How to “Stomach”
Market Volatility

During one of those days in February when market prices fell 3 to 4%, or over “1,000 points” as our friends in the financial media choose to refer to in order to embellish the story and capture your attention, one of our Relaxing Retirement members asked me a great question, “how can you be so confident even when markets are crashing?”  (those were her exact words)

Even though they have been members since well before the 2008-2009 crash, she admitted that the emotional reactions of her friends to the 24/7 news coverage every time market prices fall was getting to her.

I actually don’t blame her.  Unless you hide out in a closet, you can’t escape hearing about it these days with television, radio, and internet news in front of your eyes at all times, especially if you have an iPhone and/or an iPad!

Contrast that with October 19, 1987 when prices fell over 22% in one day!  Now that’s a crash!

On that day, the chairman of the Federal Reserve, Alan Greenspan, whom you would think would be completely aware of significant market movements moment by moment, was completely unaware of the crash for over four of the six and a half hours the market was open because he was on an airplane and there was no coverage in airplanes at that time.

Imagine that!  How times have changed.  Today, any kid with an iPhone can instantly discover the trading price of any stock in the world.

 System vs. Whim

The short answer I provided our members got a good laugh out of them: Vanguard founder John Bogle had a great response when asked how he handles market crashes, “I get scared just like everybody else when market prices fall quickly.  But, then I go and read everything I’ve written over the years to set myself straight!”

That’s actually not too far off!

The longer and more detailed answer I provided our members took a little bit, but they recommended that I share it with all of you.

The most important part is that we rely on a process and a system.  We don’t rely on a whim, or a hunch, or by deluding ourselves into thinking that we or anyone else can consistently predict short term movements in market prices.  I fully embrace the fact that I can’t and nobody else can either.

My answer also had nothing to do with making any short-term market predictions.  Not only is this an impossible task, but as I’ve discovered over the years, and will soon share with you, it’s completely unnecessary for the rational long-term investor with a plan.

Put bluntly, any time spent attempting to determine what markets will do in reaction to some stimulus/news story is a complete waste of your energy.

The Progression

Here is my recommendation for dealing with heavy doses of market volatility.  It begins with completely de-emotionalizing yourself, so let’s begin with some facts we’ve discussed over the last few months which I recommend keeping at the forefront of your mind at all times:

  • We are all trying to solve a long-term problem, not short-term, i.e. to have our Retirement Bucket™ support our desired lifestyle and remain intact for the remainder of our lives.  How long will that be?  Well, the average joint life expectancy of a 65-year old couple is 27.1 years, to age 92.  For a 75 year-old couple, it’s 18.4 years and age 93.4.  Given this, despite what the financial news media wants you to buy into for their purposes, we’re all long-term investors with the overwhelming majority of our Retirement Bucket!
  • We live in a rising cost world. In order for us to sustain our desired standard of living, our incomes must  And, in order for our incomes to rise to battle inflation and maintain our purchasing power, the value of our Retirement Bucket™ holdings must also rise.
  • Over the last 72 years since World War II, the value of the S&P 500 Index, our proxy for “the market”, has grown in price from 13.49 to 2,683.73 or just shy of 199 times in value! (You may want to take a moment to read that again) Markets have done a wonderful job of preserving our purchasing power throughout history.
  • This increase in value does not include dividends which we will get to in a moment.
  • Along the way, there have been 56 market pullbacks of at least 5%, with 9 bear market corrections between 20% and 40%, and 3 mega-bears over 40%, two of which were in the last 20 years.
  • The average length of time for the 9 bear market corrections to revert back to pre-bear prices was only 14 months. Bottom line: market volatility, corrections, and crashes are a given and a part of the long term investing experience.  They are not fun, but until we discover a way to rationally deal with them, we will never capture the wonderful returns markets have provided for us.

Reversion to the Mean

At the risk of getting over technical, there is a concept known as reversion to the mean which is very important for you to understand.  Vanguard’s John Bogle once said, “reversion to the mean is the iron rule of financial markets.”

Essentially, if you plotted the various short-term returns of a globally diversified equity portfolio, you would discover several things:

  1. Prices move wildly and randomly on a daily basis.
  2. There is a bell-shaped distribution of returns with a very large percentage of daily returns falling within a very small, concentrated range.
  3. And, a small percentage of returns falling outside of that heavy concentration of returns.

What this demonstrates is that, despite short-term movements outside of the “normal” distribution of returns, market prices eventually gravitate back toward the very long historical mean.

Time

What this means for you is investing is a long-term process and you must use time to your advantage.  In the short-term, prices move wildly and randomly and they don’t appear to make much sense.

In the long run, however, they make perfect sense and prices tend to revert to the mean.  We simply have to have a workable strategy in place to deal with short-term market volatility and hang in there long enough to capture rational long-term returns.

1.Global Diversification

Given all of this, the first tool in your Retirement Bucket Strategy™ toolbox to “stomach”      market volatility and remain confident is to play the higher probability percentages of owning a strategically allocated, globally diversified portfolio using low cost index and asset class funds which are built to capture the returns of various asset classes is a cost-efficient manner.

As opposed to attempting to “beat the market” by relying on superior selection of individual stocks, or actively managed mutual funds which have a horrible long-term track record of outperforming their respective index, take advantage of the opportunity to cost-effectively own a piece of close to 10,000 businesses (stocks) throughout the world.

By strategically diversifying your holdings in this manner, you position yourself to not only capture the returns of global capital markets as a whole, but also the potential of even better returns by taking advantage of the long-term risk premiums which have been provided by certain asset classes throughout history.

2. Liquidity

Your second tool to “stomach” market volatility is sufficient liquidity.  As opposed to someone who is still supporting themselves with the income from work, you are withdrawing funds from your Retirement Bucket™ of investments each month to support your lifestyle.  Because of this, short-term stock market price volatility can have a downside impact on you if you are forced to sell in a down market to provide the cash you need.  However, the downside impact is only on a very small portion of your Retirement Bucket™.

The mistake most retired investors make is assuming that all of their investment holdings are impacted by short-term market volatility.  If you are like most, you withdraw less than 5% of your Retirement Bucket each year.  And, most withdraw on a monthly basis, so that’s less than 1/2 of 1% of the value of your Retirement Bucket each month.  Given this, there is no need to shield your entire Retirement Bucket from short-term market price volatility. (Very important!)

Assuming for a moment that you have done your homework and you are crystal clear on your level of Retirement Bucket Dependence™, and you withdraw 5% of your Bucket per year, if you have 25% of your holdings held in money markets and short-term bonds, you have five years of your anticipated withdrawals immune to the short-term price volatility of stocks.  5 years!  (see historical lengths of market corrections earlier)

By having a carefully targeted portion of your holdings outside of short-term price volatility we experience with equities, you buy yourself time….time to hang in there with your equity holdings long enough (without panic selling during temporary market corrections) to capture long-term returns!

3. Dividends

During the phase in your life when you are “living” on your Retirement Bucket™, the third tool to help you deal with temporary market corrections is understanding the role that dividends play for you.

First, a few facts to keep in mind at all times:

  • While everyone always focuses on the current “price”, from 1950-2017, 6% of the total return of the S&P 500 Index came from dividends. 69.4% came from price appreciation which is the only measurement typically reported.
  • In 1960. the dividend on the S&P 500 Index was $1.98 on a price of $58.03. In 2017, the dividend was $48.93 on a price of $2,684, i.e. income grew from $1.98 to $48.93 over those 58 years!
  • While CPI inflation has averaged around 3% per year during those 58 years, dividends grew by 5.76% per year, or almost twice the rate of inflation.
  • Dividends have rarely gone down throughout history, and those reductions have been minor especially when measured against market correction prices.

Think of the role dividends play at this stage in your life when you are withdrawing funds to support your lifestyle.  During severe, yet normal and temporary market corrections, dividends provide significant liquidity, thus even more time to hang in there with your equity holdings long enough to capture long-term returns!

Not all stocks provide the same level of dividends, but the dividend yield of the S&P 500 Index last year was about 1.8%.  Assuming for a moment that this held true for the equity holdings in your Retirement Bucket, if you withdraw 4 to 5% of your Bucket each year to support your desired lifestyle, this means that almost half of your withdrawal come from dividends.

A great question you should know the answer to is what percentage of your annual Retirement Bucket withdrawals are supported by your dividends?  And, thus, how many more years of your anticipated withdrawals are substantially “immune” to short-term stock market corrections which dominate the news?

After I shared all of this with her, our Relaxing Retirement member asked, “so why does everyone make it sound like the end of the world when the market goes down?” 

Great question!  Two big, yet unfortunate, reasons:

  1. 24-hour news organizations do a fantastic job of scaring everyone to serve their own purposes. They perpetuate the myth that market price volatility is a bad thing when, in fact, it’s the source of long-term returns.
  2. They have no system for managing their money based on historical context, so they are forced to react emotionally vs. rationally to every piece of news.

 

Keep all of these points nearby so you can remain as confident as you deserve to be even when market prices are bouncing all over the place.

