Retirement Coach Jack Phelps Publishes New Article Explaining Why Stock Market Volatility Should Be Completely Irrelevant For You

Jack Phelps, founder of The Relaxing Retirement Coach, provides a perfect case study over the last 8 months to illustrate this classic mistake most retirees make

Wellesley, MA – April 19, 2016Jack Phelps, founder of The Relaxing Retirement Coach, a Retirement Coaching company, recently published an article on his website (https://www.theretirementcoach.com) clarifying exactly why stock market volatility is nothing to be feared.

In his article titled “Why Market Volatility is Irrelevant for You, Jack Phelps writes, “In the last eight months, you have experienced firsthand why stock market price volatility is completely irrelevant. Yes, after 28 years of careful study and hands-on work with hundreds of Relaxing Retirement members, I can unequivocally say that volatility is irrelevant for you.

The Relaxing Retirement Coach, Inc. provides their members with the ‘missing structure’ they need to make a seamless and relaxing transition to their retirement years so they can confidently do everything they want to do without worrying about money.  Their Relaxing Retirement Coaching Program™ provides members with a personalized, one-on-one retirement coaching relationship with constant attention to each and every detail necessary for them to consistently enjoy a relaxing retirement experience.

The entire article can be found at https://www.theretirementcoach.com/articles/why-market-price-volatility-is-irrelevant-for-you-3.php

To learn more about The Relaxing Retirement Coach, Inc., please visit https://www.theretirementcoach.com.

About Jack Phelps

Prior to developing The Relaxing Retirement Coaching Program back in 1994, Jack spent five years as a registered representative with Prudential Financial Services. In 1989, Jack graduated from Holy Cross College in Worcester, Massachusetts with a B.A. in Economics.

 

 

 

Why Market Price Volatility is Irrelevant for You

In the last eight months, you have experienced firsthand why stock market price volatility is completely irrelevant.

Yes, after 28 years of careful study and hands-on work with hundreds of Relaxing Retirement members, I can unequivocally say that volatility is irrelevant for you.

So that we don’t confuse the issue, and jump to the conclusion that I’ve gone off the deep end, let’s first define volatility.

Volatility simply means price movement, down and up. You may expand that to mean unstable and unpredictable.

Please note that nowhere in the definition of volatility is the word loss or permanent.

The Last Eight Months

Time has a way of healing all wounds/memories, so let’s recall the journey of market price movements over the last eight months to beautifully illustrate just how irrelevant market price volatility is:

Episode #1 of particular interest was the last days of August, 2015.

In a matter of 5 trading days, the price of the broad market S&P 500 index fell more than 11% down to 1,867. (We could examine the price of other indexes, but to keep the incredible lesson simple, we’ll stick with the S&P for now)

You may recall the hysteria created by the financial media. During the week following this drop, an all-time record $29.5 billion was withdrawn from stock funds by investors with $19 billion coming on one day!

As they always have, market prices then corrected right back up through November.

Episode #2 was the price slide that began in late December and picked up steam in early January leading financial journalists to pronounce the beginning of January 2016 as:

“The Worst Five Days to Begin Any Year”,
“The Worst First Two Weeks of Any Year”, and
“The Worst 12 Days of Any Year Since 1929!”

Attaching numbers to this “catastrophe”, the price of the S&P 500 Index fell 6.1% in the first 8 days of 2016, and bottomed out on February 11th at 1,815 down 10.5% for the year, and down 13.2% from early November.

The End of the World was pronounced once again by the financial media and more and more Americans began to buy into the belief that the bottom was officially falling out this time.

As you now know, market prices once again rebounded back up again to close out on March 31st at 2,051.

That not only means that the “worst start to any year in history” was erased. It was erased in less than two months! And, the S&P 500 Index ended the first quarter of 2016 up 1.13%.

What We Can Learn From This

Experience is a wonderful tool….if we use it.

Every life event, good and bad, is just that unless we pause for a moment to document and learn from it so we can better prepare ourselves for the future.

Expectation Level: If you enter the game with a proper expectation level, you won’t be spooked into making a cataclysmic mistake. By expectation level, I’m referring to the fact that since 1980, the average intra-year peak to trough drop in the price of the S&P 500 Index is 14.2%.

Translation: On average, market prices have temporarily fallen 14.2% at some point in the middle of the year over the last 36 years. I don’t think the importance of that fact can be stated enough times.

What this means is that you should expect market prices to temporarily fall, and fall sharply at times each and every year. That’s what market prices have always done. Why would they no longer do so in the future?

The two corrections detailed above that you have just lived through and experienced first-hand are perfect examples of this. Their effect on your long term goals is zero because they were temporary, not permanent.

A Plan: If you enter the game with a carefully thought out and detailed plan based on your long term goals, you can sleep like a baby at night with total confidence.

If you know your level of Retirement Bucket™ dependence (how much you need to withdraw each year to maintain your lifestyle).

If you keep sufficient balances in money markets and short term instruments to support your withdrawals without being forced to sell your ownership stake in companies in a temporary down market.

And, if you maintain disciplined asset allocation and an “ownership” mindset with the rest, market price volatility is 100% irrelevant for you.

The Financial Media: The goals of the financial media are not your goals. Their goal is to keep you tuned in so they can sell higher and higher priced advertising space.

Next to a good old fashioned hurricane or blizzard, the O.J. slow speed Bronco chase, or a real national catastrophe like the events of 9/11, the greatest tool ever invented to assist the mainstream press with capturing your attention is the volatility of stock market prices.

Up…down….up….down…up!

They absolutely love it because it’s a great tool to scare the living daylights out of the average American who does not understand that market price volatility is 100% irrelevant for those with a plan.

If you didn’t panic out and you maintained your focus and discipline over the last eight months, take a bow! I sincerely congratulate you. Well done!

Know that you are in the minority.

While you’re taking your bow, don’t miss the opportunity to internalize what just occurred so you will be even more prepared the next time market prices correct and the mainstream press proclaims “this time it’s different!”

You will better prepared to laugh it off the same way Lamont laughed off his father, Fred Sanford’s, weekly proclamation while grabbing his heart, “I’m comin’ Elizabeth….this is the BIG one” in the hilarious sitcom Sanford and Son.

Do You Have Time?

While watching the news last week at the end of a day in which broad stock market prices fell 1.2%, the reporter interviewed three retirees to get their reaction to the day’s events.

Each person interviewed echoed a similar problem they believe they had: “I’m worried. At my age, I don’t have time to make it back.”

The next morning, a leading headline and story on Wall Street Journal’s Market Watch website echoed the exact same sentiment spelled out by those three retirees who were interviewed:

 Stock Prices in Free Fall Again:

Retirees Worried They Don’t Have Time

The story then captured a quote from a retiree I’ve heard too many times to count:

Investing for the long term sounds great when you’re in your 30s, 40s, or 50s, but I’m 70 years old. I don’t have time to make up for any losses.”  

Does this sound familiar? Have you ever had a similar thought?

If you have, I can assure you that you’re not alone.   I can also tell you that it is unnecessarily in the way of you enjoying the Relaxing Retirement you deserve.

Whenever markets correct, as they recently have, the investment time horizon for the majority of retirees in America quickly shrinks.

