Even the Best Investors Lose Money

Nicholas Boguth Contributed by: Nicholas Boguth

Even the Best Investors Lose Money

In an ideal financial planning universe, we would only invest in things that go up. We would never see our account values go down. We would never even see a negative number on our statements. Bonds would pay interest, and interest rates would be so stable that bond prices didn’t move. Stocks would pay dividends, and every company’s earnings would only grow.

Unfortunately for us, investing is not that simple. There is no growth without risk. Nothing, and I mean NOTHING, is guaranteed to appreciate. Even the world’s best investors lose money from time to time, but what makes them the best investors is how they react when those losses happen.

Let’s take a look at Warren Buffett, one of the most successful investors of all time, and how his stock has done compared to the S&P 500 (a collection of the 500 largest public U.S. companies) over the past 25 years. Is it all positive? Does he beat the S&P 500 every year? If he did lose to the S&P 500, was it close? Would you stick with him for the following year?

Data: Morningstar Direct. Total Return.

Data: Morningstar Direct. Total Return.

What stands out to you? Two things jumped out at me:

  1. Both were negative five out of the past 25 years.
    Even one of the best investors in the world lost money the SAME number of times as the S&P 500.

  2. Buffett returned less than the S&P 500 nine times, and one of those times was by more than 40%!
    If you looked at your statement and saw that your $10,000 turned into $8,000, while everyone who owned just the 500 biggest U.S. companies now had $12,000, would you stick with Buffett or would you switch investments?

Investing is hard because of risk. Investments depreciate or underperform for years at a time. You can’t avoid this fact. One thing you can avoid is making decisions that ultimately may be harmful to your goals, by having a plan in place for those years when investments aren’t going the way you’d like.

Don’t have a plan? We would be glad to help.

Nicholas Boguth is an Investment Research Associate at Center for Financial Planning, Inc.® He performs investment research and assists with the management of client portfolios.


Any opinions are those of Nicholas Boguth and not necessarily those of Raymond James. This material is being provided for illustration purposes only and is not a complete description, nor is it a recommendation of any investment mentioned. There is no guarantee that these statements, opinions or forecasts provided herein will prove to be correct. Investing involves risk and you may incur a profit or a loss regardless of strategy selected. Prior to making an investment decision, please consult with your financial advisor about your individual situation. The S&P 500 index is comprised of approximately 500 widely held stocks that is generally considered representative of the U.S. stock market. It is unmanaged and cannot be invested into directly. Past performance is no guarantee of future results.

Nick Defenthaler, CFP® Named to 2019 Forbes Best-in-State Next-Gen Wealth Advisors.

Nick Defenthaler, CFP® Center for Financial Planning, Inc.® Forbes Best-in-State Next-Gen

Nick Defenthaler, CFP® has been named to Forbes 2019 list of "Best-in-State Next-Gen Wealth Advisors" in Michigan, where he ranked 35 in the state. Each advisor—selected by SHOOK Research—is chosen based on an algorithm of qualitative and quantitative criteria, including in-person interviews, industry experience, compliance records, revenue produced, and assets under management.


SHOOK Research considered advisors born in 1980 or later with a minimum 4 years relevant experience. Advisors have built their own practices and lead their teams; joined teams and are viewed as future leadership; or a combination of both. Ranking algorithm is based on qualitative measures derived from telephone and in-person interviews and surveys: service models, investing process, client retention, industry experience, review of compliance records, firm nominations, etc.; and quantitative criteria, such as assets under management and revenue generated for their firms. Investment performance is not a criteria because client objectives and risk tolerances vary, and advisors rarely have audited performance reports. Rankings are based on the opinions of SHOOK Research, LLC. Neither SHOOK nor Forbes receives compensation from the advisors or their firms in exchange for placement on a ranking. Raymond James is not affiliated with Forbes or Shook Research, LLC. This ranking is not indicative of advisor's future performance, is not an endorsement, and may not be representative of individual clients' experience. Out of 6,389 advisors considered, 1,489 made the final list in 2019. For more information see www.SHOOKresearch.com.

Should I Accelerate My Mortgage Payments?

Josh Bitel Contributed by: Josh Bitel, CFP®

Should I Accelerate My Mortgage Payments?

Most homeowners make their regular mortgage payments every month for the duration of the loan term, and never think of doing otherwise. But prepaying your mortgage could reduce the amount of interest you'll pay over time.

How Prepayment Affects a Mortgage

Regardless of the type of mortgage, prepaying could reduce the amount of interest you'll pay over the life of the loan. Prepayment, however, affects fixed rate mortgages and adjustable rate mortgages in different ways.