 

BEWARE:
“Retire Reassured”

Did you see this headline last week?

On Tuesday, February 27th, in big bold RED letters above The Wall Street Journal newspaper name across the top of the newspaper, was the headline, “RETIRE REASSURED, The fear of outliving your money is real, but has a solution been right in front of us all along? See Page A5.”

In tiny letters in the top left-hand corner was the word “ADVERTISEMENT.”

The full-page ad on page A5 begins with the headline, “The Return of LIFETIME INCOME: A time-tested strategy offers hope amid today’s looming retirement crisis.”

This sounds pretty appealing, doesn’t it? After all, it’s “time tested.”

As you may have realized by now, this is an advertisement by Jackson National Life Insurance Company which means we know what this “time-tested” solution is: annuities!

I have to give Jackson credit. The timing of this advertisement is very strategic, i.e. right after a rapid 10% correction in equity markets when the average American, devoid of long-term perspective and planning, has been conditioned to view short-term volatility as a long-term danger to their financial survival.

I can only imagine how incredibly expensive this was for them to run this ad in red color above the name of the newspaper on page one, and then a full-page advertisement on page A5! The cost was certainly into the hundreds of thousands of dollars, if not more!

The Problem and Solution Presented

The problem they present in the beginning, i.e. living longer and potentially running out of money, is right on and certainly accurate, and I applaud them for raising it.

The challenge, of course, is in their “solution”: “Similar to how Medigap fills the void in your health care costs by covering what Medicare won’t, adding an annuity to your plan can provide lifetime income, helping to fill the gap when Social Security, 401(k)s, and other investments fall short……As part of a comprehensive retirement plan, annuities can be a powerful way to bridge the money gap in retirement.”

A few paragraphs down, however, they tighten their grip on your emotions as they zero in on a huge fear they know Americans have. I have taken the liberty of bolding the sentence that is critical. However, the word “only” has been italicized by them for emphasis.

“There are numerous annuity options you can choose that can be customized to meet your needs. For example, some annuities start paying a lifetime income stream immediately, while others allow that income stream to be deferred to a time in the future. And with the purchase of a lifetime income benefit, an annuity is the only investment that can provide a steady stream of lifetime income unaffected by market downturns. In fact, that income even has the potential to keep growing.”

As all insurance companies do when they market annuities, they are preying on the average American’s fear of market corrections and volatility which is a very effective marketing strategy on their part.

You simply don’t want to fall prey to it!

As we have illustrated in great detail over the last few weeks, market volatility and corrections are nothing to fear for the rational, long-term investor if you employ a strategic plan. Not only are they not something to fear, but intelligent investors welcome them!

Annuities?

If you have been a steady reader of my Retirement Coach Blog, you know my feeling about annuities. While they do provide a tool in your planning toolbox, for the most part, the overwhelming majority of annuities marketed today are very complicated, expensive, restrictive, and they are grossly oversold. (One of the reasons they are oversold is they pay very large commissions to agents and advisors who sell them.)

Jackson recognizes these realities, so the ad attempts to deal with them.

“Sound too good to be true? It’s important to remember that unlike any other investment product, annuities were created by insurance companies, which have the unique ability to offer features and add-on options that help protect us against outliving our savings or having to drastically change our lifestyle in retirement.”

And, then:

“Annuities have been available for a long time, and it’s true that they can be complicated to understand and even challenging for advisors to sell in today’s regulatory environment. But that should never be a reason for investors or advisors to forgo consideration of something so critical as guaranteed lifetime income.” (I have again take the liberty of bolding this last sentence)

Doesn’t the phrase “guaranteed lifetime income” sound so attractive? Who wouldn’t want that???

What is omitted in this advertisement is the cost to you for providing this “guaranteed lifetime income.”

Guaranteed lifetime income comes when you annuitize your money.

When you “annuitize”, you are choosing to receive a guaranteed monthly payment for a period of time, typically for life similar to a pension or social security.

Two caveats (costs) come with this benefit, however:

  1. Who Owns Your Money: Once you annuitize, your money is turned over to and owned by the insurance company:
  • Single Life: When you select the single life option, you choose to receive payments for the rest your life. But, only your life. When you pass away, even if that is in three months, the insurance company keeps the money.
  • Joint and Survivor or Period Certain: If you have a spouse who you want to protect, or if the prospect of passing away too soon and having the insurance company keep your funds is a problem for you, you may select a joint and survivor or period certain plan. By doing so, you guarantee payments to your beneficiary either for your spouse’s life or for a certain period of time after your death. However, in order to compensate the insurance company for this added risk, you receive a smaller monthly payment while you’re living. And, when your spouse passes away, the insurance company keeps your money. 
  1. Inflation: Always remember that the biggest challenge we are all confronted with is having our income be able to keep pace in a rising cost world. In 1985, the cost of a first-class stamp was 15 cents. Today, it is 50 cents, more than a three-fold increase in only 33 years.

 With most annuities, your monthly payment is guaranteed. However, there is no cost of living increase each year to keep pace with inflation. So, if your monthly payout is $2,000 per month, 10 and 20 years down the road, the amount you will continue to receive is $2,000 per month while your costs to continue your same lifestyle have all increased.

Annuities which offer the ability to “potentially keep growing” cost more, so your monthly benefit is less to start.

The bottom line is to always have your eyes wide open when reading advertisements like this, and to beware of “magic pill” offers.

As much as we would all love a “magic pill” as this Jackson advertisement attempts to imply, there is no such thing.

 

 

Market Corrections and Time

Most Americans walk proudly and carefree when market prices are climbing.

Risk becomes irrelevant. Strategic asset allocation looks boring, and disciplined diversification gets called into question because some asset classes outpace others. Many begin to lament not having all of their money in the winning asset class over the last year.

The fact that markets correct all the time and have experienced many ugly stretches during their historic long-term climb is a distant memory.

And, then………the market hiccups!

We experience a normal, garden variety correction, like the 14% intra-year price drop we’ve experienced each year on average over the last 38 years.

The financial media jumps at the golden opportunity to increase viewership ratings by stirring the pot and perpetuating the myth that “this time is different.”

Microphones are placed in front of innocent retirees who claim, “I’m worried. At my age, I don’t have time to make it back.”

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 experience sharp corrections during their retirement years, the investment time horizon for too many Americans quickly shrinks.

While increases in market prices are typically met with apathy as I mentioned above, or reservation, i.e. “it can’t or won’t last”, sharp declines 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 backmantra is treated as an indisputable fact, one which governs investment decisions for the majority of Americans during their retirement years.

However, this dominant sentiment is not supported by facts.

Long Term Purchasing Power

We invest to solve a long-term problem, not a short term one. And, that problem is purchasing power.

Take a look at what you spend money on. If history is any guide, outside of a few items, prices will be significantly higher in the future if for no other reason than the stated goal of the Federal Reserve is an inflation target 2% per year.

Given this, in order for us to maintain our desired lifestyle, our income must increase substantially over our lifetime. This is not a want. This is a need.

Our income must increase. And, in order for our income to increase, our Retirement Bucket™ must increase in value over time in order 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, stock market corrections would have 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:

  • 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 (age 92.6)
  • For an 80-year old couple, their joint life expectancy is 5 years (age 94.5)
  • For an 85-year old couple, their joint life expectancy is still 1 years (age 96.1)

Take a moment to let these numbers sink in.

Assuming for a moment that you are just “average” (it’s highly likely that you are above average if you take care of yourself), 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 and the amount of time it took to “make it back.”   

** For simplicity, we will use the S&P 500 Index as a proxy for the market as it provides a long history to track and encompasses a large portion of the market value.  

Since 1945 (72 years after World War II ended), there have been 89 market pullbacks of significance:

  • 56 of them were between -5% and -9.99% with the average drop of 7%. It took average of one month to fall 7% and two months to recover back to the original price before the drop.

  • 21 of the pullbacks were between -10% and -19.99%, with an average of price drop of 14%. It took an average of 5 months to reach the bottom, and 4 months to recover back to the original price before the drop.

  • Of the remaining 12 pullbacks, 9 of them were between -20% and -39.99%, with an average of price drop of 26%. It took an average of 11 months to reach the bottom, and 14 months to recover back to the original price before the drop.

          • Adding those three together illustrates that 86 of the 89 pullbacks over the last 73 years have fully recovered in 14 months or less, with 77 of them (79%) recovering in 4 months or less.
  • Finally, 3 of the pullbacks were over -40% (including the two recent ones between 2000-2002 and 2007-2009), with an average price drop of 51%. It took an average of 23 months to reach the bottom, and 58 months to recover back to the original price before the drop.

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 precisely what it costs to support your desired 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 to start with) of your anticipated withdrawals in money markets and short-term fixed income instruments which do not experience volatility levels like equities. You then strategically diversified the remaining balance of your Retirement Bucket™ across a spectrum of equity asset classes and allowed all dividends you receive to accumulate in your money market. (**a very important distinction**)

If you are that 70-year old man, your investment time horizon is 14.13 years. If you are a woman, it’s 16.33 years.   However, if you are 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 we experienced what has happened only 3 times in the last 72 years and it took 58 months (just shy of five years) for market prices to return, you still would not have had to sell any of your equity holdings at a loss to free up funds to support your needed withdrawals because, in addition to allowing your dividends to build up in your money market, you already had those funds set aside outside of your equity holdings.