While increases in market prices over their lifetimes are typically met with reservation, i.e. “it can’t or won’t last”, decreases in market prices are greeted with the gut feeling of permanence, i.e. “it sounds really bad this time. I don’t think it will ever come back in my lifetime!

If you study financial news reporting, you will find a version of this story during every market correction.   So much so that the “we don’t have time to make it back” mantra is treated as an indisputable fact, one which governs investment decisions for the majority of Americans during their retirement years.

I’ve heard it so many times that I decided to do a little research for you to see if this dominant sentiment is supported by facts.

Our Shared Problem

As we review some critical facts, it’s important that our shared problem is at the forefront of our minds since it is the reason we all choose to invest and subject ourselves to market volatility in the first place. As we’ve alluded to many times in the past, our shared problem is two-fold: rising costs and longevity.

We live in a rising cost world. In order for us to maintain our chosen lifestyle, our income must increase substantially over our lifetime. And, our lifetime is a lot longer than it was a generation ago as you’re about to discover.

This is not a “want”. This is a “need”. Our income must increase. And, in order for our income to increase (to offset inflationary costs over our lifetime), the assets we own in our Retirement Bucket™ must increase in value over the course of our lives to generate that lifestyle sustaining income.

In short, our shared problem is a long term problem, not a short term one. If our lifespan truly is that short as the quote suggests, market corrections are of no significance.

First, we wouldn’t own equities because equities solve a long term problem.

And second, although potentially uncomfortable to think about, if we did own equities and market prices temporarily dropped right before our demise, our beneficiaries would inherit and maintain ownership of them while prices corrected back.

How Long is Long Term?

With all of this talk about time, i.e. “I don’t have time to make it back”, let’s examine the facts about just how long is “long term” using Average Life Expectancy information from mortality tables used by life insurance companies and social security.

For clarity, a few highlights:

  • Life expectancy for a 60 year old male is 44 years, and 24.37 years for a female. However, their joint life expectancy, i.e. the average life expectancy for the survivor in a 60 year old couple is 31.8 years, i.e. just shy of 92 years of age.
  • For a 70 year old couple, their joint life expectancy is 6 years.
  • For an 80 year old couple, their joint life expectancy is 5 years.
  • For an 85 year old couple, their joint life expectancy is 1 years.
  • At age 75, the average life expectancy for a male is 94 years, and 12.76 years for a female.

Take a moment to let these facts sink in.

Assuming for a moment that you are just “average” (I know that our members are well above average in many respects), where are you in these numbers?

For example, if you’re a 70 year old couple, your number is 22.6 years, so your personal investment time horizon is 22.6 years!

Stock Market Corrections

With your investment time horizon firmly in your mind, now let’s examine historical market corrections.

Since 1928, market prices have fallen 10% or more (the definition of a correction) on 87 separate occasions, and 20% or more (the definition of a ‘bear market’) on 23 separate occasions.

The average length of time for market prices to return from their bottom back to their pre-correction price level is 111 days. Since those are trading days, that means 5 months.

Yes, you read that correctly. 5 months!

 Investment Time Horizon

With these historical facts, let’s now return to those Average Life Expectancy facts and your investment time horizon to determine if the often heard quote, “Investing for the long term sounds great when you’re in your 30s, 40s, or 50s, but I’m 70 years old. I don’t have time to make up for any losses” is valid for you.  

Let’s assume for a moment that you have followed The Relaxing Retirement Formula™, i.e. you have determined what it costs to support your lifestyle, and how much of that must be withdrawn each year from your Retirement Bucket™. You have set aside multiple years worth (5 is a very safe number) of your anticipated withdrawals in money markets and short term income instruments, and properly diversified the rest across a spectrum of equity asset classes.

If you are that 70 year old man and you are single, your investment time horizon is 14.13 years. If you are a woman, it’s 16.33 years.   If married, it’s 22.6 years. In either case, is the “I don’t have time to make it back” mantra factually valid? No!

Even if it took five years for market prices to return, which is twelve times longer than the historical average, you would not have had to sell any of your equity holdings at a loss to free up funds to support your needed withdrawals because you already had those funds set aside outside of equities.

The reality is that your investment time horizon is a lot longer than you may think, and if you follow The Relaxing Retirement Formula™, you do have time!

Knowing this should give you enormous confidence to spend what you have planned to spend no matter what the current market conditions are at the moment.

 

Retirement Coach Jack Phelps Publishes New Article Illustrating How To Determine if You Have Enough

Jack Phelps, founder of The Relaxing Retirement Coach, uses a case study to uncover the missing answer

Wellesley, MA – January 26, 2016Jack Phelps, founder of The Relaxing Retirement Coach, a Retirement Coaching company, recently published an article on his website (https://www.theretirementcoach.com) demonstrating why two couples with the same assets and income levels can have drastically different needs.

In his article titled “Do We Have Enough, Jack Phelps writes, “When I meet with someone for the first time, one of the things they want to know very early in our conversation is “do you think we have enough?” That’s the question on the tip of everyone’s tongue. My answer is always the same.”

The Relaxing Retirement Coach, Inc. provides their members with the ‘missing structure’ they need to make a seamless and relaxing transition to their retirement years so they can confidently do everything they want to do without worrying about money.  Their Relaxing Retirement Coaching Program™ provides members with a personalized, one-on-one retirement coaching relationship with constant attention to each and every detail necessary for them to consistently enjoy a relaxing retirement experience.

The entire article can be found at https://www.theretirementcoach.com/articles/do-we-have-enough-3.php

To learn more about The Relaxing Retirement Coach, Inc., please visit https://www.theretirementcoach.com.

About Jack Phelps

Prior to developing The Relaxing Retirement Coaching Program back in 1994, Jack spent five years as a registered representative with Prudential Financial Services. In 1989, Jack graduated from Holy Cross College in Worcester, Massachusetts with a B.A. in Economics.

 

 

 

Do We Have Enough?

When I meet with someone for the first time, one of the things they want to know very early in our conversation is “do you think we have enough?”

That’s the question on the tip of everyone’s tongue.

My answer is always the same, “I don’t know……yet…. because the number is so different for everyone. But I can show you how to find out!”

Why Is Everyone’s Number So Different?

Let’s take a look at two couples, Jim and Mary, and Ron and Rose, both age 65.

To keep it simple using round numbers, assume each couple has:

  • $2 million dollars in investments,
  • the same social security retirement income, and
  • the same

Beyond that, here’s what else we know about them:

Jim and Mary have no mortgage or home equity line of credit, and they’ve recently completed many of the major upgrades to their home, i.e. a new roof, siding, a new furnace, and updated bathrooms. They have always lived a very modest lifestyle with little or no debt.

Ron and Rose, on the other hand, still have a $300,000 balance on their home equity line of credit that they took out to pay for their kids’ college tuitions and weddings, and a condo down in Florida they bought a few years back. They each drive high end cars. And, while their home is very nice, after 31 years, it’s starting to look “tired” and could use some upgrades.

Can you see how each couple’s number is drastically different?

What’s the difference?

Even though both couples have the exact same level of investments, and the same amount of income coming in from social security and pensions, the amount they need to have in their Retirement Bucket™ is drastically different because they spend so differently.

In short, Ron and Rose are a lot more dependent on their Retirement Bucket™ than Jim and Mary.