If you prepay a fixed rate mortgage, you'll pay off your loan early. By reducing the term of your mortgage, you'll pay less interest over the life of the loan, and you'll own your home free and clear in less time.

If you prepay an adjustable rate mortgage, the term of your mortgage generally won't change. Your total loan balance will be reduced faster than scheduled, so you'll pay less interest over the life of the loan. Every time your interest rate is recalculated, your monthly payments may go down as well, since they'll be calculated against a smaller principal balance. If your interest rate goes up substantially, however, your monthly payments could increase, even though your principal balance has decreased.

Should I Prepay My Mortgage?

A common predicament is what to do with extra cash. Should you invest it or use it to prepay your mortgage? You'll need to consider many factors when making your decision. For instance, do you have an investment alternative that will give you a greater yield after taxes than prepaying your mortgage would offer in savings? Perhaps you'd be better off putting your money in a tax-deferred investment vehicle (particularly one in which your contributions are matched, as in some employer-sponsored 401(k) plans). Remember, though, that the interest savings from prepaying your mortgage is a certainty; by comparison, the return on an alternative investment may not be a sure thing.

Other factors may also influence your decision. The best time to consider making prepayments on your mortgage would be when:

  • You can afford to contribute money on a regular basis.

  • You have no better investment alternatives of comparable certainty.

  • You cannot refinance your mortgage to obtain a lower interest rate.

  • You have no outstanding consumer debts charging you high interest that isn't deductible for income tax purposes (e.g., credit card balances).

  • You are in the early years of your mortgage when, given the amortization schedule, the interest charges are highest.

  • You have sufficient liquid savings (three-to-six months' worth of living expenses) to cover your needs in the event of an emergency.

  • You won't need the funds in the near future for some other purpose, such as paying for college or caring for an aging parent.

  • You intend to remain in your home for at least the next few years.

Particularly against a fixed rate mortgage, regular contributions toward prepayment can dramatically shorten the life of the loan and result in savings on the total interest you're charged. As always, consult your financial planner before making any large financial moves. We’re here to look at the big picture and help you make the best decisions for your particular situation.

Josh Bitel, CFP® is an Associate Financial Planner at Center for Financial Planning, Inc.® He conducts financial planning analysis for clients and has a special interest in retirement income analysis.


UPDATED from original post on December 6, 2016 by Matt Trujillo.

Any opinions are those of the author and not necessarily those of RJFS or Raymond James. The information has been obtained from sources considered to be reliable, but we do not guarantee that the foregoing material is accurate or complete. Raymond James Financial Services, Inc. and your Raymond James Financial Advisor do not solicit or offer residential mortgage products and are unable to accept any residential mortgage loan applications or to offer or negotiate terms of any such loan. You will be referred to a qualified Raymond James Bank employee for your residential mortgage lending needs.

Three-Legged Stool Strategy

Tim Wyman Contributed by: Timothy Wyman, CFP®, JD

Tim Wyman, CFP®, JD Center for Financial Planning, Inc.® 3 legged stool strategy

Generating income in retirement is one of the most common financial goals for retirees and soon-to-be retirees. The good news is that you can “recreate your paycheck” in a variety of ways.

Retirement income might be visualized using a “Three-Legged Stool”. The first two sources, or legs, of retirement income are generally Social Security and pensions (although fewer and fewer retirees are covered by a pension these days). The third leg for most retirees will come from personal investments (there is a potential fourth leg – part-time work – but that’s for another day). It is this leg of the stool, the investment leg, that requires preparation, planning, and analysis. The most effective plan for you depends on your individual circumstances, but here are some common methods for your consideration:

  1. Dividends and Interest

  2. 3–5 Year Income Cushion or Bucket

  3. The Annuity Cushion

  4. Systematic Withdrawal or Total Return Approach

Dividends & Interest

Usually, a balanced portfolio is constructed so your investment income – dividends and interest – is sufficient to meet your living expenses. Principal is used only for major, discretionary capital purchases. This method is used only when there is sufficient investment capital available to meet your income need, if any, after Social Security and pension.

3-5 Year Income Cushion or Bucket Approach

This method might be appropriate when your investment portfolio is not large enough to generate sufficient dividends and interest. Preferably five (but no less than three) years of your income shortfall is held in lower risk fixed income investments and are available as needed. The remainder of the portfolio is usually in a balanced investments. The Income Cushion or Bucket is periodically replenished. For example, if the stock market is up, liquidate sufficient stock to maintain the 3-5 year cushion. If stock market is down, draw on the fixed income cushion while you anticipate the market recovery. If fixed income is exhausted, review your income requirements, which may lead to at least a temporary reduction in income. 

