Category Archives: Investing & Retirement

50 Things: What a Professional Financial Advisor Does for You

If you live in or around Menlo Park, Redwood City, San Mateo or the San Francisco Bay Area and Peninsula, contact Gosho Financial Group today to talk about our world-class service with a personal touch to assist you with a smart 401k plan.

FINANCIAL PLANNING

1. Cares more about you and your money than anyone who doesn’t share your last name.
2. Guides you to think about areas of your financial life you may not have considered.
3. Formalizes your goals and puts them in writing.
4. Helps you prioritize your financial opportunities.
5. Helps you determine realistic goals.
6. Studies possible alternatives that could meet your goals.
7. Prepares a financial plan and/or an investment policy statement for you.
8. Suggests creative alternatives that you may not have considered including the best way to claim Social Security.
9. Reviews and recommends life insurance policies to protect your family.
10. Assists you in setting up a company retirement plan.
11. Assists in preparing an estate plan for you.
12. Reviews your children’s custodial accounts and 529 plans.
13. Helps you determine your IRA Required Minimum Distribution.
14. Provides reminders about key financial planning data.
15. Checks with you before the end of the year to identify any last minute financial planning needs.
16. Guides you on ways to fund health care in retirement.

INVESTMENTS

17. Prepares an asset allocation for you so you can achieve the best rate of return for a given level of risk tolerance.
18. Stays up to date on changes in the investment world.
19. Monitors your investments.
20. Reviews your investments in your company 401k or 403b plans.
21. Reviews your existing IRAs.
22. Helps convert your investments to lifetime income.
23. Refers you to banking establishments for loan and trust alternatives.
24. Suggests alternatives to increase your income during retirement.
25. Records and researches your cost basis on securities.
26. Provides you with unbiased investment research.
27. Provides you with personal investment analysis.
28. Determines the risk level of your existing portfolio.
29. Helps you consolidate and simplify your investments.
30. Can provide you with technical, fundamental, and quantitative investment analysis.
31. Provides introductions to money managers.
32. Shows you how to access your statements and other information online.

TAXES

33. Suggests alternatives to lower your taxes during retirement.
34. Reviews your tax returns with an eye to possible savings in the future.
35. Stays up to date on tax law changes.
36. Helps you reduce your taxes.
37. Repositions investments to take full advantage of tax law provisions.
38. Works with your tax and legal advisors to help you meet your financial goals.

PERSON-TO-PERSON

39. Monitors changes in your life and family situation.
40. Proactively keeps in touch with you.
41. Serves as a human glossary of financial terms such as beta, P/E ratio, and Sharpe ratio.
42. Provides referrals to other professionals, such as accountants and attorneys.
43. Shares the experience of dozens or hundreds of his clients who have faced circumstances similar to yours.
44. Helps with the continuity of your family’s financial plan through generations.
45. Facilitates the transfer of investments from individual names to trust, or from an owner through to beneficiaries.
46. Keeps you on track.
47. Identifies your savings shortfalls.
48. Develops and monitors a strategy for debt reduction.
49. Is a wise sounding board for ideas you are considering.
50. Is honest with you.

Learn more about how a CFP can assist you.

If you live in or around Menlo Park, Redwood City, San Mateo or the San Francisco Bay Area and Peninsula, contact Gosho Financial Group today to talk about our world-class service with a personal touch to assist you with a smart 401k plan.


– William Smith

*Carol Gosho, Principal, Gosho Financial Group with Securities offered through TD Ameritrade Institutional, Member FINRA/SIPC.

 

 

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Achieving Your Nest Egg

How much money do you need to retire? What rate of return on your investments do you need to achieve your “nest egg”?

There are several key tasks you need to complete before you can determine what rate of return you’ll need in order to fund your retirement. These include the following:

  1. Decide the age at which you want to retire.
  2. Decide the annual income you’ll need for your retirement years. It may be wise to estimate on the high end for this number. Generally speaking, it’s reasonable to assume you’ll need about 80% of your current annual salary in order to maintain your standard of living.
  3. Add up the current market value of all your savings and investments.
  4. Estimate the value of your social security benefits. U.S. residents can obtain their estimated benefits at the Social Security Administration (SSA) website.

A Sample Calculation
Before we begin with our sample calculation, a word on inflation. When drawing up your retirement plan, it’s simplest to express all your numbers in today’s dollars.

Now on to the sample calculation. Consider the hypothetical case of John, a 45-year-old man currently earning $100,000 after taxes. Let’s go through the key factors for John:

  1. John wants to retire at age 65.
  2. John will need $80,000 of annual retirement income – in today’s dollars (i.e., not adjusted for inflation).
  3. John currently has $400,000 in savings and investments.
  4. Visiting the SSA website, we can quickly calculate John’s estimated social security benefits in today’s dollars. Assuming John is born 45 years ago and will retire 20 years from now, we can retrieve his estimated social security benefits in today’s dollars. The SSA website gives us a value of around $2,300 per month.


1. Based on 80% of his annual earnings.

Now, John determined he would need $80,000 (in today’s dollars) annually to live during his retirement years. To the nearest $100, this works out to about $6,700 per month. Assuming John’s social security funds come through as estimated, we can subtract his estimated monthly benefits from his required monthly income amount.

This leaves him with $4,400 per month that he must fund on his own ($6,700 – $2,300 = $4,400), or $52,800 per year.


John is in good health and has a family history of longevity. He also wants to make sure he can pass along a sizable portion of wealth to his children. As a result, John wants to establish a nest egg large enough to enable him to live off of its investment income – and not eat into his principal amount – during his retirement years.

Assuming John will be able to grow his investments to $750,000 (1) by the time he retires he will need a dividend yield of just a fraction above 7% to obtain the $52,800 he will need annually.  Seven percent might be possible if dividends increase 3.5%/yr for 20 years. Without any investment appreciation or dividend income, $750,000 would last 14.2 years if drawing out $52,800/year.

This illustrates the importance of monitoring your investment growth rate (3.2%) and the dividend growth rate (3.5%) of your individual holdings or total portfolio.  6.7% total return is not easy to come by today without a great deal of volatility.

 


Note:

  1. If John doesn’t invest any more money for the 20 years of retirement, his $400K will grow to $750K by dint of a 3.2% annual return.

 

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