The income that will be required to support Ron and Rose will be much greater than Jim and Mary. As such, Ron and Rose will need to withdraw a much bigger amount each year from their Retirement Bucket™, thus requiring a bigger number.

But, Have They Reached Their “Number”?

With that said, however, have Ron and Rose reached their “number”?

How about Jim and Mary?

At this point, we don’t know. And, that’s a very important point!

Most people make their decisions based on their perception of how they “measure up” to others. Based on what they hear on television, or on what a friend or colleague tells them.

The reason we don’t know if Ron and Rose or Jim and Mary have reached their “number” is that we haven’t thoroughly quantified what it costs them to support their lifestyle yet.

And, that’s the key. Yes, it’s true that Jim and Mary are more likely to have reached their “number”. But, Ron and Rose may have as well.

It’s ALL in the Numbers

This is why it’s so critically important for you to have a clear handle on what it costs you to live the way you want. Otherwise, you will have unnecessary anxiety and you will “pull your punches” by restricting your spending for the rest of your life because you don’t know if you have enough.

Or, you will continue to work because you think you “have” to, when in fact you may not “have” to.

So, as we kick off a brand new year together, the first critical step in The Relaxing Retirement Formula™ is to get a really good grasp on just how dependent you are on your retirement savings.

Become infatuated with knowing your numbers cold!

I’m going to show you the fastest and most accurate way to accomplish that.

 

Brother #1 vs. Brother #2

Imagine for a moment that you’re having a conversation over dinner last Friday night with your brother and his wife. Answering the common question, “what’s new”, he dives right in and shares what he’s been up to.

In addition to the nice home he owns and lives in with his family, he also owns a two-family home in town which he has been collecting rent on for 15 years.

He explains to you that he called up his real estate broker last week on a Tuesday afternoon and asked the broker what she believed he could sell the rental property for that day. He didn’t want to know what he could sell it for in a month or two, but right then.

Given the demand for a quick response, her answer was $600,000.

He then called back on Wednesday morning at 9:43 a.m. and asked how much she thought he could receive if he sold it then.

He then called back at 11:57 a.m. and asked the same question.

Finally, he called her back that same afternoon at 3:26 p.m. and asked how much she thought he could sell it for then.

Before you called the local hospital for the men in the white coats to come and take him away in a straight jacket, you asked him if he did this often.

“Oh, I do it all the time,” he said

Why, you ask, do you waste your time if you’re not selling?

“I like to stay on top of things so I know how I’m doing.”

Brother #2

Imagine for a moment that you’re visiting your brother and his wife at their home in Florida.

In the first morning of your visit, you notice that he’s watching CNBC’s Squawk Box on television and there are two guys shouting conflicting opinions on the effect of The Fed raising interest rates on market prices.

As you’re all waiting on him to head out for lunch, you notice that he has Yahoo Finance pulled up on his iPad checking the prices on the different stock market exchanges.

“The Dow is down 120 points,” he laments as you’re walking out the door to the car.

At the conclusion of lunch at the restaurant, he asks the waiter to switch the channel on the television over to CNBC so he can see what the market is up to.

After some shopping in town, you head home in his car. On the way, he has business radio tuned in on the radio so he can hear how the market closed at the end of the day.

After a nice meal at his home that night, you all settle in to watch Jim Kramer discuss his take on the market activity that day, and what he recommends everybody do in reaction to the day’s events.

After a futile attempt to get him to change the channel over to a comedy show that you can all watch, you gently ask him if he “paid this much attention to the market every day.”

“Of course,” he said. “Don’t you?”

After replying that you don’t, you then ask him why he does it.

“I like to stay on top of things so I know how I’m doing.”

 What Do You Think?

Is the behavior exemplified by the brother in story #1 (real estate) any different than the brother in story #2 (stock market)?

The answer is no. There is no difference at all! They’re both equally bizarre and destructive.

The only difference is the investment vehicle they’re using.

Upon first glance, I suspect the behavior of Brother #1 (real estate) appears more outrageous.

I also suspect you know someone who mirrors the behavior of Brother #2 (stock market). Perhaps you know someone like this quite well.

We all do and it’s becoming way, way too common. The media has turned investing into a sport with minute by minute reporting of “points” on the Dow. Why do you think they use that terminology?

The truth is that the behavior of Brother #2 (stock market) is no more bizarre and destructive than the behavior of Brother #1 (real estate).

Randomly ‘checking in’ via the internet, the radio, or the television, etc. multiple times a day to “see how ‘the market’ is doing” is the same as Brother #1 calling his real estate broker on three separate occasions in one day to find out how much she could sell his rental property for at that precise moment.

Neither accomplishes anything.

What Are They Looking For?

The bigger question is what is each brother looking for?

What they’re both looking for is a sense of certainty in the short and long run. They want to make sure they’re not “falling asleep at the wheel” and missing out.

The reason they have this feeling and desire is their overall ‘big picture’ interpretation, and thus ingrained belief of the world on a day to day basis, i.e. that world economies and financial markets are completely fragile, erratic, ungrounded, and out of control. And, that the bottom could permanently fall out of their financial lives without any warning whatsoever, and they could be permanently bankrupt because of it.

Please take a moment to go back and read that paragraph again. It’s that important.

This is the psychological state of most retirees in America today, and it is my strong opinion that it is not necessarily their fault (in the short run). I emphasize ‘in the short run’ because in the long run, everyone has a responsibility to continuously seek the objective truth, and discard everything else which has not objectively been proven to be true.

What everyone is fed by the financial media over and over on a day to day basis confirms that economies and financial markets are completely fragile, erratic, ungrounded, and out of control. And, that the bottom could permanently fall out of their financial lives without any warning whatsoever and they could be permanently bankrupt because of it.

If anyone were to take a step back and unemotionally evaluate this assertion, they could and would arrive at the truth which is that it is completely false.

However, it is not reported because of its level of truth. It is reported because it keeps millions and millions of viewers tuned in day after day after day.

Think about it. If the financial media can perpetuate this myth, and they can get millions to buy into it, then they condition those millions (like Brother #2) to tune in multiple times each day in order to fulfill their conditioned desire to “stay on top of things”.

If engaging in this activity was of any value to you, I’d strongly endorse it in a heartbeat. It is not. Do everything you can to avoid the trap.

Investing is not a sport, thus scoring it on a minute by minute basis, as the financial media would like you to do, is not only unhealthy, but it is ineffective as a means of helping you achieve your long term goals.

This does not mean that you should aimlessly bury your head in the sand. What is does mean is that, in the face of the endless barrage of information coming at you every day, you must exercise extreme levels of awareness of the “intent” of the information, remember that you are in control, and protect your confidence.

 

Retirement Coach Jack Phelps Publishes New Article Illustrating a Great Strategy for Dealing with Market Turbulence

Jack Phelps, founder of The Relaxing Retirement Coach, contrasts what massively successful investors focus on vs. what the overwhelming majority focuses on

Wellesley, MA – October 12, 2015Jack Phelps, founder of The Relaxing Retirement Coach, a Retirement Coaching company, recently published an article on his website (https://www.theretirementcoach.com) demonstrating why focusing on “the stock market” is a recipe for disaster.

In his article titled “Take a Look Under Your Hood, Jack Phelps writes, “Why does it seem as though Buffett, and other great investors like Ron Baron, always keep on buying great companies they believe in despite market turbulence all around them that paralyzes the masses?”