The Annuity Cushion

This method is very similar to the 3-5 year income cushion. A portion of the fixed income portfolio is placed into a fixed-period, immediate annuity with at least a 5-year income stream. This method might work well when a bridge is needed to a future income stream, such as Social Security or pension. 

Systematic Withdrawal or Total Return Approach

Consider this method if your portfolio does not generate sufficient interest and dividends to meet your income shortfall. Generally speaking, in a balanced, or equity-tilted, portfolio, the income shortfall (after-interest income) is met at least partially from equity withdrawals. Lastly, set a reasonably conservative systematic withdrawal rate, which studies suggest is near 4% of the initial portfolio value, adjusted annually for inflation. 

After helping retirees for the last 30-plus years create workable retirement income, our experience has shown us that many times one of the above methods (and even a combination) can help with re-creating your paycheck in retirement. The key is to provide a strong foundation – or in this case – a sturdy stool. 

Where Did It Go?

Do you ever find that you have too much month at the end of your money? Be honest, in the blink of an eye, extra money seems to vanish. For those still in their earnings years, one of the keys to accumulating wealth, thus achieving your financial objectives, is to stop the disappearing act. Transfer dollars from your monthly cash flow to your net worth statement by adding funds to your savings accounts, taxable investment accounts, and retirement accounts (such as employer sponsored 401k and 403b accounts) and IRAs (Traditional or ROTH). Another smart move is to use funds from your monthly cash flow to pay down debt … which also improves your net worth statement.

Saving money and improving your overall financial position is easier said than done. The truth is that saving money is more than simply a function of dollars and cents; it requires discipline and perseverance. You may have heard about the “paying yourself first” strategy. The most effective way to pay yourself first is to set up automatic savings programs. The 401k (or other employer plan) is the best way to do this – but you can also establish similar automated savings plans with brokerage companies and financial institutions such as banks or credit unions. 

Just as important, be intentional with your spending. Rather than thinking in terms of a budget (which sounds a lot like dieting), think about establishing a “spending plan”. Planning your expenses as best you can will help ensure that you spend money on the things that add value to your life and should help keep your money from mysteriously vanishing at the end of the month.

For a free resource to help track your cash flow, email Timothy.Wyman@CenterFinPlan.com.

Timothy Wyman, CFP®, JD, is the Managing Partner and CERTIFIED FINANCIAL PLANNER™ professional at Center for Financial Planning, Inc.® For the second consecutive year, in 2019 Forbes included Tim in its Best-In-State Wealth Advisors List in Michigan¹. He was also named a 2018 Financial Times 400 Top Financial Advisor²


¹ The Forbes ranking of Best-In-State Wealth Advisors, developed by SHOOK Research is based on an algorithm of qualitative criteria and quantitative data. Those advisors that are considered have a minimum of 7 years of experience, and the algorithm weighs factors like revenue trends, AUM, compliance records, industry experience and those that encompass best practices in their practices and approach to working with clients. Portfolio performance is not a criteria due to varying client objectives and lack of audited data. Out of 29,334 advisors nominated by their firms, 3,477 received the award. This ranking is not indicative of advisor's future performance, is not an endorsement, and may not be representative of individual clients' experience. Neither Raymond James nor any of its Financial Advisors or RIA firms pay a fee in exchange for this award/rating. Raymond James is not affiliated with Forbes or Shook Research, LLC. Links are being provided for information purposes only. Raymond James is not affiliated with and does not endorse, authorize or sponsor any of the listed websites or their respective sponsors. Raymond James is not responsible for the content of any website or the collection or use of information regarding any website's users and/or members. Any opinions are those of Center for Financial Planning, Inc.® and not necessarily those of Raymond James.

² The FT 400 was developed in collaboration with Ignites Research, a subsidiary of the FT that provides special-ized content on asset management. To qualify for the list, advisers had to have 10 years of experience and at least $300 million in assets under management (AUM) and no more than 60% of the AUM with institutional clients. The FT reaches out to some of the largest brokerages in the U.S. and asks them to provide a list of advisors who meet the minimum criteria outlined above. These advisors are then invited to apply for the ranking. Only advisors who submit an online application can be considered for the ranking. In 2018, roughly 880 applications were re-ceived and 400 were selected to the final list (45.5%). The 400 qualified advisers were then scored on six attrib-utes: AUM, AUM growth rate, compliance record, years of experience, industry certifications, and online accessibil-ity. AUM is the top factor, accounting for roughly 60-70 percent of the applicant's score. Additionally, to provide a diversity of advisors, the FT placed a cap on the number of advisors from any one state that's roughly correlated to the distribution of millionaires across the U.S. The ranking may not be representative of any one client's experi-ence, is not an endorsement, and is not indicative of advisor's future performance. Neither Raymond James nor any of its Financial Advisors pay a fee in exchange for this award/rating. The FT is not affiliated with Raymond James.

