In the pension and Social Security law infancy of the 1930s, normal retirement was age 67 and life expectancy was age 62. It simply wasn’t expected that most were ever going to collect on either. 

With the advancement of modern medicine, life expectancy has been extended closer to age 84. Yet corporate America has a pension system that would allow the employees the ability to retire as early as age 55, with an unreduced pension, based on an 85-point system (combination of age and years of service). 

Today, with extended life expectancy and an early retirement feature, the actual years spent in retirement has been extended well beyond what pension actuaries were prepared for. Traditional defined benefit pension plans guarantee a retiree an income for life. If married, it is possible to guarantee an income for the lives of both spouses. Over time, this has become a crippling financial obligation for corporate America. With the approval of the IRS and ERISA, corporate America decided to start unwinding traditional defined benefit pension plans and convert them to cash balance plans. They were obligated to use a certain formula tied to current interest rates and an actuarial life expectancy. It is somewhat counterintuitive that a rising interest rate environment would actually lower a potential lump sum pension payout. The reason the direction interest rates moving have an inverse effect on lump sum pension values lies within how the conversion calculation is done. First, the original traditional pension benefit obligation is calculated based on the employees earned credits. This results in an amount the employee is to receive monthly. Then, that monthly income amount is converted into a lump sum present value of what the total future payout would be over the participants lifetime. The participant’s lifetime is determined by actuarial life tables. 

For example, if you’re trying to calculate for an income replacement, the higher the interest rate the lower the actual lump sum needed. So if I need $5,000 per year of income and can earn 5% on my money, I need $100,000 invested. If I could earn 8% on my money I only need approximately $62,500 invested to replace that same $5,000 of income. The higher the interest rate at the time of retirement the lower the lump sum. The US government has been raising interest rates in an attempt to slow inflation. 

All this is quite confusing and complex. Most people just want to retire worry free, but today they feel as though they are required to become pension actuaries and investment professionals before doing so. It is fair to say most are just trying to make their best informed retirement decision. This is where it becomes invaluable to seek the advice of a trained professional. These types of decisions are typically irreversible and will impact you for life. 

Please reach out to one of our financial advisors before trying to make this life-altering decision on your own. We are here for you and your friends and co-workers. Let us help!

Are you a good steward of your finances? As a financial advisor with over three decades of experience, I’ve seen many differing views on the topic of money. But in all my years, one thing I’ve never heard is that it’s possible to save too much money for unexpected life events. 

I always say, “Money itself can’t make you happy, but it sure can go a long way toward helping.” My friend and colleague, Carson Shadowen, elaborates on this point, stating money itself can’t make you happy, yes. However, saving enough of it creates flexibility and freedom to help you feel more secure about your financial future (a feeling very reminiscent of happiness!).

Life is full of uncertainties. It’s essential to control what you can control. The better prepared you are for life’s hurdles, the better able you’re able to navigate them.

Here are a few ways to be a better steward of your money in 2022:

  1. Pay yourself first. Start saving early for the future by putting money into:
    1. An emergency fund for a rainy day, because it will rain.
    2. Your employer 401(k). At a minimum, contribute at the rate of the company match to take full advantage of “free” money. When you receive that next significant pay increase, increase your contributions.
  2. Start a save to spend account. The premise is simple—save for what you want to spend. That next big vacation? Start saving for it now instead of paying for it on credit cards with interest later.
  3. Be frugal, not cheap. Focus on the value of things, not just the cost. Especially with technology, remember that early adopters often pay the price for innovation. Consider whether or not it’s genuinely worth the cost to have all of the bells and whistles.
  4. Live within your means. Align your lifestyle with your income, so you aren’t living in the red. Your happiness shouldn’t be defined by keeping up with anyone else–your family, your friends, or the Joneses. 
  5. Find a balance between what you NEED and what you WANT. Wanting things is perfectly normal, but make sure you aren’t compromising your financial integrity to acquire all of life’s wants. 
  6. Set a budget. A budget is a great way to help you manage your money. Think of a budget as a financial blueprint. Just like you wouldn’t build a house without a blueprint, don’t leave your financial future to fate. Check out our financial organizer here.
  7. Choose charitable contributions carefully. It’s gratifying to help those who need it most, but don’t give away everything today that you may need later.
  8. Invest wisely. Low interest, low-risk accounts may not grow at the rate needed to accomplish your financial goals. Without a reasonable return on invested assets, you will need more money to achieve your goals. You work hard for your money; your money should be able to work just as hard for you.
  9. Seek the advice of a professional you trust. We always tell our clients that we want to be in the top five people they call when they experience a life event. That’s a level of trust we don’t take lightly. By staying connected to our clients, we can help them navigate life’s changes, challenges, and hurdles to keep on the path to financial success. 
  10. Define your legacy. Determine what you want your legacy to be to start preparing for it. Do you want to leave your assets to your loved ones? Do you want to help an organization or a cause that could benefit from your success? By defining your goals for tomorrow now, you can start preparing today.