The Relaxing Retirement Coach, Inc. provides their members with the ‘missing structure’ they need to make a seamless and relaxing transition to their retirement years so they can confidently do everything they want to do without worrying about money.  Their Relaxing Retirement Coaching Program™ provides members with a personalized, one-on-one retirement coaching relationship with constant attention to each and every detail necessary for them to consistently enjoy a relaxing retirement experience.

The entire article can be found at https://www.theretirementcoach.com/articles/take-a-look-under-your-hood-3.php

To learn more about The Relaxing Retirement Coach, Inc., please visit https://www.theretirementcoach.com.

About Jack Phelps

Prior to developing The Relaxing Retirement Coaching Program back in 1994, Jack spent five years as a registered representative with Prudential Financial Services. In 1989, Jack graduated from Holy Cross College in Worcester, Massachusetts with a B.A. ask powersports . in Economics.

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Take a Look Under Your Hood

Days before the recent market panic in late August, Warren Buffett made the biggest acquisition in Berkshire Hathaway history. With oil prices down as low as they’ve been in years, he bought $5 Billion worth of Phillips 66, and added to his already hefty IBM holdings.

What is equally interesting to note is that he also didn’t sell anything during that laser quick period in August when market index prices fell 11% in a week.

Why does it seem as though Buffett, and other great investors like Ron Baron, always keep on buying great companies they believe in despite market turbulence all around them that paralyzes the masses?

The biggest reason is that they’re not focused on investing in “the stock market”. They recognize that “the stock market” is nothing other than a medium to buy and sell shares of all the companies in which they own shares.

They’re focused on the prospects of the companies they own, and those they’re looking to acquire, and their ability to prosper for years to come.

Investing is Owning

During market corrections like we’ve recently experienced, it’s always a great idea to focus on the big picture of what investing really is, and why you’re even engaging in it.

Investing is owning plain and simple. We can never forget that. Long term growth is not obtained through “trading”, i.e. buying and selling.

The growth we need our Retirement Buckets to experience is achieved when the value of the companies we own (and the dividends they pay) grow over the long term.

What Do You Own?

When you think about investing, or you discuss it with friends and/or family, how do you describe your experience? Do you talk about investing in “the market” or do you talk about the great companies you own?

One of my strongest recommendations is to focus on the latter: owning companies. After all, that’s what you’re doing.

For example, if you own shares in Schwab’s Large Cap ETF, you own a piece of 767 companies.

Let’s look under the hood for minute and examine the companies you own if you’re invested in that fund or a similar large cap index:

  • Apple
  • Microsoft
  • Exxon Mobil
  • Johnson & Johnson
  • GE
  • Berkshire Hathaway
  • Wells Fargo
  • JP Morgan Chase
  • Facebook
  • Amazon
  • Boeing
  • Walgreens
  • Honeywell, and
  • UPS to name a few of the top holdings

If you own the iShares MSCI EAFE Index ETF or The Schwab International Index ETF, you own a piece of 934 and 1,216 companies respectively including:

  • Nestle
  • Novartis
  • Roche Holdings
  • Toyota
  • HSBC
  • Sanofi
  • Bayer
  • British Petroleum
  • Novo Nordisk, and
  • Royal Dutch Shell to name a few.

Quite a List

Stop and think about this for a moment. If you’re invested in any of those funds, or a similar fund, you own a piece of each of those incredible companies. And, we’ve only listed the top holdings in a few of your funds in just two of the asset classes where you own.

During temporary market corrections like we’ve experienced lately, a great idea is to take a look at the list of the top companies you own pieces of and give some thought to their prospects in the years ahead.

What will the demand for the company’s products and services be in the future given technology and all the demographic shifts going on all over the world?

Given that only one billion out of the 7.3 billion people in the world own smart phones, what is the likelihood that Apple’s long term future is bright?

Given the explosion of diabetes due to the ‘westernization’ of diets throughout the world, do you think that Novo Nordisk has a bright future given that it currently has a 50% market share of the global insulin market?

Given the infrastructure and database put in place for millions of buyers who have been conditioned to shop on-line for anything and everything, how well do you believe Amazon is positioned to perform in the future?

Given the massive ascension of millions and millions of people in developing countries into the middle class, how many more cars do you believe Toyota will sell in the next 20 years? How many airplanes will Boeing sell to airlines catering to increased business and pleasure air travelers? How many Walgreens locations will open up to handle the massive demand for prescriptions and personal care products?

Focus on Owning

If I had to identify the top characteristics of my most successful members, and those whom I’ve studied for over two dozen years who have created true financial independence for themselves, one of the most important would be what they focus on and how they talk about their investing experience. They don’t talk about “the market”, or points on the Dow.

They talk about the companies they own.

 

Retirement Coach Jack Phelps Publishes New Article Revealing a Startling Analogy Between the Leading Causes of Death and Financial Dependence

Jack Phelps, founder of The Relaxing Retirement Coach, shares the revelation he had after a dinner conversation with friends and his ensuing research with the World Health Organization

Wellesley, MA – August 11, 2015Jack Phelps, founder of The Relaxing Retirement Coach, a Retirement Coaching company, recently published an article on his website (https://www.theretirementcoach.com) illustrating the incredible similarities between the perception and reality of poor physical and financial health.

In his article titled “Playing the Odds, Jack Phelps writes, “Our dinner conversation kicked into high gear when our friend said something I’ve heard so many times, ‘All your exercise and attention to healthy eating is great, but there’s no guarantee you won’t still drop dead of a heart attack if it’s in your genes. My father and grandfather both died of a heart attack before they were 62.’”

The Relaxing Retirement Coach, Inc. provides their members with the ‘missing structure’ they need to make a seamless and relaxing transition to their retirement years so they can confidently do everything they want to do without worrying about money.  Their Relaxing Retirement Coaching Program™ provides members with a personalized, one-on-one retirement coaching relationship with constant attention to each and every detail necessary for them to consistently enjoy a relaxing retirement experience.

The entire article can be found at https://www.theretirementcoach.com/articles/play-the-odds-3.php

To learn more about The Relaxing Retirement Coach, Inc., please visit https://www.theretirementcoach.com.

About Jack Phelps

Prior to developing The Relaxing Retirement Coaching Program back in 1994, Jack spent five years as a registered representative with Prudential Financial Services. In 1989, Jack graduated from Holy Cross College in Worcester, Massachusetts with a B.A. in Economics.

 

 

 

Play The Odds

While having dinner with friends in Chatham last week, we had a long conversation about health.

The “spirited” debate essentially boiled down to the leading causes of death and the role that ‘luck’ and genetics play vs. the choices we make.

I’d like to share parts of that conversation with you, and the revelation I arrived at about the remarkable similarities to ‘financial health’.

This will take a few moments, but I promise you this extended discussion and research on health has an extremely important lesson in it for all of us about the financial health you and your family members will experience.

Our dinner conversation kicked into high gear when our friend said something I’ve heard so many times, “All your exercise and attention to healthy eating is great, but there’s no guarantee you won’t still drop dead of a heart attack if it’s in your genes. My father and grandfather both died of a heart attack before they were 62.”