The foregoing information has been obtained from sources considered to be reliable, but we do not guarantee that it is accurate or complete, it is not a statement of all available data necessary for making an investment decision, and it does not constitute a recommendation. Any opinions are those of Tim Wyman, and not necessarily those of Raymond James. Investing involves risk and you may incur a profit or loss regardless of strategy selected, including diversification and asset allocation. Dividends are not guaranteed and must be authorized by the company's board of directors. Past performance is not indicative of future results. A fixed annuity is a long-term, tax-deferred insurance contract designed for retirement. It allows you to create a fixed stream of income through a process called annuitization and also provides a fixed rate of return based on the terms of the contract. Fixed annuities have limitations. If you decide to take your money out early, you may face fees called surrender charges. Plus, if you're not yet 59½, you may also have to pay an additional 10% tax penalty on top of ordinary income taxes. You should also know that a fixed annuity contains guarantees and protections that are subject to the issuing insurance company's ability to pay for them. Every investor's situation is unique and you should consider your investment goals, risk tolerance and time horizon before making any investment. Prior to making an investment decision, please consult with your financial advisor about your individual situation.

The Collaborative Divorce: A Win/Win Financial Settlement?

Jacki Roessler Contributed by: Jacki Roessler, CDFA®

The Collaborative Divorce: A win/win financial settlement

Traditionally in Michigan, couples could approach divorce in two ways: through litigation or mediation. Both can be contentious and lead to further litigation post-divorce.

Although it has, for quite some time, had a foothold in other states, a new approach is steadily gaining momentum in Michigan: the Collaborative Divorce Process. Collaborative Divorce is a team approach in which both parties obtain legal counsel trained and certified in the Collaborative method. Other trained professionals, such as a mental health professionals and financial experts, can be added to the team. The goal of the Collaborative team, which of course includes both spouses, is to resolve all the parties’ issues outside of the court system in a way that is both transparent and fair.

The big question clients ask me is this: Does it work and is it right for every case?

As a divorce financial planner with nearly 25 years of experience, I have to admit that I greatly prefer the Collaborative Process. Does it work? Absolutely! Is it for every case? Maybe not. Read on to determine whether it might be worth exploring for you.

My role in a Collaborative Case is to act as a financial neutral for both parties. What does that look like? It generally incudes gathering and compiling all the financial data into simple spreadsheets everyone can understand. I put together a list of all the parties’ assets and liabilities and run a cash flow analysis for both to help determine each parties’ post-divorce living expenses. If one person has been primarily in charge of the finances, and the other one is in the dark, I will often meet with one or both spouses individually to educate them. This levels the playing field when it’s time to re-convene the team and discuss financial settlement options.

How is this different than a traditional case? There is transparency of information.

As a neutral, I receive all the financial data including account statements, tax returns, pension and employment information, budgets, etc. There is no tracking down of missing data or wondering whether all the assets have been captured. Not only does this eliminate stress for the least informed party, but it also saves on the legal fees that pile up when an attorney has to become a data detective.

After all the financial data is captured, compiled, and understood, the real team work can begin. We can be creative and arrive at financial solutions no one could even take the time to consider in a traditional divorce.

So, is it for everyone? It’s for everyone who wants to settle outside of court. If either of the parties attempts to hide or conceal information, the Collaborative Process probably will not work. It also is for couples who are willing to commit the time for team-to-team meetings and however many meetings are needed to come to resolution on all issues. Lastly, in my experience, Collaborative Divorce requires the parties to keep an open mind. When parties are entrenched in a position and will not budge, the Collaborative Process can become stalled.

If you think Collaborative Divorce might work for you, do some exploring! It always makes sense to look at all the options available when you’re making decisions that affect the rest of your life.

Jacki Roessler, CDFA®, is a Divorce Planner at Center for Financial Planning, Inc.® and Branch Associate, Raymond James Financial Services. With more than 25 years of experience in the field, she is a recognized leader in the area of Divorce Financial Planning.