The reality is that your investment time horizon is a lot longer than you may think, and if you adhere to 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.

 

 

We Begin 2018 With That Word Again

While shooting baskets at the gym with my son Michael down in Chatham last weekend, I observed him do something I’ve seen him do dozens of times over the years. Something we’re all guilty of and can learn from as I will expand on in a moment.

As I rebounded and fed him the ball after warming up for a bit, he went on a roll and hit over a dozen jump shots in a row from behind the 3-point arc.

His energy level was way up and he began every shot with his legs. His eyes never left the front of the rim. He was completely focused and repeated the exact same motion and follow-through over and over from different positions on the court, all ending with the same good result. You could say that Michael was “in the zone.”

However, that didn’t last very long. In typical 15-year-old-boy fashion, almost as if bored with the good results he was having, he then began dribbling erratically and taking all kinds of crazy, off-balanced shots like you see NBA players taking on ESPN’s Sport Center highlights.

The disciplined form and follow-through he demonstrated before was gone. He dribbled the ball off his foot a few times. His eyes were everywhere but on the front of the rim. And, he clanked a bunch of shots in a row off the rim, hitting 20% of his attempts at best!

Interestingly, after sharing this observation with him (as any “good father” would do… wink-wink), and listening to him disagree with my assessment, he then attempted to get his rhythm back to where it was before.

After struggling for quite a while, it did eventually come back, but not without the pain of having to break the bad habits he developed in that short period of time.

(In full disclosure, my father was a terrific coach and a real “technician” on the correct way to shoot a basketball, so I learned everything from him. He was a classic “old school” John Wooden type who disliked any showboating, and believed in mastering the fundamentals. Into his 60s, he could still drain 10 out of 10 from the top of the key with no problem!)

Microcosm

The experience I just described to you is extremely common among young athletes, and it’s a microcosm of what goes on constantly in team sports. It’s the biggest reason why it’s so rare to see repeat champions.

There are countless examples of high level athletes and great teams who battle through challenging times with incredible levels of focus, discipline, and grittiness prior to experiencing a winning result.

However, after experiencing the high of the win, or the great play, they often spend a lot of time celebrating, and the focus and discipline that got them there goes out the window. They allow themselves to become distracted and complacent, and they lose their focus and their edge. They stop paying attention to the fundamentals and their performance falls right back into mediocrity.

The most blatant example I can think of is the 1985 Chicago Bears who dismantled and embarrassed the New England Patriots in the Super Bowl. You may recall “The Super Bowl Shuffle” video the players created, and the dozen players who cashed in by writing books and going on the speaking circuit after the season.

That incredible collection of players never won again after that. All of that talent was wasted.

This is why the truly great coaches (i.e. Bill Belichick – Patriots, Nick Saban – Alabama football, and Gregg Popovich – San Antonio Spurs) deserve so much credit.

Each of these coaches and their teams have experienced incredible levels of sustained success. In the middle of all of that long term success, however, was a bunch of short term failure. Yet, no matter what the result was, good or bad, they don’t allow themselves, or their teams, to get distracted for long.

Just think of Coach Belichick’s famous line after reporters repeatedly wanted to talk about the Patriots embarrassing loss on Monday Night Football a few years back: “We’re on to Cincinnati.”

In a world of filled with massive levels of distractions, especially for young athletes with large incomes, the ability of these coaches to keep their players focused on what’s important is legendary.

They have a carefully designed system in place for every important detail and situation. This is what allows them to unemotionally react to positive or negative results with a focused and winning mindset.

The Analogy and The Lesson

So, why am I sharing all of this with you?

Well, as the political banter continued at a feverish pace all year long, 2017 provided all of us with a lot of very good financial news. In addition to all major economies around the world growing in sync for the first time I can recall, market prices of virtually every asset class rose by double digits, dividends continued their upward trajectory, and our Retirement Buckets™ all grew substantially.

All of this took place with very little downward market price volatility. While the average intra-year peak to trough drop in market prices is 14.1% annually since 1980, we barely experienced a 3% pullback at any time last year.

This, of course, is great news and you should feel proud that you maintained the discipline and focus required to capture these market returns.

After all, mutual and exchange traded equity funds, which invest in stocks, remarkably remained in “net” withdrawal in 2017. That means that more Americans withdrew money from equity funds than bought them during a period of time when market prices soared. Translation: many investors lost their focus and discipline and missed the boat.

While we should all allow ourselves a moment to feel good about capturing these results, there is potential danger in allowing the celebration to go on for too long.

As is the case with athletes who experience a successful outcome like I described above, there is the temptation to become complacent, lose our discipline, and forget the fundamentals.

Just like we don’t overreact when inevitable market corrections occur and prices temporarily fall like the historically severe 49% decline from 2000-2002 or the 56% decline from 2007-2009, we want to have the same reaction to our results in 2017 when market prices grew substantially, i.e. not get too high with the highs nor too low with the lows.

Do everything you can to keep yourself grounded during all market conditions, and maintain your discipline so you can continue to make educated, rational, long term decisions.

In short, instill the discipline of adhering to the fundamentals.

The Fundamentals

An example of adhering to the fundamentals is maintaining your risk exposure to a pre-determined level through rebalancing.

2017 was quite a year for technology and emerging market stocks. Each of their respective indexes grew in excess of 30%.

While this is certainly good news to experience these sizable returns, a common emotional response is the assumption that these two asset classes have momentum, and will continue to rise in price this year thus validating many Americans’ desire to buy more.

What they forget during this emotional, and likely greedy, reaction are two very important points. First, any level of performance, and especially outer performance in any one direction as these two experienced in 2017, is no indication or signal of continued future performance, i.e. the famous tagline: past performance is no guarantee of future results.

The second point is that there is a flip side to overexposure to any individual stock, sector, or asset class: increased risk.

At this critical stage in your life, your investments should be strategically designed to capture the long-term investment returns of a diversified and calculated mix of asset classes with appropriate levels of exposure to risk and volatility.

However, as we all witnessed again in 2017, even if you have already taken this important step in the past, the market price of these various asset classes moves up and down a lot throwing your carefully designed mix out of balance over time.

Extensive Academic research of markets over years and years has demonstrated that out of balance investment portfolios, with asset classes that have grown beyond their target allocations, take on inappropriate risk exposures.

In order to ensure a consistent level of risk exposure for you, this is a great time to stick to the fundamentals by evaluating your current vs. your target allocation to determine if there is a need for rebalancing among all of your holdings.

 

 

Retirement Coach Jack Phelps Publishes New Blog Exposing Year End Tax Moves to Support Your Cash Flow Needs

Jack Phelps, founder of The Relaxing Retirement Coach, strategizes tax efficient moves you can make before year end to free up funds from your Retirement Bucket

 Wellesley, MA –December 15, 2016Jack Phelps, founder of The Relaxing Retirement Coach, a Retirement Coaching company, recently published a blog on his website (https://www.theretirementcoach.com) illustrating tax efficient moves to make before year end to free up necessary funds from your Retirement Bucket™.

Jack Phelps writes, “Paying more taxes than you’re legally obligated to pay is not an act of patriotism. It’s laziness! Take control in places where you still can and keep what you’re entitled to keep!”

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 blog can be found at https://www.theretirementcoach.com/blog/how-to-support-your-cash-flow-needs-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.

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Retirement Coach Jack Phelps Publishes New Article Sharing a Checklist of Year End Strategies to Consider

Jack Phelps, founder of The Relaxing Retirement Coach, introduces reminders of strategies that all retirees should address before the end of 2016

Wellesley, MA – December 8, 2016Jack Phelps, founder of The Relaxing Retirement Coach, a Retirement Coaching company, recently published an article on his website (https://www.theretirementcoach.com) sharing a checklist of reminders to address before the clock strikes midnight on December 31st.

In his article titled “2016 Year End Checklist”, Jack Phelps writes, “It’s hard to believe but December is here, so let’s take this annual opportunity to review a quick checklist of year-end strategies and reminders.”

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/2016-year-end-checklist-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.

2016 Year End Checklist

It’s hard to believe but December is here, so let’s take this annual opportunity to review a quick checklist of year-end strategies and reminders.

If we’ve all been properly strategizing and implementing throughout the year, as the overwhelming majority of Relaxing Retirement members have, this year-end checklist will simply serve to confirm what we’ve already done.

However, I know how busy life can get, and I know that managing each minute detail in your financial life isn’t always at the top of your list you draw up each and every morning with your cup of coffee.