I’m sure you’ve heard some version of this comment before. Ultimately, it’s the same as, “you can do everything right and still get hit by a bus!” Or, “I know a guy who was ‘healthy’ who collapsed and died while running.”

Driving home from dinner, I made a mental note to do some research before seeing them again.

 World Health Organization

My ‘fact finding’ mission brought me to The World Health Organization website. (www.who.int)

Here are some very important facts about the four leading causes of death (The italicizing and bolding is mine for emphasis):

Non-communicable diseases (NCD) were responsible for 68% of all deaths globally in 2012, up from 60% in 2000. The 4 main NCDs are cardiovascular diseases, cancers, diabetes and chronic lung diseases. Communicable, maternal, neonatal and nutrition conditions collectively were responsible for 23% of global deaths, and injuries caused 9% of all deaths.

  1. Cardiovascular Diseases (CVDs)

 CVDs are the number one cause of death globally: more people die annually from CVDs than from any other cause.

An estimated 17.5 million people died from CVDs in 2012, representing 31% of all global deaths.

Most cardiovascular diseases can be prevented by addressing behavioral risk factors such as tobacco use, unhealthy diet and obesity, physical inactivity and harmful use of alcohol using population-wide strategies. 

  1. Cancer

Cancers figure among the leading causes of morbidity and mortality worldwide, with approximately 14 million new cases and 8.2 million cancer related deaths in 2012.

Around one third of cancer deaths are due to the 5 leading behavioral and dietary risks: high body mass index, low fruit and vegetable intake, lack of physical activity, tobacco use, alcohol use.

Tobacco use is the most important risk factor for cancer causing around 20% of global cancer deaths and around 70% of global lung cancer deaths.

  1. Diabetes

In 2012, an estimated 1.5 million deaths were directly caused by diabetes.

Type 2 diabetes comprises 90% of people with diabetes around the world and is largely the result of excess body weight and physical inactivity.

Healthy diet, regular physical activity, maintaining a normal body weight and avoiding tobacco use can prevent or delay the onset of type 2 diabetes.

  1. Chronic Obstructive Pulmonary Disease (COPD)

More than 3 million people died of COPD in 2012, which is equal to 6% of all deaths globally that year.

The primary cause of COPD is tobacco smoke (through tobacco use or second-hand smoke).

What’s the Commonality?

As you read through all of this, do you notice any commonalities?

First, two thirds of all deaths are related to non-communicable diseases (NCDs), i.e. not an epidemic and not an accident.

Among the four leading NCDs, the startling commonality is that they are not random, and not genetic. They’re primarily brought on by lifestyle choices and the physical effects these choices have on our body:

  • Eating: what do we eat, when do we eat, and how much do we eat?
  • Drinking: how much alcohol do we consume? How much water do we consume?
  • Smoking
  • Exercise: how often, and what type
  • Stress
  • Sleep: how much do you get, and what’s the quality of your sleep?

There’s No Guarantee

Armed with these facts, let’s now go back to my dinner conversation with our friend and her comment: “All your exercise and attention to healthy eating is great, but there’s no guarantee you won’t still drop dead of a heart attack if it’s in your genes. My father and grandfather both died of a heart attack before they were 62.”

I sympathize with the loss of her father and grandfather because I lost my mother to cancer at age 57, but the fact that they both died of a heart attack before age 62 doesn’t necessarily suggest that it was genetic. What are the chances that their lifestyle choices, and the negative long term effects they had on their bodies, were similar?

More important, however, was our friend’s choice of the word “guarantee”. It’s a very, very important word and one that led to my “revelation”.

Everyone yearns for certainty in their lives. In other words, they desire and would much prefer guarantees with everything (health, finances, etc.)

Unfortunately for those who seek it, life is not a straight line. There are no guaranteed results in anything.

Given this, to achieve whatever it is that you want, use your freedom to choose.

Research and play the odds at every turn!

In health, it’s 100% true that you could get hit by a bus and die. It’s also true that genetics plays a role in your longevity.

However, as The World Health Organization statistics suggest, your lifestyle choices (a nicer word than behavior) have a far, far greater impact on your health, vitality, and ultimately, your longevity.

If you have a sincere desire to be healthy and live a long life, why would you not study how to eat better, drink much more water and less alcohol, stop smoking cigarettes, exercise rigorously on a daily basis, etc.

Those like our friend who choose to focus on the role that genetics or accidents play in our long term health, etc. prefer believing it’s out of their control because it absolves them of any responsibility or role in the outcome. After all, “there’s no guarantee”.

What they’re really saying is they prefer not to make the proper choices and just do whatever feels good in the moment without any regard to the long term ramifications.

It’s easier to say it’s out of our control, it’s random, or it’s predetermined.

However, that’s a rejection of the reality that we all have the freedom to make the choice to play the odds at every turn and reap the rewards the statistics demonstrate.

My Revelation:

The Analogy to Financial Health

 At this point, you’re probably wondering what this has to do with financial health!

In short….everything!

When you step outside of our Relaxing Retirement membership community, and you read or listen to the majority of individuals (and, by extension, the financial media) talk about those who have achieved financial success, what do you hear?

  • Right Place, Right Time, Luck: Those who have done well had the luck of good timing, choosing to work for many years for company X vs. Y, the business they created benefitted from outside events, etc. and they earned a large income,
  • Trust fund kid, i.e. they inherited it (despite Forbes annual statistics of the remotely small minority to have sustained wealth coming from inheritance),
  • Magic Investment: they somehow obtained information, probably unethically or unfairly, that lead to a great investing outcome,
  • Education: they went to X school

Do you see the commonality in all of this?

It all adds up to the belief that financial independence is all random, luck, and good fortune, and you have very little influence over the financial outcomes in your life.

As potentially mean spirited as this may sound, just as it is with the health examples I gave, it’s easy and convenient to believe that financial independence is all random, luck, and good fortune.

Believing that absolves them of the responsibility of focusing on the long term, and making the necessary choices you have made which have generated your financial independence!

It’s easier to just block all of that out and focus on what brings instant, short term pleasure today, i.e. a new car I can’t afford, a 60 inch flat screen television, eating out five nights a week and running up the balance on my credits cards, or investing in a new “can’t miss hitting a home run” venture I heard about with money borrowed from my home equity line of credit.

Stark Contrast

The reality that I have witnessed amongst our members over the last 26 years is that almost none of you inherited anything. The majority did not earn extraordinarily large incomes during your working years. And, very, very few of you went to Harvard or Yale!

The reason you’re in the top 6% club has nothing to do with any of the traditional dogma most folks conveniently buy into.

You made decisions long ago that you stuck with over your lifetime to spend much less than you made, i.e. live within your means, and save and intelligently invest the difference.

You took 100% responsibility for the outcome you’ve experienced. You didn’t look for a mystical guarantee, or a magic pill (investment). You never panicked. And, you stuck with your plan.

In short, you played the odds.

And, this is what it all boils down to. There are no guarantees and no magic pills, so you may alert anyone and everyone you know to call off the search.

There are, however, successful formulas built on highly probable odds in both health and finance that are in plain view for all of us to see.

I’ve often said that if I fail, it’s certainly not going to be because I wasn’t prepared or I wasn’t willing to accept 100% responsibility for whatever outcome I realized.

In health, and in finance, we should all welcome our wonderful freedom to exercise control and choose our actions. And, happily do whatever is necessary to play the odds at every turn.