Any opinions are those of author and not necessarily those of Raymond James. All opinions are as of this date and are subject to change without notice. The information has been obtained from sources considered to be reliable, but we do not guarantee that the foregoing material is accurate or complete.

Our very own Matt Trujillo crowned 2019 Chess Champion!

Gerri Harmer Contributed by: Gerri Harmer

Matt Trujillo, CFP® Center for Financial Planning, Inc.®

The Center’s own Matt Trujillo has added chess champion to his list of accomplishments! Client Service Manager Gerri Harmer recently sat down with Matt to talk about his road to victory at the Michigan Bottom Half Class Championships.

Gerri Harmer: Congratulations on your recent victory! Let me ask you some clarifying questions so the folks at home know what this is all about! First, can you tell us a little bit more about the tournament you just played in and how the championship is decided?

Matt Trujillo: Sure I would be happy to. The tournament is held annually in Lansing, Michigan and is divided into five sections or classes. The lowest section is either for people without a rating (brand new to tournament chess) or a rating lower than 900, and then each section after that is 200 points higher than the previous section.

Gerri Harmer: So were you in the section with the beginners?

Matt Trujillo: No, my section was Class A, which is for players rated between 1800 – 1999. This is considered the top class, so it was definitely stiff competition.

Gerri Harmer: Wow that does sound like some pretty stiff competition. So was it just bragging rights or did you win anything to go with your title?

Matt Trujillo: There is no money in chess unless you are ranked in the top 10 in the world. At my level, it’s a few hundred dollars and a big trophy, but what really motivates me is the bragging rights. It’s a game of strategy and tactics, and I want to be the best.

A ‘Swiss style’ tournament

Gerri Harmer: What was the tournament format like? Was it round robin style, where everyone plays everyone, or a bracket format?

Matt Trujillo: It’s actually neither of those. The way these tournaments work is called a “Swiss Style” tournament. In round one, your section is divided by your rating coming into the tournament. So if there is 50 people in the section, the highest rated player will be paired against the 26th rated player and the 2nd highest rated player will be paired against the 27th highest rated player, and so on and so forth. After round one, winners play winners and losers play losers.

Gerri Harmer: So how many games do you have to win to be crowned the champion?

Matt Trujillo: Every win you get is worth one point, a loss is worth zero points, and a tie (draw) is worth half a point. I finished the event with three wins, two draws, and zero losses, which means I had four total points out of a possible five.

Gerri Harmer: So if you keep winning every round, do you play against someone else that won every round as well?

Matt Trujillo: Yes, that is exactly right. There was a total of five rounds, and going into the fifth round, I had two wins and two draws for a total of three points; however, my opponent had three wins and one draw, so he was actually in first place going into the final round.

Gerri Harmer: Wow! So if you had lost or got a draw, what place would you have taken?

Matt Trujillo: If I had drawn I would have taken 3rd, and if I had lost, I wouldn’t even have had a spot in the winner’s circle. It was truly a must-win situation going into the final round.

Sticking to his game

Gerri Harmer: Did you change your strategy at all given that it was a must-win?

Matt Trujillo: No, I didn’t. Some players will do that and play a more aggressive style when they know they have to win, but I prefer just to stick to my game. I play a certain style that I know really well, and I have found through past experience that if I deviate from that, it usually doesn’t end well!

Gerri Harmer: Good idea to stick to your guns! Did the game last a long time since there was so much on the line?

Matt Trujillo: Every game of the tournament lasted a long time, and the final round was no different. Every game I played was right around four hours long.

Gerri Harmer: Four hours long? I don’t know if I could sit still for that long! So when is your next tournament?

Matt Trujillo: Ya, it definitely takes a high level of patience and mental discipline to compete at this level! Good question about my next tournament…I’m not really sure. I was planning on playing in the Michigan Open on August 30th, but that is labor day weekend, and Diane and the kids want to go up north, so that tournament is off the table! I might play in a few small, one-day tournaments, but the next big one will probably be in January 2020.

Gerri Harmer: Well congratulations again on this accomplishment, and best of luck to you in January!

Gerri Harmer is a Client Service Manager at Center for Financial Planning, Inc.® She specializes in client service, event planning, and marketing.

Roth vs. Traditional IRA: Which is best for you?

Kali Hassinger Contributed by: Kali Hassinger, CFP®

Roth vs Traditional IRA: Which is best for you?

If you’re planning to use an IRA to save for retirement, but aren’t sure whether Roth or Traditional is best for you, we can help sort it out. Before we break down the pros and cons of each, however, we need to make sure that you are eligible to make contributions.

