.

Estate planning is crucial for everyone, not just the wealthy, and it’s best handled sooner rather than later. On some level, you may know this, but somehow people tend to ignore the task. These documents are not just for distributing your assets; they are essential tools for decision-making in times when you might not be able to express your wishes. Whether it’s a health care proxy, power of attorney or living will, these legal instruments are the only way your loved ones can possibly know your desires and can respect your wishes regarding life-or-death medical decisions and end-of-life care.

Furthermore, if you’re planning to leave money or property to loved ones, consider the benefits of doing so while you’re still alive. This can not only provide you with the joy of seeing them use and appreciate your gift but also can be a wise move for tax purposes.

Without these documents, you leave the distribution of your estate and the decision-making at critical moments to the state’s default laws. This abdication of control can lead to outcomes you never intended. Ultimately, having your affairs in order is a straightforward act of responsibility and kindness to your family…”

Thing Three

Just A Thought  

“The will to succeed is important.  But what’s more important is the will to prepare.” – Bobby Knight