Are you speculating or gambling with your retirement money?

I’ve only been to a casino twice in my life. The first time was the summer after I graduated high school. A friend and I  took a Greyhound bus just over the border into Windsor, Ontario, and stayed there until just after dinner before returning home on the bus.

Before I left, I carefully decided how much money I needed for food and how much money I was willing to completely lose to playing at the casino. I set aside $20 for my lunch and snacks and had another $40 that I had determined would be OK if I ended up losing it all.

Once I got to the casino, I took my $40 and exchanged it for the casino’s tokens and asked for two cups. I put all $40 worth of tokens into one cup and the second cup was for any winnings from the day. I remember having fun playing the slots and some other machine-based games. Every time I played, I pulled the coins from the first cup. Every time I won, I placed the winnings into the second cup.

At the end of the day, I spent $18 of my $20 on food, and had kept $18 of winnings from my original $40. So, I took $60 and was willing to part with it all, and I was able to come back home with $20. I had fun and stayed disciplined with my tokens… for the most part. I have to confess that I pulled some from my winnings cup to play a few more rounds.

Now, I want to take a quick break and be clear that I do not advocate that anyone should go to casinos or engage in gambling of any kind. By design, gambling of any kind (including playing the lottery) is a loser’s game and the house always wins. It can be addictive and destroy lives.

I also believe that no one should gamble their life savings.

If you have read some of the earlier blog posts, you may have grasped that I am a believer in free markets and a passive investing philosophy. One of the biggest reasons I am a believer in these concepts is because they work, have been academically tested, and many investors who have adopted this philosophy as their own have reaped the benefits.

I also believe that active management is a form of speculation and gambling with the money you need to live on in the future and the money you want to have set aside for your legacy. Active management of your portfolio can be you buying and selling stocks, trying to time the market, or using a fund manager who engages in these methods. These are the warning signs that you may be speculating or gambling with your money.

A lot of people I meet may believe they are not doing any of these things because they aren’t the ones actually doing it, but chances are they are actually paying an advisor and/or a mutual fund manager who is doing it on their behalf.

If you want to compare it to my casino story from earlier, it would be as though the $60 was the money you gave me to start. I charged a $20 fee for my expenses and invested the other $40 on your behalf. I spend my time analyzing which machines to play and when I think which slot will pay out. I guess wrong a lot of the time, though I still show some earnings. At the end of the day, your $40 has now become $18 and you are unhappy.

Though this analogy is kind of crude, it is pretty close to what happens in real life to some investors. They get sold a product or a mutual fund that seems pretty good and they decide to invest a portion or all of their money in it. The fund manager charges a fee and then underperforms his benchmark and the investor is left with the rest.

How can you be certain that you are not gambling with your retirement? You can read these 20 Must-Answer Questions as a self quiz. You can also set up a time to speak with me. I would love to help you begin your journey towards financial peace of mind.

When Is The Right Time to Panic WIth Your Investments?

I had a conversation recently about our culture and how I think that oftentimes we are pushed and pulled along by the overly sensationalized media.

With things like standing for the National Anthem, Russia scandal, market crashes, wildfires in California, global warming, various sex scandals and so on plastering the TV screens and our phones, is it any wonder that we can easily get caught up in it all?

We use phrases like “falling in love” and “falling out of love” as though love was something that happened to us instead of a conscious choice to display affection, vulnerability, and benevolence towards others. We find ourselves staying up way too late at night in arguments on Facebook or Twitter with people we don’t even know.

There is no shortage of stuff out there that is trying to get our attention, and no shortage of companies spending loads of money to get our eyeballs on their programs.

You may be thinking - yeah… so what does this have to do with my investments?

Well, everything.

This emotional rollercoaster in the media can create fear and panic in us. And when the right story comes out, it can make us get scared and tempt us to do something rash with our portfolio. For example, if US stocks plummet quickly, we may be tempted to sell them to “stop the bleeding.” Or, if gold starts doing well, we may be tempted to add more of it to our portfolio.

In each of these cases, you would be doing the wrong thing at the wrong time. Your instincts are telling you to do one thing, but it is not the prudent thing to do.

So how do you fight these temptations? Part of it is realizing that when it comes to your investments, it is never the right time to panic. Part of it is getting educated on how the markets actually work and in particular, how your portfolio is designed and how it behaves.

What is best is to hire a coach to educate you so you can be empowered to get disciplined and stay disciplined with your portfolio. After all, you have hopes and dreams for your future. You have things you would like to do with your family, for your family, for your place of worship, and the world around you.

In some sense, you could say that hiring a coach and being disciplined makes the difference to whether or not your hopes and dreams will even come true.

If you are reading this and realizing that you need to become more educated and more empowered to realize your hopes and dreams, please contact us or attend one of our upcoming workshops.

Most People Aren’t Going to Make It, But You Can

In March of 2016, this article was published and it has some scary statistics about Americans and their retirement savings:

• One third, yes 1 in 3, have $0 saved for retirement

• 42% of Millennials have not yet started saving

• 52% of Gen-Xers have less than $10k saved

• Only 1 in 4 Boomers have over $300k saved

According to the Social Security Administration, the average monthly benefit is $1,418. For simplicity, let’s round up to $1,500/month. If you are a couple in your late 60s, your annual income might look something like this:

• $1,500/month x 2 people = $3,000/month

• This amounts to $36,000/year

Let’s also pretend that you are one of the four Boomers who has over $300k saved; let’s say $500k is saved. If you use a simple 4% withdrawal, this would be an additional $20,000/year. Your annual income would be $56,000 for you and your spouse. Is that enough to live on?

Obviously, it depends on where you live and what kind of life you want to live. In northwest Ohio where I live, this would be enough to live on for a year and you could take a trip or two, spoil your grandkids, and maybe save up for one huge exotic trip or other major expense. But that would be about it.

But… this is only going to be true for 1 in 4 American Boomers. This would be the best case scenario for this group of Boomers. But what about the other 75% of American Boomers? And what about the Gen-Xers or Millennials?

As an investment adviser, these statistics are very concerning. If we extrapolate out the figures, it would seem that most people just aren’t going to make it financially.

This is the bad news. The good news is that anyone 60 or younger statistically still has a chance to turn things around. And the younger you are, the better off you could be.

You don’t have to be another American who didn’t end up saving enough for your future. You can begin today. Today can be the day you get back on track with your finances.

If you need help getting on track or back on track, I would love to talk with you. There are steps you can begin taking right now that can have impact on the rest of your life and the legacy that you want to leave behind.