Retirement Coach Jack Phelps Publishes New Article answering the question of why we would want to ‘invest internationally’

Jack Phelps, founder of The Relaxing Retirement Coach, shows why demographic changes should play a major part in your investment decisions

Wellesley, MA – July 3, 2015Jack Phelps, founder of The Relaxing Retirement Coach, a Retirement Coaching company, recently published an article on his website (https://www.theretirementcoach.com) clarifying international investing misconceptions, and how to evaluate a company in today’s world.

In his article titled “Part II – International Investing”, Jack Phelps writes, “Whether it’s an American based company like Apple increasing sales in China or India, or a Swiss based pharmaceutical company selling insulin in the United States and abroad, who they’re selling to and the potential that brings is the critical factor.”

The Relaxing Retirement Coach, Inc. provides their members with the ‘missing structure’ they need to make a seamless and relaxing transition to their retirement years so they can confidently do everything they want to do without worrying about money.  Their Relaxing Retirement Coaching Program™ provides members with a personalized, one-on-one retirement coaching relationship with constant attention to each and every detail necessary for them to consistently enjoy a relaxing retirement experience.

The entire article can be found at https://www.theretirementcoach.com/articles/part-ii-international-investing-3.php

To learn more about The Relaxing Retirement Coach, Inc., please visit https://www.theretirementcoach.com.

About Jack Phelps

Prior to developing The Relaxing Retirement Coaching Program back in 1994, Jack spent five years as a registered representative with Prudential Financial Services. In 1989, Jack graduated from Holy Cross College in Worcester, Massachusetts with a B.A. in Economics.

 

 

 

Part II: International Investing

In my last article, we examined the misconception that international investing equals investing in the “economy” of the country or region in which the company is headquartered.

In short, there were two important distinctions:

  1. When we all invest, we’re investing in companies, not countries or the “economy” of a country,
  2. Where a company’s headquarters is located has become much less relevant when evaluating their potential success. A more accurate method of evaluating a company’s opportunities is through a “revenue lens”, i.e.  where their revenue comes from.

However, this stopped short of answering the question of why we would want to ‘invest internationally’.

The answer to that question lies in demographics. The United States, and the model in which it was built with free enterprise and the protection of personal property rights, has spawned the greatest advancement of living conditions and individual wealth in human history.

Unfortunately, many other nations took a longer period of time to institute and protect the personal freedoms which led to this explosion of improvements.

Slowly but surely, however, this is all changing. The living conditions and wealth of billions of individuals all over the world are rising rapidly, especially in developing market nations.

By the end of the decade, it is estimated that 440 million individuals will move into the middle class in Brazil, Russia, and China alone! (For reference, the United States has approximately 330 million total citizens.)

As you might imagine, this move up the wealth ladder has led to a rapid change in consumption patterns, and an increased need and desire for upscale goods and services including luxury apparel, health care, automobiles, and travel.

Health Care

In health care, for example, Novo Nordisk has a 50% share of the global insulin market. Just think about controlling half the world’s supply of insulin! Currently, 40% of their revenue comes from sales in the United States.

Now, let’s look into the future for Novo Nordisk. With the rapid movement into the middle class in so many developing nations that I noted above, the ‘westernization’ of diets has led to increased levels of diabetes. Increased diabetes leads to increased demand for insulin.

Just imagine what their marketplace will look like in 20 years.

Consumer Products

On the heels of the announcement that Apple’s cash reserves alone would make it the 17th largest company, many have questioned CEO Tim Cook’s plan to continue their stellar growth.

Cook talked about two major markets in which he thinks Apple has potential to sell many more iPhones.

The first is China. Apple is already doing well there, but Cook believes there’s an opportunity to do even more.

The next major market for Apple to attack, Cook said, is India. “We’ve started making investments in India, we’re growing rapidly in India, but we’re on a very small base there. But in some number of years, you could envision India being really significant, too, and should be.”

Air Travel

Another example is air travel. As the lifestyles of these upwardly mobile millions of people begin to increase, so will their desire to travel for pleasure, and for business in order to actively participate in global trade.

Companies who create the infrastructure necessary will also benefit, including roads, railroads, electricity, and telecommunications. All of these are crucial to the movement of goods and services to this growing group of individuals.

Takeaway and Strategy

The marketplace for all companies today has expanded rapidly, and will continue to expand based on these demographic shifts and future trade agreements.

The key point to grasp is that the location of the headquarters of a company is less and less important in evaluating their future.

Whether it’s an American based company like Apple increasing sales in China or India, or a Swiss based pharmaceutical company selling insulin in the United States and abroad, who they’re selling to and the potential that brings is the critical factor.

When you’re building your diversified Retirement Bucket™ of investments, it would be very shortsighted to limit your holdings to companies headquartered in the United States alone.

By doing so, you’re missing out on the opportunity to own companies headquartered outside the United States who not only sell to individuals in these rapidly expanding developing market countries, but also right here in the United States.

That would be the equivalent to fighting the heavyweight champ with one arm tied behind your back!

In your never ending battle to have your Retirement Bucket™ keep pace with your rising lifestyle costs, you want to stockpile and own as many good companies as you can who are positioned to take advantage of these growth patterns all over the world.

 

Retirement Coach Jack Phelps Publishes New Article Clarifying Common Misconceptions Surrounding International Investing

Jack Phelps, founder of The Relaxing Retirement Coach, provides a very simple method to understand international investing

Wellesley, MA – June 4, 2015 – Jack Phelps, founder of The Relaxing Retirement Coach, a Retirement Coaching company, recently published an article on his website (https://www.theretirementcoach.com) exposing common misconceptions about international investing and how you can understand the critical topic more easily.

In his article titled “International Investing”, Jack Phelps writes, “There is a lot of confusion over the issue of international (or global) investing so I’d like to clarify a few misconceptions so you can be a more educated investor in your retirement years.”
The Relaxing Retirement Coach, Inc. provides their members with the ‘missing structure’ they need to make a seamless and relaxing transition to their retirement years so they can confidently do everything they want to do without worrying about money. Their Relaxing Retirement Coaching Program™ provides members with a personalized, one-on-one retirement coaching relationship with constant attention to each and every detail necessary for them to consistently enjoy a relaxing retirement experience.

The entire article can be found at https://www.theretirementcoach.com/articles/international-or-global-investing-3.php

To learn more about The Relaxing Retirement Coach, Inc., please visit https://www.theretirementcoach.com.

About Jack Phelps

Prior to developing The Relaxing Retirement Coaching Program™ back in 1994, Jack spent five years as a registered representative with Prudential Financial Services. In 1989, Jack graduated from Holy Cross College in Worcester, Massachusetts with a B.A. in Economics.

International (or Global) Investing

When you hear the phrase “investing overseas”, what is the first thought that comes into your mind?

If you’re like many Americans, you might respond by saying:

“Isn’t investing overseas risky?”, or

“Why would anyone want to invest overseas?  Isn’t Europe’s ‘economy’ struggling?”

There is a lot of confusion over the issue of international (or global) investing so I’d like to clarify a few misconceptions so you can be the most educated investor.