Given that, if you haven’t already, here are some strategies and reminders to be thinking about and acting on before December 31st:

 

  • Medicare: Open enrollment for Medicare, including Part D and Medicare Advantage, ends this coming Wednesday, December 7th. Don’t miss this opportunity to shop plans to best suit your health needs and your wallet. Check out the non-government Medicare.com website for great information and their Annual Election Period Checklist.
  • Age 70 ½ (and older) Annual Required Minimum Distribution (RMD): If you’re age 70 ½ or older, you must take a mandatory distribution from your IRA. The amount you must withdraw in calendar year 2016 is based on the combined value of all your qualified retirement plans as of December 31, 2015 (IRAs, SEPs, 401(k)s of ex-employers, etc.). Roth IRA values are not included, and the value of a 401(k) plan you are still contributing to is not included unless you are more than a 5% owner in the employer sponsoring the plan.
  • Negative Income: Take a close look at last year’s (2015) federal income tax return. Make sure that your “taxable” income on page 2 of your 1040 is a positive This may sound like any oxymoron, but it’s not.

As you’ve heard me mention numerous times in the past, I see this way too often with folks in their retirement years, i.e. itemized deductions and personal exemptions which are higher than your taxable income.

This can happen for anyone who doesn’t have a significant pension. A new Relaxing Retirement member this year had over $2.35 million in their Retirement Bucket™, yet they still fell into this “negative income” category in 2015.

If this is also true for you, what it indicates is that you have an opportunity to realize and show more taxable income and still pay no federal income taxes.

How? Withdraw more taxable funds from your IRA that otherwise would have been taxable, or “realize” capital gains on some of your non-IRA investments.

  • Roth IRA Conversion: Explore converting some of your IRA to a Roth IRA, especially if you have “negative” income (see previous bullet). It gives you an opportunity to convert some (or all) of your IRA to a Roth with no (or very little) federal income tax consequences. And, allow your money to continue to grow tax free for the rest of your life!

The key is to be aware of your marginal income tax brackets so you are not paying too much to convert. For example, if your IRA is worth $900,000, converting the entire IRA would subject the majority of the $900,000 to the highest federal income tax bracket. However, converting $40,000 may allow you to do so with no income taxes given your itemized deductions and personal exemptions.

  • Retirement Plans at Work: If you’re still earning money from work, even if that is part time, make sure you maximize contributions to your 401(k), 403(b), or 457 MA Deferred Compensation Plans if employed, or your Sep, Simple, Defined Benefit Plan, or IRA if you’re self-employed. Every dollar you contribute comes off the taxable income column on your tax return.
  • Capital Gains and Losses: In addition to your realized capital gains so far this year, both from sales and from capital gain distributions in your actively managed mutual funds held outside of IRAs, take a close look at your unrealized capital gain or loss positioning in your Non-IRA accounts right now.

Then, go back to Schedule D on your 2015 return and verify if you have any realized capital losses that you may have carried forward to 2016.

Armed with this all of this information, you can make informed decisions on buying and selling in order to free up cash for your upcoming spending needs.

  • Your Spending: So you can continue to spend with confidence, take a look at what you spent in 2016 vs. what you predicted you would spend in your Lifestyle Cost Estimator™. Is it more? Is it less?

Remember, your goal is NOT to restrict your spending or to “budget”. It’s simply to “account” for what you’ve spent and be confident with your numbers.

If I had to sum up one commonality amongst my most successful Relaxing Retirement Members, it’s that they all know their numbers and they can tell you exactly where they are.

The reason they’re so financially confident, and in turn successful, is they are in complete control of their finances vs. the masses who are completely out of control and in constant reaction each day.

They’re not locked up in a room studying investments and tax laws all day. Quite the opposite!

They’re actually the ones who travel the most and have the most fun without being concerned about money. And, the reason they’re not concerned is they have a clear handle on what it costs for them to live exactly the way they want.

 

If you have any questions as to where you personally stand in relation to any of these, please don’t hesitate to call us.

Fred’s Thinking

The father of a mentor of mine had a great saying, “You can learn from everyone, even if it’s an example of what NOT to do!”

I had such an interesting conversation a few weeks back that I just have to pass it on to you. It’s that important.

A really good guy, who worked with one of our Relaxing Retirement members (I’m going to refer to him as “Fred” to protect his privacy), visited our office for the first time for his Retirement Strategy Assessment™. Fred is planning on retiring in the next six months, and he wants to make a smooth transition.

During the course of our lengthy discussion, I learned that Fred’s retirement income will come from social security (for him and his wife), and a small amount of (net) rental income from a two-family home that he owns with his brother.

To make up the difference and fill the gap, the remainder will predominantly come from his 401(k) plan at work that he’s been contributing to for years, including maxing out contributions over the last eight.

As we walked through Fred’s numbers to determine how much he would need to draw from his Retirement Bucket™ of investments each year to supplement social security and their rental income, I asked Charlie an important question: “do you know the rate of return you need to earn to generate that supplemental income, and keep pace with inflation so your money doesn’t run out?” (By the way, if you don’t have the answer to this question, STOP whatever you’re doing and find out)

His response was, “I want 10%!”

Having Fred’s numbers that he provided sketched out on The Retirement Bucket™ worksheet right in front of us, I asked him how he arrived at that number.

Fred said, “I’ve been tracking my plan at work and that’s what it’s been doing.”

Key Lesson #1

There are two great lessons here. First, I asked Fred the rate of return he needed to earn, not the rate he wanted to earn.

Over the last 28 years, when asked the same question, I’ve only had 3 individuals tell me the rate of return they needed to earn, and two of them were wrong in their estimate because of incorrect assumptions. Everyone else did what Fred did; they told me the rate of return they wanted to earn.

The challenge with this is that without knowing the rate of return you need to earn at this critical stage in life, you are throwing darts at a board and constantly chasing the next “hot” thing. This is a recipe for disaster and massive amounts of frustration.

If you don’t know the investment rate of return you need to earn, how can you evaluate if the investments you currently own, or if the investment you’re considering, have the potential to do the job? You have no measuring stick!

Key Lesson #2

When I asked Fred where he came up with a 10% rate of return as his goal, he said that he’s been tracking the fund that he owns in his 401(k) plan at work and that’s what it’s “doing”.

“It’s a great fund,” Fred said.

I then asked him how long he had been tracking the fund.

His response, “all year long!”

Now, before going any further (there’s more), let’s talk about Fred’s ‘thinking’.

First, Fred has fallen prey to a colossal mistake that the majority of investors fall prey to; he believes in his heart that because his fund in his 401(k) plan at work has “done” 10%, that it is “doing” 10%.

The problem with that thinking is the “doing” assumption.

In the world of investments, there is no such thing as “doing”. The only thing we know about any investment is how well it has “done”.

How well it will do in the future, which is what we are now concerned with because it has to support Fred’s lifestyle for the next 30 years, is all based on someone’s OPINION. There’s no guarantee.

In Fred’s defense, whenever an investment has just gone up, most people tend to believe that it will continue to go up. It just “feels” that way.

This is why the greatest inflows into equity mutual funds in this country occur right after market prices reach an all-time high as the DOW just did after the presidential election.

The opposite is also true. When prices drop swiftly, most panic and buy into “the sky is permanently falling” mindset, hence the reason why the largest level of outflows from equity mutual funds occur when prices have just fallen rapidly. A great recent example of this was after The Brexit Vote.

Key Lesson #3

Fred stated his investment return goals in “nominal” terms. When you determine your investment goals and later evaluate your progress, you have to do so using real return percentages. Here’s the difference:

If you determined that you earned an 8% nominal rate of return in a given year, you might feel great about that. However, if you did so in an environment like we had back in 1980 when inflation was in double digits, you would conclude that your “real” return, as measured against inflation, was negative.

On the other hand, if you earned 4% in a given year, you might be disappointed with that nominal return. However, if inflation in the same year was between zero and one percent (as it is clocking in at right now in the United States as indicated by the paltry Cost of Living Adjustment to your Social Security income), then 4% is likely a very good return.

The key is to set goals and measure progress in real terms, i.e. relative to purchasing power after the impact of inflation.

The Kicker

The kicker in all of this was Fred’s response upon revealing all of this to him. Fred’s question was, “well, what rate of return can you get me? I met with Fidelity last week, and they said 8%. That’s lousy!”

 What Fred was looking for here was a magic pill.

What’s sad is that when someone gives Fred a truly convincing ‘sales pitch’ promising him a big rate of return, he will likely to fall for it!

And, this is a highly educated man; a white collar professional for over 37 years.

Fred didn’t lack intelligence. Like the overwhelming majority of Americans, he had never been taught the correct questions to ask.

What Can We Learn From This?

For starters, although I’m sure you’re shaking your head at Fred right now, I don’t want to downplay the seriousness of the situation. Fred is not 40 years old. He’s 65. He doesn’t have another 25 years left to work and earn income to make up for a “loss” suffered because of bad thinking.

His Retirement Bucket™ now has to support him for the rest of his life.   If it runs dry, it’s no laughing matter. He’s going to be in BIG trouble. And, all the trouble he went to in order to diligently save over all these years will have all been for naught!