For 2019 Roth IRA contribution rules/limits:

  • For single filers, the modified adjusted gross income (MAGI) limit is phased out between $122,000 and $137,000. (Unsure what MAGI is? Click here.)

  • For married filing jointly, the MAGI limit is phased out between $193,000 and $203,000

  • Please keep in mind that it makes no difference whether you are covered by a qualified plan at work (such as a 401k or 403b). You simply have to be under the income thresholds.

  • The maximum contribution amount is $6,000 if you’re under age 50. Those who are 50 and older (and have earned income for the year) can contribute an additional $1,000 each year.

For 2019 Traditional IRA contributions:

  • For single filers who are covered by a company retirement plan (401k, 403b, etc.), in 2019 the deduction for your IRA contribution is phased out between $64,000 and $74,000 of modified adjusted gross income (MAGI).

  • For married filers covered by a company retirement plan, the deduction is phased out between $103,000 and $123,000 of MAGI.

  • For married filers not covered by a company plan, but who have a spouse who is covered, the deduction is phased out between $193,000 and $203,000 of MAGI.

  • Maximum contribution amount is $6,000 if you’re under age 50. Those who are 50 and older (and have earned income for the year) can contribute an additional $1,000 each year.

If you are eligible, you may be wondering which makes more sense for you. Well, as with many financial questions…it depends! 

Roth IRA Advantage

The benefit of a Roth IRA is that the money grows tax-deferred. When you are over age 59 ½, you can take the money out tax free. However, in exchange, you don’t get an upfront tax deduction when investing in the Roth. You are paying your tax bill today, rather than in the future. 

Traditional IRA Advantage

With a Traditional IRA, you get a tax deduction for the year you contribute money to the IRA. For example, a married couple filing jointly with a MAGI of $190,000 (just below the phase-out threshold when one spouse has access to a qualified plan) would likely be in a 24% marginal tax bracket. If they made a full $6,000 Traditional IRA contribution, they would save $1,440 in taxes. To make that same $6,000 contribution to a ROTH, they would need to earn $7,895, pay 24% in taxes, and then make the $6,000 contribution. The drawback of the traditional IRA is that you will be taxed on it when you begin making withdrawals in retirement.

Pay Now or Pay Later?

It’s challenging to decide which account is right for you, because nobody has any idea what tax rates will be in the future. If you choose to pay your tax bill now (Roth IRA), and in retirement you find yourself in a lower tax bracket, you may have been better off going the Traditional IRA route. However, if you decide to make a Traditional IRA contribution for the tax break now, and in retirement find yourself in a higher tax bracket, then you may have been better off going with a Roth. 

How Do You Decide?

A lot depends on your situation, such as the career path you’ve chosen and your desired income in retirement. However, we typically recommend that those just starting their careers (who will most likely see their incomes increase over the years) make Roth contributions. If your income is stable, and you’re in a higher tax bracket, a Traditional IRA and immediate tax break may make more sense now.

Before making any final decisions, it’s always a good idea to work with a qualified financial professional to help you understand what works best for you.

Kali Hassinger, CFP®, CDFA®, is a CERTIFIED FINANCIAL PLANNER™ professional at Center for Financial Planning, Inc.® She has more than a decade of financial planning and insurance industry experience.


UPDATED from original post on June 19, 2014 by Matt Trujillo, CFP®

This material is being provided for information purposes only and is not a complete description, nor is it a recommendation. Any opinions are those of Kali Hassinger, CFP®, CDFA®, and not necessarily those of Raymond James. The information has been obtained from sources considered to be reliable, but we do not guarantee that the foregoing material is accurate or complete. Roth IRA owners must be 59½ or older and have held the IRA for five years before tax-free withdrawals are permitted. You should discuss any tax matters with the appropriate professional.

Climate Change and What It Means for Investors

Jaclyn Jackson Contributed by: Jaclyn Jackson

Climate Change and What it Means for Investors

Coming in 1.71°F above its historical average of 59.9°F, June 2019 was the hottest June globally in 140 years of recorded data. June’s temperature increase is the latest in an upward trend that began in the 1970s. While debates hotter than any June persist about the validity of global warming, the fact remains that climate change carries significant implications for individuals, industries, and investors alike.

Global Temperature Differential Relative to June Historical Average

Industry and Economic Impact

Not convinced Mother Nature can wreak havoc on your day-to-day life? Just ask any New Yorker who recently experienced a heatwave, flooding, and power outages all in the same week. In fact, there’s no need to look that far; as of this writing, some Detroiters are still hoping to regain power after incredibly warm weather hit the region.