Most simply put, money is a means to an end in this life. With proper management, guidance, and prudence, you can achieve a great deal of success.

Here’s wishing you a safe, healthy and happy 2022 and beyond!

I believe financial readiness takes on many forms. One of those forms we help our clients prepare for is being financially independent. Said differently, the stage in life where your money works for you versus you working for it—especially in retirement.  In my experience, households that are successful in their financial independence are the ones where both partners are involved.  There is a larger percentage of married couples than single-adult households. I find that in most marriages (or life partnerships) we divide different household responsibilities and duties. We each take ownership of something we enjoy or are best suited to handle. This may be based on educational training, enjoyment of the task, or by default, but someone has to do it!

In my household, for example, most health-related issues or questions go through my wife, as she is a Registered Nurse. When it comes to finances, however, she defaults to me as a professional wealth manager. She can handle our finances, but she does not have the desire to handle them. As a financial advisor, it is natural for me to take on the responsibility of our finances. She has always said, “You handle it. If I cannot trust you, then who can I trust?” But therein lies the problem. I do not make any major financial decisions without running them by her. I believe women have unbelievable intuition and it is important that she stays informed.

Life sometimes has a way of throwing us some harsh curveballs. I have experienced a lot in my 35+ years in this business. I have seen situations where a spouse has relied entirely on their life partner for all household financial decisions. Why? Because of their ability, faith, and trust in their partner. I remind my wife if something happened to me, she would be forced to make all financial decisionswithout a sounding board, in the most emotional state in her life. In my experience, it is a much easier and more successful transition when both partners stay engaged in the household finances. I am not necessarily talking about duplicated efforts, or all decisions being made jointly, but I am talking about being aware, knowing what is going on, and understanding why decisions are being made.

The best solution is to engage in a relationship with a Financial Advisor who knows your dreams, goals, and fears. One that knows your limitations and your strengths. One that has the ability and desire to help when life gets rough. And we all know life can be difficult some days.  People underestimate the value of a long-standing relationship with a trusted advisor until life exposes its difficulties. Just because you understand and enjoy investing does not mean that your spouse does. Do not let divorce, death, mental or physical impairments of your spouse ruin what the two of you have worked so hard to create.

Action Items

  • Both spouses should attend as many reviews with their Financial Advisor as possible
  • Make certain you have a good working relationship with a trusted advisor. One willing to understand both of your viewpoints, strengths, and weaknesses
  • Take inventory of your financial assets
    •  We can help with this. Go to Under the “Our Process” tab go to “Financial Tools” for our Personal Financial Organizer
  • Keep your estate plan current—know what it says and why it is structured the way it is
  • Know your advisory team—Financial Advisor, CPA, Attorney, Insurance Agent, etc.
  • Have a high-level understanding of your household financial picture

Financial readiness should not be left to chance, nor should you wait until it is too late to address the need. Stay involved in the event you are put in a position to make all financial decisions on your own. This should provide confidence and peace of mind now and in the future.