What I’m hoping that you will learn from me telling Fred’s story is that when you’ve reached the point in your life where the money you’ve accumulated now has to support you, you have to think differently. The downside risk is too great if you don’t.

Before you can even begin to think about allocating investments at this stage in your life, you have to determine the rate of return you need to earn to generate the lifestyle sustaining income you need so you don’t run out of money.

This is very different from the rate you ‘want’ to earn.

Once you know that rate, you can then go about designing an investment allocation that has the best opportunity to generate that return.

Chasing after investments or asset classes that have just done well, and assuming that they will continue that upward pace forever, is what amateurs do. That’s why so many people are so unsuccessful at investing, especially during their retirement years.

Don’t fall into that trap. It’s too dangerous in its simplicity.

 

Retirement Coach Jack Phelps Publishes New Blog Highlighting The False Premise of Predictions and Forecasts After The Election

Jack Phelps, founder of The Relaxing Retirement Coach, reviews an article published in the Wall Street Journal as a wonderful example of what to steer clear from

 Wellesley, MA –November 16, 2016Jack Phelps, founder of The Relaxing Retirement Coach, a Retirement Coaching company, recently published a blog on his website (https://www.theretirementcoach.com) highlighting the folly of predictions and forecasts in light of the election results.

Jack Phelps writes, “The question you have to ask yourself is why do we pay so much attention to financial data and “expert” predictions”?

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 blog can be found at https://www.theretirementcoach.com/rra-strategy/postelection-blues-and-forecasting-2.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.

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Retirement Coach Jack Phelps Publishes New Article Sharing The Dilemma Realized Too Late When Withdrawing Money From An Annuity

Jack Phelps, founder of The Relaxing Retirement Coach, shares his thoughts on why he believes annuities are grossly oversold

Wellesley, MA – October 17, 2016Jack Phelps, founder of The Relaxing Retirement Coach, a Retirement Coaching company, recently published an article on his website (https://www.theretirementcoach.com) explaining the nuts and bolts of annuities so you aren’t sold something you don’t want or need.

In his article titled “Do You Know What You’re Buying?, Jack Phelps writes, “What they discovered was they couldn’t withdraw any more money from their annuities without paying a 12% surrender charge to the insurance company! On the $325,000 they need to withdraw, that’s a charge of $39,000 that can’t be recovered later, and it’s not tax deductible.”

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-you-know-what-you-are-buying-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 You Know What You Are Buying?

I recently had a conversation with the brother of an existing member who is unfortunately, and completely unnecessarily, experiencing some serious pain.

He and his wife retired three years ago and now want to split time between a new condo in a suburb West of Boston, and a small condo in Florida during the winter.

The reason he called was they were confused and completely frustrated with the answers they were receiving from their advisor, and he wanted a second opinion.

His dilemma, as he explained, was that they both rolled over their 401(k) plans into annuities inside of an IRA because they were told they could earn market returns “without risking their principal”.

Uh-oh! Does this sound familiar?

Their dilemma was they wanted to temporarily withdraw a chunk of money from their plan to help finance the purchases and moves. IRAs allow you to withdraw money and re-deposit funds within a 60 day window without any taxes or penalties.

That was the good news. Now for the bad news….

What they discovered was that they couldn’t withdraw any more money from their annuities without paying a 12% surrender charge to the insurance company!

Uggggghhhh.

On the $325,000 they want to withdraw, that’s a charge of $39,000 that can’t be recovered later, and it’s not tax deductible.

Can you imagine being in this predicament? Frustrating and sad at the same time!

After my extended conversation with him, and after thinking about all of the questions I receive about annuities, I thought I’d take the opportunity to discuss the pros and cons so that you can independently understand and personally evaluate annuities for your own unique situation.

Preliminary Comments

Before we dig in, just a few preliminary comments…

The first is that an annuity is like any other investment vehicle; they’re a tool to put in your toolbox of potential options.

They’re not a one-size-fits-all solution. This is one of my biggest pet peeves. Agents and “advisers” are out there in droves pushing annuities as THE solution to every financial problem.

Like any investment, there has to be a very good reason why you would invest in an annuity. Hopefully, that comes after you’ve carefully and strategically designed a Retirement Blueprint™, and after understanding all the facts and ramifications first.

The second point is that, while annuities can be a potential option for some to solve a specific problem, I believe they’re grossly oversold.

In my estimation, 99% of the annuities sold are inappropriate.

Given this, my goal is to help you better understand them so that you can make an educated decision for yourself.

What’s an Annuity Anyway?

Let’s begin today by first laying out what an annuity is.

An annuity is simply a savings instrument sponsored by an insurance company.

There are many different classifications and variations, so let’s tackle those first:

Immediate vs. Deferred Annuity

A deferred annuity has two phases to it:

  • Accumulation: funds you deposit grow inside the annuity on a tax deferred basis until you withdraw funds.
  • Withdrawal or Distribution: you choose how you’d like to withdraw funds from your annuity, either by “annuitizing” the value and receiving a guaranteed monthly payment, or by simply taking withdrawals as you see fit. (more on this in a moment)

An immediate annuity has no accumulation phase. You simply place money into the plan and begin receiving monthly income for life. If you currently receive a monthly pension from your employer, what you’re receiving payments from is typically a form of an immediate annuity that your employer has placed funds in to guarantee your monthly payment.

Accumulation Phase

During the accumulation phase of a deferred annuity, there are two broad options:

Fixed Annuity: When you invest in a fixed vs. a variable annuity, what they’re referring to is the “investment” element. In the case of a fixed annuity, your deposit is credited with interest paid by the insurance company. How much interest you receive is based on the performance of the insurance company who sponsors the annuity, so in that respect, it acts like a CD at the bank. Typically, they come with a minimum guaranteed interest rate for the life of the annuity contract.

Variable Annuity: In a variable annuity, in addition to having a “fixed rate” option to choose from, you are also provided a list of subaccounts which act like mutual funds from various mutual fund companies. There are no guarantees. The performance of your plan will be based on the performance of the underlying subaccounts.

Withdrawal or Distribution Phase

During the withdrawal or distribution phase, there are also two broad options:

Random Withdrawal: When you want to begin receiving money from the plan, the first option, within a deferred annuity only, is to simply take random withdrawals subject to the deferred sales charge limitations set forth by your company. For example, within most companies, you may not withdraw the entire balance of your annuity within the first six to twelve years without paying a surrender charge. However, prior to the end of that period, many companies allow you to take a partial withdrawal without any charge.

Annuitizing (Guaranteed Monthly Payment): When you “annuitize”, you are choosing to receive a guaranteed monthly payment for a period of time, typically for life. In this case, it acts like a pension or the social security income you receive.

  • Single Life: When you select the single life option, you choose to receive payments for your life only. When you pass away, even if that’s in three months, the insurance company keeps the money. However, if you live to be 156 years old, the insurance company must continue to pay you the guaranteed monthly check.
  • Joint and Survivor or Period Certain: If you have a spouse who you want to protect, or if the prospect of passing away too soon and having the insurance company keep your funds is a problem for you, you may select a joint and survivor or period certain plan. By doing so, you guarantee payments to your beneficiary either for life or for a certain period of time after your death. However, in order to compensate the insurance company for this added risk, you receive a smaller monthly payment while you’re living.

Now that we have the basics down, we’ll continue with a discussion of the pros and cons of using annuities so that you can evaluate them for your own use.

Stay tuned.

 

Retirement Coach Jack Phelps Publishes New Blog Answering The Clinton vs. Trump Question

Jack Phelps, founder of The Relaxing Retirement Coach, shares his thoughts on the effects of a Clinton or Trump presidency on your economic future.

Wellesley, MA –October 10, 2016Jack Phelps, founder of The Relaxing Retirement Coach, a Retirement Coaching company, recently published a blog on his website (https://www.theretirementcoach.com) illustrating how you should react to a Clinton vs. Trump victory.

Jack Phelps writes, “Over the last two months, a day doesn’t pass without one of our members asking me what I think will happen to “the economy” or “the market” if Donald Trump wins, or if Hillary Clinton wins the election!”

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 blog can be found at https://www.theretirementcoach.com/blog/clinton-vs-trump-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.

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Retirement Coach Jack Phelps Publishes New Blog Warning Retirees to Beware Political Season Pitfalls

Jack Phelps, founder of The Relaxing Retirement Coach, outlines a critical mistake he has seen retirees make during heated political seasons like we’re experiencing right now

Wellesley, MA –April 21, 2016Jack Phelps, founder of The Relaxing Retirement Coach, a Retirement Coaching company, recently published a blog on his website (https://www.theretirementcoach.com) revealing a key strategy to employ during the next 7 months.

Jack Phelps writes, “In keeping with past presidential elections, I’ve received well over a dozen inquiries about my thoughts on the election, and how I see markets reacting if Donald Trump gets elected vs. Hillary Clinton vs. Ted Cruz vs. Bernie Saunders. ”

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 blog can be found at https://www.theretirementcoach.com/blog/beware-political-season-pitfalls-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.