While it’s pretty clear how extreme weather conditions generate problems for energy companies, heatwaves can disrupt other industries. Manufacturing plants experience reduced production when temperatures soar above 90 degrees; fewer people look for homes, which affects the real estate industry’s most active season; and increased hospitalizations impact insurance companies. While these problems more directly speak to developed, urban areas and industries, they don’t even begin to define the potential implications of climate change around the globe.

Goldman Sachs summarized it best: “We believe that in addition to environmental impact, direct damage from mortality, labor productivity, agriculture, energy demand, and coastal storms may also significantly impact overall economic growth.”

Investors Demand More

It’s no wonder 477 global investors (including money managers and large pension funds around the world) issued a letter to governments attending the G-20 summit in Osaka, Japan. Commanding $34 trillion in assets, they’ve concluded that ignoring the Paris Agreement’s mission would create “an unacceptably high temperature increase that would cause substantial negative economic impacts.” Investors created the letter to petition government leaders to achieve the 2015 Paris Agreement goals, accelerate private sector investment into low carbon transition, and commit to improved climate-related financial reporting.

Be the Change

These investors also use their substantial financial weight to speak with companies in their portfolios about how they are addressing and alleviating industry-specific climate change issues. Individual investors can take a similar approach, by using their financial power to invest in mutual/exchange traded funds that evaluate the environmental, social, and governance (ESG) qualities of companies in their portfolios, as well as more traditional methods of research.

Are you ready to be the change?

Learn more about The Center’s Social Portfolio and ESG investing here.

Jaclyn Jackson is a Portfolio Administrator at Center for Financial Planning, Inc.® She manages client portfolios and performs investment research.


Investors should carefully consider the investment objectives, risks, charges and expenses of Mutual Funds and Exchange-Traded Funds (ETFs) before investing. The prospectus and summary prospectus contains this and other information about Mutual Funds and ETFs. The prospectus and summary prospectus is available from your financial advisor and should be read carefully before investing.

Opinions expressed are those of the author and are not necessarily those of Raymond James. All opinions are as of this date and are subject to change without notice. The information contained in this blog 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. Investing involves risk and investors may incur a profit or a loss regardless of strategy selected. Prior to making an investment decision, please consult with your financial advisor about your individual situation.

SOURCES: https://www.pionline.com/esg/investor-group-pleads-g-20-global-warming https://theinvestoragenda.org/wp-content/uploads/2019/06/FINAL-at-June-24-Global-Investor-Statement-to-Governments-on-Climate-Change-26.06.19-1.pdf

The Power of Working Longer

Nick Defenthaler Contributed by: Nick Defenthaler, CFP®

The Power of Working Longer Center for Financial Planning, Inc.®

Saving 1% more towards retirement for the final 10 years of one’s career has the same impact as working one month longer.

Yes, you read that correctly. Saving 15% in your 401k instead of 14% for the 10 years leading up to retirement has the same impact as delaying retirement by only 30 days! Hard to believe but that’s exactly what the National Bureau of Economic Research found in their 2018 research paper titled “The Power of Working Longer”. To make your eyes pop even more, consider that saving 1% more for 30 years was shown to have the same impact as working 3-4 months longer. Wow!

If you’re like me, you find these statistics absolutely incredible. This clearly highlights the impact that working longer has on your retirement plan. As we’re getting very close to retirement (usually five years or less), most of us won’t be able to make a meaningful impact on our 25-35 year retirement horizon by increasing our savings rate. At this point in our careers, it just doesn’t move the needle the way you might think it would.  

Without question, the best way you can increase the probability of success for your retirement income strategy in the latter stages of your career is to work longer. But when I say “working longer”, I don’t necessarily mean working longer on a full-time basis.  

A trend I am seeing more and more, one that excites me, is a concept known as “phased retirement”. This essentially means that you’re easing into retirement and not going from working full-time to quitting work cold turkey. We as humans tend to view retirement as “all on” or “all off”. If you ask me, that’s the wrong approach. We need to start thinking of part-time employment as part of an overall financial game plan.  

Let’s look at a real-life client I recently encountered (whose name was changed to protect identity):

Mary, age 62, came in for her annual planning meeting and shared with me that the stress of her well-paying sales position was completely wearing her down. At this stage in her life and career, she no longer had the energy for the 50-hour work weeks and frequent travel. Now a grandmother of three, she wanted to spend more time with her kids and grandkids but feared that retiring at 62, compared with our plan of 65, would impact her long-term financial picture.  