Let’s begin by taking a big step back for a moment and clarifying why we all invest in the first place.  We all choose to invest in order to accomplish multiple goals, but in the big picture, they all fall under two main goals:

  1. Build our Retirement Bucket™ large enough to achieve complete financial independence so we don’t have to depend on the income from work in order to support our desired lifestyles.
  2. Maintain our purchasing power into the future in a world which has witnessed staggering levels of price increases throughout history.

In order to accomplish these goals, we all must own assets (investing) which have the potential to grow fast enough to keep pace with our rising lifestyle costs.

The $64,000 question is then always, “what should we invest in”?

A better way of stating that is “what companies should we own” since owning is what investing is all about?

One way of distinguishing one company from another is where the company is headquartered, i.e. in the United States vs. anywhere else around the world.

International investing simply means owning pieces of a company (or companies) who has their headquarters located outside the United States.

That’s it.

An example of this would be owing companies like Toyota (automobile manufacturer headquartered in Japan), Novartis (pharmaceuticals company headquartered in Switzerland), or Burberry (luxury apparel headquartered in the United Kingdom).

Companies vs. Countries

One big misconception is that international investing equals investing in the economy of a certain country.

If that was true, owning shares of Toyota would mean investing in Japan.

Owning shares of Novartis would mean investing in Switzerland, or Switzerland’s economy.

Clearly, this is off base given that each company is a truly global doing business all over the world.

Toyota derives a very large percentage of their revenue from buyers located outside of Japan, predominantly in North America.  I’m one of them!

In contrast, McDonalds, which is based in the United States, has locations in more than 100 countries around the world.

When we all invest, we’re investing in companies, not countries.

Headquarter Location vs. Revenue Location

Before the liberalization of trade policies throughout the world, companies did the overwhelming majority of their business in their home region.

Today, this is no longer true.  Large multinational companies now earn the majority of their revenue outside of their original geographic boundaries.

For this reason, where a company’s headquarters is located has become much less relevant when evaluating their potential success, and thus the trajectory of their stock price.

A more accurate method of evaluating a company’s opportunities is through a “revenue lens”.

Companies now report where their revenue comes from so we can get a much more accurate picture of where their business is generated.

This critical piece of information tells you so much more about a company’s prospects than where it is headquartered.

When you hear the term “international investing”, always keep these points in mind.

Stay tuned as we now delve into why we want to invest in companies located outside the United States.  This is a very important issue.

Retirement Coach Jack Phelps Publishes New Article Revealing Warren Buffett’s Unique Thoughts on Risk and Volatility

Wellesley, MA –April 22, 2015Jack Phelps, founder of The Relaxing Retirement Coach, a Retirement Coaching company, recently published an article on his website (https://www.theretirementcoach.com) sharing Warren Buffett’s critical thoughts on volatility and risk for retirees.

In his article titled “Warren Buffett’s Annual Report”, Jack Phelps writes, “While I strongly disagree with Warren on many national policy issues, his investment philosophy and process are sensational and worthy of careful attention by all of us.”

The Relaxing Retirement Coach, Inc. provides their members with the ‘missing structure’ they need to make a seamless and relaxing transition to their retirement years so they can confidently do everything they want to do without worrying about money.  Their Relaxing Retirement Coaching Program™ provides members with a personalized, one-on-one retirement coaching relationship with constant attention to each and every detail necessary for them to consistently enjoy a relaxing retirement experience.

The entire article can be found at https://www.theretirementcoach.com/articles/warren-buffett%E2%80%99s-annual-report-3.php

To learn more about The Relaxing Retirement Coach, Inc., please visit https://www.theretirementcoach.com.

About Jack Phelps

Prior to developing The Relaxing Retirement Coaching Program back in 1994, Jack spent five years as a registered representative with Prudential Financial Services. In 1989, Jack graduated from Holy Cross College in Worcester, Massachusetts with a B.A. in Economics.

Warren Buffett’s Annual Report

If you’ve never taken the opportunity to read Warren Buffett’s annual letter to Berkshire Hathaway shareholders, I highly recommend it.

While I strongly disagree with Warren on many national policy issues, his investment philosophy and process are sensational and worthy of careful attention by all of us.

In his 42 page letter, he dissects the performance of all of the Berkshire’s companies which is fascinating.  You can’t help but marvel at the depth of thinking that goes into each of their holdings.

Warren is also refreshingly forthcoming about his mistakes.  While his overall long term investment track record is spectacular, he has made his share of mistakes and he spells several of them out for his shareholders with brutal honesty.

Rather than summarize the entire letter, which is well worth reading, I want to provide you with an excerpt from page 18 on risk and volatility that says it all.

I strongly recommend having a yellow highlighter in hand while you read this:

“Our investment results have been helped by a terrific tailwind.  During the 1964-2014 period, the S&P 500 rose from 84 to 2,059, with reinvested dividends, generated an overall return of 11,196%.  Concurrently, the purchasing power of the dollar declined a staggering 87%.  That decrease means that it now takes $1 to buy what would be bought for 13 cents in 1965 (as measured by The Consumer Price Index).

There is an important message for investors in that disparate performance between stocks and dollars.  Think back to our 2011 annual report, in which we defined investing as “the transfer to others of purchasing power now with the reasoned expectation of receiving more purchasing power – after taxes have been paid on nominal gains – in the future.”

The unconventional, but inescapable conclusion to be drawn from the past 50 years is that is has been far safer to invest in a diversified collection of American businesses than to invest in securities – Treasuries for example – whose value has been tied to American currency.  That was also true in the preceding half-century, a period including the Great Depression and two world wars.  Investors should heed this history.  To one degree or another, it is almost certain to be repeated during the next century.

Stock prices will always be far more volatile than cash equivalent holdings.  Over the long term, however, currency-denominated instruments are riskier investments – far riskier investments – than widely diversified stock portfolios that are bought over time and that are owned in a manner invoking only token fees and commissions.  That lesson has not customarily been taught in business schools, where volatility is almost universally used as a proxy for risk.  Though this pedagogic assumption makes for easy teaching, it is dead wrong.  Volatility is far from synonymous with risk.  Popular formulas that equate the two terms lead students, investors, and CEOs astray.

It is true, of course, that owning equities for a day or a week or a year is far riskier (in both nominal and purchasing power terms) than leaving funds in cash equivalents.  That is relevant to certain investors – …..any party that may have meaningful near-term needs for funds should keep appropriate sums in Treasuries or insured bank deposits.

For the great majority of investors, however, who can – and should – invest with a multi-decade horizon, quotational declines are unimportant.  Their focus should remain fixed on attaining significant gains in purchasing power over their lifetimes.  For them, a diversified equity portfolio, bought over time, will prove far less risky than dollar-based securities.

If the investor, instead, fears price volatility, erroneously viewing it as a measure of risk, he may, ironically end up doing some very risky things.  Recall, if you will, the pundits who six  years ago bemoaned falling stock prices and advised investing in “safe” Treasury bills or bank certificates of deposit.   People who heeded this sermon are now earning a pittance on sums they had previously expected would finance a pleasant retirement.  (The S&P 500 was then below 700; now it is about 2,100.)  If not for their fear of meaningless price volatility, these investors could have assured themselves of a good income for life by simply buying a low cost index fund whose dividends would trend upward over the years and whose principal would grow as well (with many ups and downs, to be sure).