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Retirement Coach Jack Phelps Publishes New Blog Highlighting the detrimental role of emotions in investing

Jack Phelps, founder of The Relaxing Retirement Coach, discusses the crucial distinction between objective vs. subjective evaluation

 Wellesley, MA –March 22, 2016Jack Phelps, founder of The Relaxing Retirement Coach, a Retirement Coaching company, recently published a blog on his website (https://www.theretirementcoach.com) detailing the 4th crucial step in his Relaxing Retirement Formula™.

Jack Phelps writes, “We can’t leave it up to how we feel on a given day.”

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 blog can be found at https://www.theretirementcoach.com/blog/we-cant-leave-it-up-to-how-we-feel.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.

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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.

 

Retirement Coach Jack Phelps Publishes New Blog Illustrating Where Retirees Focus Must Be Right Now

Jack Phelps, founder of The Relaxing Retirement Coach, discusses the dangerous concept of “Bright Shiny Object Syndrome”

Wellesley, MA –January 22, 2016Jack Phelps, founder of The Relaxing Retirement Coach, a Retirement Coaching company, recently published a blog on his website (https://www.theretirementcoach.com) discussing the dangers of misguided focus at this time of year.

Jack Phelps writes, “The focus of many individuals I meet with for the first time is in several different directions.   They engage in what is known as “bright shiny object syndrome”.

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 blog can be found at https://www.theretirementcoach.com/blog/bright-shiny-object-syndrome-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.

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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 Blog Sharing a Fabulous Idea For You to Discuss Around Your Thanksgiving Day Table

Jack Phelps, founder of The Relaxing Retirement Coach, shares the concept of “The Magic Bank Account”

Wellesley, MA –November 24, 2015Jack Phelps, founder of The Relaxing Retirement Coach, a Retirement Coaching company, recently published a blog on his website (https://www.theretirementcoach.com) sharing a timeless fable found In the pocket of coach Paul ‘Bear’ Bryant.

Jack Phelps writes, “Each of us is already the winner of this PRIZE. We just can’t seem to see 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 blog can be found at https://www.theretirementcoach.com/blog/the-magic-bank-account-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.

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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 Blog Highlighting the Devastating Mistake Recently Made by Millions of Americans

Jack Phelps, founder of The Relaxing Retirement Coach, reports on the recent market correction, and the costly reaction by the masses

Wellesley, MA –October 7, 2015Jack Phelps, founder of The Relaxing Retirement Coach, a Retirement Coaching company, recently published a blog on his website (https://www.theretirementcoach.com) illustrating the most common pitfall that millions of retirees recently paid dearly for.

Jack Phelps writes, “If you ever wanted a clear cut example of why the overwhelming majority of Americans never achieve financial independence, and never join the ranks of the top 6% of Americans who confidently continue their lifestyle without having to work anymore, there it is in black and white.”

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 blog can be found at https://www.theretirementcoach.com/blog/29-5-billion-in-one-week-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.

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Retirement Coach Jack Phelps Publishes New Article Helping You Select The Correct Pension Option for You

Jack Phelps, founder of The Relaxing Retirement Coach, shares the process you must go through that he shared with several retired members who received a new offer from Lucent Technologies

Wellesley, MA – September 7, 2015 – Jack Phelps, founder of The Relaxing Retirement Coach, a Retirement Coaching company, recently published an article on his website (https://www.theretirementcoach.com) evaluating the pros and cons of receiving your pension as a monthly deposit vs. a lump sum.

In his article titled “How to Select the Correct Pension Option for You”, Jack Phelps writes, “Over a decade ago, when a dozen or so of our Relaxing Retirement members retired from Lucent Technologies, their only option was to receive their pension as a monthly payout. Given this, they didn’t have many big decisions to make. Recently, however, each of these members has received an offer from Lucent to end their existing monthly pension and receive a large, lump sum pension payout.”
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/how-to-select-the-correct-pension-option-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.

How to Select the Correct Pension Option For You

Over a decade ago, when a dozen or so of our Relaxing Retirement members retired from Lucent Technologies, their only option was to receive their pension as a monthly payout. Given this, they didn’t have many big decisions to make.

Recently, however, each of these members has received an offer from Lucent to end their existing monthly pension and receive a large, lump sum pension payout.

Given that they’ve each been receiving their monthly pension check for over a decade, they wanted me to evaluate Lucent’s offer and recommend the best option for them.

After walking several of them through the pros and cons of their options, I decided that it would be a good idea to share them with all of our members.

The Traditional Pension

As a quick refresher before I reveal the pros and cons of each, for years, the traditional method of receiving a pension was in the form of a guaranteed monthly check.  It was quite a simple decision to make.

However, a few years back, corporations realized that the long term liability of guaranteeing all of their employees a monthly check for as long as they lived (and possibly as long as their spouse lives) was well outside their level of expertise and comfort level.

To combat this, many companies now provide all of their employees with the option to receive their pension in the form of a lump sum versus receiving a guaranteed monthly pension for life. 

If you could receive your pension in the form of a ‘guaranteed’ monthly check, why would you want to take your pension in the form of a lump sum? 

There are several factors that I’d like to share with you so that you can be a little more educated before making this “irrevocable” decision.

Before I continue, let me stress the importance of the word irrevocable.  This means that once you make the decision and submit your paperwork, it’s over!  You can’t go back and change your mind, so take the time you need to understand all of your options before making any decisions.

  1. Your Survivors: 

Pensions were not designed to continue forever.  They were designed to be paid to you, and potentially your spouse if you elect one of the monthly joint and survivor payout options.

Let’s say you’ve worked for your employer for 31 years and now you’re retiring.  When you pass away, even if it’s within the first year, only your spouse can continue to receive pension payments if you elected a joint and survivor option.

However, when your spouse dies, that’s it.  Pensions were not designed to be paid out to families.

So, think about that.  You could work for your employer for 31+ years and forgo years of a higher salary in the hopes that they will pay you a pension instead.  If you and your spouse pass away sooner than you planned, your children and grandchildren will not see one cent of your pension.

The only way to give your family a chance to receive the pension that you’ve worked so hard to build up is to take it in the form of a lump sum and roll it over to your IRA.

If you do this, whatever amount of money you and your spouse don’t withdraw gets passed on to your children, grandchildren, or whoever else you wish to receive it.

  1. Inflation:

One of the biggest fears everyone has today is outliving your income because of rising prices due to inflation. 

It’s a problem that is very real.

Like our members who have been receiving a pension from Lucent all these years, if you receive your pension as a monthly check, chances are great that your pension does NOT have a cost of living element to it, especially if you work for a private sector company.  (Massachusetts state employee pensions only provide a cost of living adjustment on the first $16,000 per year, so pensions only increase by $30 per month.)

Translation: fixed monthly pensions do not protect you from rising costs over your lifetime.

In other words, if your monthly pension is $5,000 per month today, in 10 years, you will still receive $5,000 per month.  In 20 years, the same $5,000 per month, so there is no inflation protection.

However, as we all know, prices do go up every year.  Even at a very low 3% per year pace (I recommend budgeting in a much higher inflation rate), you will need $8,064 per month to buy the same amount of goods that your $5,000 per month pension buys today.  In 20 years, you’ll need over $10,800 per month!

Where will the difference come from?

As an alternative, if you choose the lump sum option on your pension and roll the balances over to an IRA tax free and invest it, at least you can own investments that have a chance to keep pace with inflation.

There’s no guarantee, but at least you have the potential to keep pace with inflation if the lump sum is invested prudently.

  1.  Interest Rates:

One of the questions I received from most of the Lucent retirees was how did Lucent calculate my lump sum?

Essentially, it boils down to two issues:

  1. Your age and life expectancy: the older you are, the shorter your life expectancy.  All other factors being equal, the older you are, the smaller the lump sum needed to provide to you in order to match your monthly payout option because the span of time to provide you with your monthly pension is predicted to be shorter.
  1. Current interest rates: the amount of your lump sum is calculated using an assumed interest rate that you can earn if you received a lump sum and had to create your monthly pension out of your own savings. 

Using round numbers, if your monthly pension payout was $5,000, and interest rates were 8%, you would require a much smaller lump sum payout than if interest rates were only 2%.  Creating $5,000 per month while only earning 2% is a lot harder than doing so earning 8%, hence the larger lump sum required when interest rates are low.

This is the situation that our members who retired from Lucent are in today.  Interest rates are historically low, so their lump sum offers are much higher than they would be if interest rates were 8%. 

  1.  Changing Situations: 

One of the events that leads an individual to call me for the first time is their desire to stop working and ‘retire’.  Or, they receive an “offer” from their employer. 

Something happened in their professional or personal lives that made them say, “OK, that’s it.  I’m ready to retire. Now let’s find out if I can afford to do it, and then how I should do it.” 

Interestingly, in many situations that I’ve personally witnessed over the last 26 years, after stopping work for about six months, and crossing off all the projects that have been on their “to-do list” for far too long, some of them hit the wall and realize that they were happier when they were working (at least part time). 