The more we talked, the more clear it became that Mary did not want to completely stop working; she just could not take the full-time grind anymore. When we put pen to paper, we concluded that she could still achieve her desired retirement income goal by working part-time for the next three years (to get her to Medicare age). Her income would drop to a level that would not allow her to save at all for retirement, but believe it or not, that had no meaningful impact on her long-term plan. Earning enough money to cover virtually all of her living expenses and not dipping into her portfolio until age 65 was the key factor.

Having conversations around your desired retirement age is obviously a critical component to your overall planning. However, a sometimes overlooked question is, “WHY do you want to retire at that age?”. As a society, we do a good job of creating social norms in many aspects of life, and retirement is not immune to this. I’ve actually heard several clients respond to this question with, “Because that’s the age you’re supposed to retire!”. When I hear this, I get nervous, because these folks usually make it three months into the retirement transition, only to find they are not truly happy. They found purpose in their careers, they enjoyed the social aspects of their jobs, and they loved keeping busy, whether or not they realized it at the time.

The bottom line is this: Don’t discount the effectiveness of easing into full retirement, both from a financial and lifestyle standpoint.

Some clients have found a great deal of happiness during this stage of life by working less, trying a different career, or even starting a small business they’ve dreamed about for years. The possibilities are endless. Have an open mind and find the balance that works for you, that’s what it’s all about.

Nick Defenthaler, CFP®, is a CERTIFIED FINANCIAL PLANNER™ professional at Center for Financial Planning, Inc.® He contributed to a PBS documentary on the importance of saving for retirement and has been a trusted source for national media outlets, including CNBC, MSN Money, Financial Planning Magazine, and OnWallStreet.com.


The information contained in this blog 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. Opinions expressed in the attached article are those of the author and are not necessarily those of Raymond James. All opinions are as of this date and are subject to change without notice. Keep in mind that there is no assurance that any strategy will ultimately be successful or profitable nor protect against a loss.

Women’s Leadership as an Investment Concept

Center for Financial Planning, Inc.® Women's Leadership

REPOST

Did you know three of the five partners at The Center are women? We live the value of gender diversity in the ownership and leadership of our firm.

Women’s leadership can and should also be understood as an investment concept.

Many studies have shown that women bring a unique perspective to senior and executive management roles within firms. This “secret ingredient” adds profitability, better risk preparedness, more collaboration, and more innovation to companies. 

An emerging consensus recognizes that the status and roles of women may be an excellent clue to a company’s growth potential.

Despite this, a large wage gap persists between women and equivalent men in the workforce, and there’s very little gender diversity among senior management and corporate boards.

Many barriers affect female participation in management and the boardroom.

One of the most easily understood is time out of the workforce.

Women spend an average 12.6 years out of the workforce to care for children or parents, whereas men only spend an average of 10 months outside the workforce!

This pull between work and family responsibilities likely has a lot to do with the disparities that still exist. After reading Lean In by Sheryl Sandberg, COO of Facebook, I discovered that barriers within ourselves also prevent women from climbing the corporate ladder. There are days when I long to be able to spend more time at home with my daughter, but I also recognize the importance of being the role model of a woman who is happy and successful in her career, as well as enjoying quality family time. My daughter also gains the benefit of seeing a father who is very engaged and shares the responsibilities of parenting, who is a real partner to me. This rhythm works for us. Finding your family’s own rhythm and peace is of utmost importance.

Sharing ideas and our own experiences is part of the solution. Another potential solution is using your investments to express your viewpoint with your dollars. If you would like to learn more, please contact your financial planner!

Angela Palacios, CFP®, AIF®, is a partner and Director of Investments at Center for Financial Planning, Inc.® She chairs The Center Investment Committee and pens a quarterly Investment Commentary.


Any opinions are those of Angela Palacios, CFP®, AIF® and not necessarily those of Raymond James. Expressions of opinion are as of this date and are subject to change without notice. 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. Raymond James is not affiliated with and does not endorse the opinions or services of Sheryl Sandberg or Facebook. This material is being provided for information purposes only and is not a complete description, nor is it a recommendation. This information is not intended as a solicitation or an offer to buy or sell any security referred to herein. Past performance is not a guarantee of future results. Investing involves risk and investors may incur a profit or a loss regardless of strategy selected. Certified Financial Planner Board of Standards Inc. owns the certification marks CFP®, CERTIFIED FINANCIAL PLANNER™, CFP® (with plaque design) and CFP® (with flame design) in the U.S., which it awards to individuals who successfully complete CFP Board's initial and ongoing certification requirements.