Investors, of course, can, by their own behavior, make stock ownership highly risky.  And many do.  Active trading, attempts to “time” market movements, inadequate diversification, the payment of high and unnecessary fees to managers and advisors, and the use of borrowed money can destroy the decent returns that a life-long owner of equities would otherwise enjoy.  Indeed, borrowed money has no place in the investors’ tool kit; Anything can happen anytime in markets.  And, no advisor, economist, or TV commentator – and definitely not Charlie nor I – can tell you when chaos will occur.  Market forecasters will fill your ear but will never fill your wallet.”

As shampoo bottle instructions have always said: “Shampoo, Rinse, Repeat.”

My recommendation for this excerpt: “Read, Pause for Reflection, Read again!”

This is bulletin board material for all of us to read almost on a daily basis!

Retirement Coach Jack Phelps Publishes New Article Revealing The Common Tax Tragedy That Occurs When Inheriting an IRA

Jack Phelps, founder of The Relaxing Retirement Coach, shares a real life case study where kids lose 45% of their father’s IRA to taxes.

Wellesley, MA– August 29, 2013  – Jack Phelps, founder of The Relaxing Retirement Coach, a Retirement Coaching company, recently published an article on his website (https://www.theretirementcoach.com) illustrating the consequences of your children being uninformed when they inherit your IRA.

In his article titled “Will Your Kids Lose 45% of Your IRA”, Jack Phelps writes, “Depending on their own personal tax brackets, it’s likely that they gave up 40-50% of their share in federal and state income taxes in one fell swoop!”

The Relaxing Retirement Coach, Inc. provides their members with the ‘missing structure’ they need to make a seamless and relaxing transition to their retirement years so they can confidently do everything they want to do without worrying about money.  Their Relaxing Retirement Coaching Program™ provides members with a personalized, one-on-one retirement coaching relationship with constant attention to each and every detail necessary for them to consistently enjoy a relaxing retirement experience.

The entire article can be found here.

To learn more about The Relaxing Retirement Coach, Inc., please visit https://www.theretirementcoach.com.

About Jack Phelps

Prior to developing The Relaxing Retirement Coaching Program back in 1994, Jack spent five years as a registered representative with Prudential Financial Services. In 1989, Jack graduated from Holy Cross College in Worcester, Massachusetts with a B.A. in Economics.

Retirement Coach Jack Phelps Publishes New Article With Tips To Determine Whether Retirees Still Need Life Insurance

Jack Phelps, founder of The Relaxing Retirement Coach, notes that many retirees continue to pay life insurance premiums unnecessarily and walks readers through the process of determining whether they still need life insurance.

Wellesley, MA – June 28, 2011 – Jack Phelps, founder of The Relaxing Retirement Coach, a Retirement Coaching company, recently published an article on his website (https://www.theretirementcoach.com) objectively evaluating life insurance for retirees. The article, titled “Can You Afford to Get Rid of Your Life Insurance?” helps readers evaluate their financial situation and determine whether or not life insurance is truly necessary.

Jack Phelps writes, “What I’ve found to be so interesting over the years is trying to demonstrate to someone who has had life insurance for years that they no longer need to keep it.”

The Relaxing Retirement Coach, Inc. provides their members with the ‘missing structure’ they need to make a seamless and relaxing transition to their retirement years so they can confidently do everything they want to do without worrying about money.  Their Relaxing Retirement Coaching Program™ provides members with a personalized, one-on-one retirement coaching relationship with constant attention to each and every detail necessary for them to consistently enjoy a relaxing retirement experience.

The entire article can be found at https://www.theretirementcoach.com/articles/can-you-afford-to-get-rid-of-your-life-insurance-3.php

To learn more about The Relaxing Retirement Coach, Inc., please visit https://www.theretirementcoach.com

About Jack Phelps

Prior to developing The Relaxing Retirement Coaching Program back in 1994, Jack spent five years as a registered representative with Prudential Financial Services. In 1989, Jack graduated from Holy Cross College in Worcester, Massachusetts with a B.A. in Economics.

Can You Afford to Get Rid of Your Life Insurance?

One of the responsibilities that we tackle for all of our members in The Relaxing Retirement Coaching Program™ is managing risk.

You can’t avoid all risks completely, so I view it as evaluating and then “managing” them.

When you were younger and raising a family, the financial risk your family faced if you were no longer here was much more real for you.

If your paycheck wasn’t there for your family, what would they do?

However, now that your family is grown and out of the house, do you still need to pay those premiums and keep that life insurance?

That’s a very important question that, for most people, is more emotional than rational.

What I’ve found to be so interesting over the years is trying to demonstrate to someone who has had life insurance for years that they no longer need to keep it.

It’s hard to let it go after paying for it for so long.

How Can You Determine If You Still Need It

This is really just a math question. And, it requires the same 3 questions we asked last month about a completely different risk:

  1. “What’s my financial loss if I don’t have this insurance?”
  2. “What’s the probability that I’ll suffer this loss?”
  3. “Am I willing to risk absorbing this entire loss myself, or should I pass on some or all of the risk to an insurance company by paying a premium?”

In this case, what is life insurance?

It’s money. Money that is delivered to your heirs upon your death.

So, the question is, does your spouse and family still need that additional amount of money when you die (over and above everything you’ve saved and accumulated) to support and continue their lifestyle?

Let’s assume for a minute that you’ve gone through the all-important process of identifying precisely what it costs you and your spouse to live exactly the way you want.

You’ve prioritized what you want to have happen while you’re living and when you pass away.

You’ve tallied up all of your income sources like social security, pensions, and rental real estate. And, you have a crystal clear handle on where all of your money is.

You’ve run your Retirement Resource Forecasters™ into the future and the results are that you have more than enough money to support you and your spouse for as long as you live.

In other words, you no longer need to work to support yourself. You have enough money saved up and you can afford to “retire”, aka, you no longer need a paycheck from work!

Answering Question #1

Going back to Question #1 above then, what is the financial loss if you don’t have this insurance?

Take a moment to really think about this.

If you have enough money saved up to support both of you while you’re both living, shouldn’t there also be enough money to support only one of you if something happens to you?

If the answer is yes then you don’t need to pay for life insurance anymore!

Your spouse and family don’t need more “money” when you pass away (i.e. life insurance) because you already have enough.

There are two exceptions to this where you may still want to carry life insurance:

  1. If you have a monthly pension which ends when you pass away because you’ve chosen the Single Life pension option.
  2. If you’re purchasing the life insurance inside of an irrevocable life insurance trust to help provide liquidity and pay your eventual estate taxes or income taxes due if you have large IRA holdings.

The key point in all of this is ‘knowing your numbers’.

If you’ve done your homework and you know exactly where you stand financially as we discussed above, then it becomes a rational decision based on fact, not emotion.

Take the time to know your numbers, and objectively evaluate them so you don’t pay for something you don’t need anymore.

It’s highly unlikely that an insurance agent is going to tell you this because they continue to receive commissions as long as you keep the insurance, so you have to do a little homework to keep yourself honest.

The bottom line is that if the risk of “financial” loss is no longer there, you don’t need to pay life insurance premiums any more. You are far better off spending those premium dollars to cover a more pressing financial risk like long term care or personal liability from a lawsuit.

Or, if you’ve already taken care of that, take another vacation every year, or go out to dinner one more time every month to a restaurant you wouldn’t have gone to otherwise!