So, many decide to go back to work in some capacity.

However, when they retired, if they chose the monthly pension option instead of receiving their pension in a lump sum, they’ve got a little problem. 

In addition to receiving income from their new work, they are now receiving their monthly pension. And, this is throwing much of that income into a higher tax bracket. 

Why don’t they just go back to their former employer and ask them to delay their pension payments until they stop working again?

The problem is the decision is irrevocable, which is another way of saying that you can’t stop the train once it starts.  The monthly pension checks will continue and they have to deal with the adverse income tax consequences.

However, let’s assume for a moment that they had chosen the lump sum option, rolled the balance of the pension tax free over to an IRA, and began taking monthly withdrawals from their IRA for income. 

If they went back to work, they could simply stop taking IRA withdrawals until they stopped working in the future.  Once they stop, they can start withdrawing money from their IRA again each month.

Using this method, they only pay taxes on the amount of money they’re spending. 

  1. Liquidity for Cash Requirements:

In life, many situations come up that we didn’t plan on:

  • the oil burner unexpectedly goes,
  • water damage that is not covered 100% by insurance,
  • a grown child who is experiencing challenging times and requires financial assistance, etc.

When these unexpected events occur, or even if they are expected but necessary like purchasing your next car, this means you need a chunk of money.

If you select the monthly pension, and you don’t have a solid amount in liquid savings and investments in addition to your monthly pension, you may have a problem.  And, that problem is liquidity.

The problem is you can’t call your ex-employer and request an advance on your next three pension checks!  They may get a chuckle out of your request, but they can’t advance you any pension checks.

Had you instead chosen the lump sum option and rolled it over to an IRA, you choose how much you want to withdraw and “when”, so you have much more flexibility.

Think of it as your Retirement Bucket.  Any time you need money, you simply turn the tap on.  If you need more, you turn it up.  If you need less, you turn it down.  And, if you don’t need any, your just turn it off!

You control everything.

The only time when you must withdraw funds from your IRA is when you reach age 70 ½ to satisfy the IRS’ Required Minimum Distribution. 

  1. Health of Your Employer:

The last consideration I want to call your attention to is the future health of your employer.  This may not apply to all situations, but think about this.  You’re counting on your employer being healthy and honest enough to continue paying you and your spouse your monthly pension for decades to come.

How many corporations sustain themselves for that long?  Especially after what we’ve all witnessed.

The answer is not many.  Yes, there is something known as The Pension Benefit Guaranty Corporation which supposedly guarantees your pension.  However, as they have admitted, they’re grossly under-funded. 

The only way to make sure that you’re going to get everything you’re entitled to is to take it in the form of a lump sum.  This way, your financial future is not tied to one corporation for the rest of your life.  This is simply the principle of diversification.  You don’t want your financial future tied to one of ANYTHING. 

As you’ve seen, there’s a lot that goes into deciding the best way to go.  In the overwhelming majority of situations I’ve witnessed, because of the flexibility, your best bet is to receive your pension in a lump sum so that you can control your outcome.

However, take the time to walk through each example I’ve given you to see what is best in your own situation.  If you have a lot of other liquid investments, and you don’t have a family to leave your pension to, you may prefer to receive your pension on a monthly basis.

Remember, once you make a decision and submit your paperwork, you can’t go back and change your mind. 

That’s why it’s so important to take the time to understand all of your options before making any decisions. 

Years from now, you’ll be glad you did.

Retirement Coach Jack Phelps Publishes New Blog Discussing the Recent Market Correction and How You Must Respond

Jack Phelps, founder of The Relaxing Retirement Coach, puts this correction in perspective by observing the effect of historical corrections

Wellesley, MA –September 2, 2015Jack Phelps, founder of The Relaxing Retirement Coach, a Retirement Coaching company, recently published a blog on his website (https://www.theretirementcoach.com) helping retirees properly deal with this latest stock market correction.

Jack Phelps writes, “While watching the financial media have a field day with second by second reporting of falling prices, it can be challenging to maintain your confidence. Because of this, I believe it’s a great idea take a look at history to put everything in proper perspective so we can all continue to make rational, goal driven decisions.”

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 blog can be found at https://www.theretirementcoach.com/blog/blindsided-by-the-market-correction-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.

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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 Blog Sharing a Great Resource For Those Challenged by The “Blank Slate” Schedule That Comes With Retirement

Jack Phelps, founder of The Relaxing Retirement Coach, discusses the common dilemma of all the “free” time suddenly realized when leaving the workplace

Wellesley, MA –August 6, 2015 – Jack Phelps, founder of The Relaxing Retirement Coach, a Retirement Coaching company, recently published a blog on his website (https://www.theretirementcoach.com) sharing an excellent way to discover what you really want to be doing in your retirement years.

Jack Phelps writes, “Over the years, I’ve had the opportunity to watch dozens and dozens of Relaxing Retirement members make the transition from the set schedule of work life to the open, blank slate day once their work ends and they retire. When free time is suddenly in abundance after keeping to a very strict schedule, some make the transition with no problem at all. However, many retirees struggle.”

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 blog can be found at https://www.theretirementcoach.com/blog/what-to-do-without-work-in-your-life-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.
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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 Blog Exposing a Serious Financial Risk That You Must Deal With Right Now

Jack Phelps, founder of The Relaxing Retirement Coach, helps you evaluate every option available to you to deal with this risk

 Wellesley, MA –June 28, 2015Jack Phelps, founder of The Relaxing Retirement Coach, a Retirement Coaching company, recently published a blog on his website (https://www.theretirementcoach.com) outlining the overwhelming financial risks you face as you age, and how you can most effectively deal with them.

Jack Phelps writes, “In the first five months of 2015, we’ve already had (3) Relaxing Retirement members who have required long term care services, i.e. assisted living or nursing home, and another who will enter an alzheimer’s specialty facility later this year. I can’t begin to tell you how incredibly sad it is to watch individuals, whom I’ve known and had an intimate relationship with for years, reach this point in their lives.”

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 blog can be found at https://www.theretirementcoach.com/blog/your-long-term-care-dilemma-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.

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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 Blog Removing the Taboo of a Having a Mortgage in Retirement

Wellesley, MA –June 1, 2015Jack Phelps, founder of The Relaxing Retirement Coach, a Retirement Coaching company, recently published a blog on his website (https://www.theretirementcoach.com) sharing his thoughts about carrying a mortgage into your retirement years.

Jack Phelps writes, “Being 100% debt free is NOT a prerequisite for a relaxing retirement.  All other things being equal, it is terrific if you have no debt, and an extremely satisfying feeling to owe nothing to anyone!  However, having a mortgage should not prevent you from retiring if your numbers still work.”

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 blog can be found at https://www.theretirementcoach.com/blog/reasons-to-have-a-mortgage-in-retirement-5.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.

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Retirement Coach Jack Phelps Publishes New Blog Answering the Question of Paying Off an Existing Mortgage or Not

Wellesley, MA –April 25, 2015Jack Phelps, founder of The Relaxing Retirement Coach, a Retirement Coaching company, recently published a blog on his website (https://www.theretirementcoach.com) sharing his thoughts on how to handle your existing mortgage before you retire.

Jack Phelps writes, “One of the questions I receive all the time, predominantly from new Relaxing Retirement members, is “should we pay off our existing mortgage”?

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 blog can be found at https://www.theretirementcoach.com/blog/should-you-pay-off-your-existing-mortgage-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.

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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.

Retirement Coach Jack Phelps Publishes New Blog Illustrating The Most Overlooked Element in Retirement Planning

Wellesley, MA –March 27, 2015Jack Phelps, founder of The Relaxing Retirement Coach, a Retirement Coaching company, recently published a blog on his website (https://www.theretirementcoach.com) illustrating the destructive effects of inflation and how you can overcome them.

Jack Phelps writes, “Stop and think about what investing is for a moment, and why you do 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 blog can be found at https://www.theretirementcoach.com/blog/have-you-overlooked-this-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.

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Retirement Coach Jack Phelps Publishes New Article Exposing The Reality of Inevitable Bear Markets

Wellesley, MA –March 24, 2015Jack Phelps, founder of The Relaxing Retirement Coach, a Retirement Coaching company, recently published an article on his website (https://www.theretirementcoach.com) illustrating how retirees must prepare for and deal with the inevitable bear market.

In his article titled “Did You Hear The Bell”, Jack Phelps writes, “Six years removed, it may be difficult to recall the exact feelings you had had during the crisis.  But, I’m sure you can recall that it wasn’t peaches and cream!”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/did-you-hear-the-bell-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.

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Did You Hear The Bell?

Did you hear the bell ring this past Tuesday?

If you didn’t, don’t feel cheated!

A bell didn’t exactly ring, but there are those who believe that significant market movements should be preceded by the ringing of a bell.  (More on that in a minute)

Tuesday was the six year anniversary of the “bottom” of the bear market when prices reached their lowest point.

On March 9, 2009, the value of the S&P 500 Index bottomed out at 677.

Now fast forward to the end of February, 2015 (last Friday): the value of the same S&P 500 Index stood at 2,105!

That represents a price increase of over 210% over that six year span.  And, this doesn’t include the dividends you would have received for maintaining ownership during those years which represented approximately 2% more in return per year.

Over that same time frame, the price of the small cap Russell 2000 Index grew from 343 to 1,233 (almost 260%)!

Remarkable, but why is all of this significant?

It’s enormously significant because of the lesson and reminder that it provides us all.

Six years removed, it may be difficult to recall the exact feelings you had had during the crisis.  But, I’m sure you can recall that it wasn’t peaches and cream!

The media had a field day and relentlessly pounded the message that “this time is different”, and that it would take “decades” to climb out of this mess.

How wrong they were, and how wrong they always are about bear markets.

What We Know About Bear Markets

1)    While they don’t feel very good while we’re in the middle of one, bear markets are a “normal” part of our investing experience.
Yes, normal!

In the last 70 years, there have been 14 of them, and the average peak to trough price drop was 31%.

That’s an average of once every 5 years.

And, every one of them was treated as if it was the end of the world while it was occurring.

The last drop of 19.4% came in 2011 when the euro imploded, the U.S. government was threatening shutdown, and the S&P downgraded sovereign debt for the first time in history.

If history is any indicator, what this tells us is that another one of these “bears” is coming.

However, please don’t take this as a predication that one is upon us or even approaching.

Neither I nor anyone else has any idea when the next one will come.

A bell will NOT ring indicating a bear market is about to kick in.  There never has been a bell and there never will be. We simply want to be emotionally prepared.

2)    The good news about bear markets, which we’ve all just lived through, is that they have all been temporary declines wedged into the permanent historical advancement of stock market prices.

The average “peak to peak again” timeframe of bear markets has been 40 months (3.3 years).  This represents the time it took for market prices to rise back up to its previous high after a significant drop.

3)    During the next bear market, there will be pressure and temptation to forget this lesson and “sell” when signs of a bear market are in place.

However, by the time it officially becomes a bear market, an average of two thirds of the total decline will have already occurred.

In other words, by the time you decide to “get out”, you will likely have already suffered the worst.

4)    Here’s a recent example to illustrate all of this.  In addition to cash you set aside in money markets and short term instruments to fund your spending needs over the coming years, let’s assume that you had an even $1 million invested in an S&P 500 Index fund back at the last market peak on October 9, 2007.

(The example is easiest to follow using round numbers and one investment in an index fund.  You would never have everything invested in one fund.)

Because you intelligently set aside funds to take care of your spending needs, you didn’t need to sell or even feel compelled to sell your S&P 500 Index fund shares over the following 17 months when the value fell to almost $440,000 on March 9, 2009 when the market reached bottom.

This represented a 57% peak to trough drop, the largest broad market drop since 1929!

You were tempted because the news was bleak, but you stayed with your plan and maintained your ownership of all your shares.

Six years later, on February 28, 2015, your shares are now worth just shy of $1,350,000!

Keep in mind that this was what took place after the worst broad market price decline since 1929!

What can we learn from this about bear markets?

  • Bear markets are psychologically challenging, but only to the degree that you believe they’re permanent (which they never have been).
  • Trying to “time” bear markets, i.e. when they will begin and when they will end so you can “be out” at the precisely the right time, insures that you will end up worse than if you had just stayed the course.
  • At any point in a bear market, it’s easy to “get out” and sell.  The hard part is attempting to determine when to get back in.

Decisions to buy and sell are not made looking through a rear view mirror.  They’re made at individual points in time without any definitive knowledge about what’s about to occur next.

  • A “bell” doesn’t ring indicating it’s time to sell, and then again when it’s time to buy.
  • Finally, if you’re investing in the first place, you’re doing so because you need the investment returns provided by equity markets.

Getting the full returns that equities provide is entirely predicated on our ability to ride out temporary bear market declines.

The key lesson and strategy is that if (and only if) you’ve done your homework and prepared properly, then you have the structure in place to weather bear markets like we all experienced together back in 2008-2009, and maintain your financial confidence.

I can’t begin to tell you the number of Relaxing Retirement members who have confided in me that they would never have been able to stick it out if they weren’t involved in our program.

Doing your homework and adhering to a plan like The Relaxing Retirement Formula doesn’t insure that you will never experience temporary price declines.

What it does is allow you to do is completely ignore the dominant media culture who will pronounce that “it’s completely different this time”, and respond to bear markets with full confidence that they’re normal and temporary, and not an event that leads you to abandon and dismantle your ownership of what you’ve carefully planned to provide the lifestyle sustaining income you need for the rest of your life.

Retirement Coach Jack Phelps Publishes New Article Highlighting Lessons Learned By Observing “The Patriot Way”

Wellesley, MA –February 11, 2015 – Jack Phelps, founder of The Relaxing Retirement Coach, a Retirement Coaching company, recently published an article on his website (https://www.theretirementcoach.com) illustrating four key points of the New England Patriots “winning formula” that every retiree can apply to achieve long term financial independence.

In his article titled “Lessons From The Patriot Way”, Jack Phelps writes, “Not only did the New England Patriots provide us with the thrill of another Super Bowl victory, but they also provided us with lessons from their winning formula that we can all apply and benefit from.”

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.

Lessons From “The Patriot Way”

As a very interested observer of Coach Bill Belichick and the Patriots over the years, there is so much we can learn from their incredibly successful “formula” to implement during this unique stage of life that you’re experiencing right now. Here are four of them that I’ve observed:

#1. Preparation

Did you listen to the interview with Malcolm Butler, the Patriots rookie cornerback who made the game saving interception to seal the game?

It was extremely telling!

He said the team practiced against that formation and play several times over the last two weeks. When the Seahawks lined up in that goal line formation with stacked receivers, the coaching staff’s detailed scouting report and game plan prepared Butler to anticipate what the play was going to be so he could successfully react.

The result was one of the most miraculous plays in history.

The lesson, however, is the preparation that led to him anticipating what Seattle was going to do so he could “jump” the route and make the interception. If you didn’t know anything about football, you might have concluded after the play that the pass was intended for him and not the receiver!

There’s an old adage that people don’t plan to fail; they simply fail to plan. If you carefully study the characteristics of those who achieve financial independence, as I have studiously done over the last 25 years, you don’t have to look very far to determine why such a teeny, tiny percentage of Americans are financially independent when they reach “retirement age”, while the overwhelming majority are still dependent on the income from work, or from financial support from family, friends, and government.

It’s not due to a lack of ability or opportunity. They simply didn’t make the same set of choices to focus and prepare.

#2. Focus on What You Can Control

One of the behaviors that never ceases to amaze me about Bill Belichick is that his expression never changes.

Contrast his facial expression after the Patriots scored the go ahead touchdown with his expression after Kearse made that unbelievable circus catch down the right sideline at the end of the game to put the Seahawks in scoring position on the five yard line.

There was zero difference in his reaction! He has trained himself not to allow anything to distract his focus from his long term goal which is to win the game. He has learned to focus on what he can control which is to instantly turn the page and determine what his team should do next, i.e. how to intelligently (not emotionally) respond.

The other added benefit to this is not allowing his young players to see him rattled or out of control at any time. This teaches them to remain in control and focused as well so they can “do their job”.

“Focusing on what you can control” and “doing your job” is a winning formula for our Relaxing Retirement members as well. We can’t control wild swings in equity prices, interest rates, tax law changes, or poor decisions and policies by our law makers throughout history. But, what we can control is our response to them and the educated action or inaction we choose to take as a result.

#3. Ignore the Noise

Every Patriots player will attest to seeing signs that say “Ignore the Noise” everywhere in their facilities. What exactly does that mean?

Ignore the Noise means completely blocking out what others are “saying” about you or something that is important to you, either positive or negative.

As we have witnessed countless times before, athletes who get caught up in what others (i.e. media) have to say about them, either good or bad, are doomed.

As we discussed in detail with our case study a few months back, most financial “news” is really just an opinion. It’s extremely rare that anything reported today is a certified and undisputed fact.

There are numerous “opinions” about everything, all of which you can’t control.

“Ignoring the Noise” is a winning formula for our members as well. Virtually nothing that was once reported as a crisis worthy of worry actually had an impact on your financial future. Yet, when it was first reported with earthquake intensity, all of those who were not trained to “ignore the noise” reacted emotionally and paid an enormous long term price.

#4. Resiliency

This might be the most important lesson of all.

Winning is not about doing everything well. Winning is about limiting the effects of negative short term results and overcoming them, i.e. being resilient.

Please take a second to re-read that last paragraph.

Remember week four when the Patriots got blown out at Kansas City on national television? Do you recall the banter in all forms of sports media?

The Patriots are “just not good”. They’ve lost their way. Belichick drafted Jimmy Garrapolo to take over for Brady who doesn’t have it anymore and wants out.

What was Belichick’s response to the media firestorm following the game?

He didn’t slam his fist into the podium as you see other coaches do.

He didn’t call out his players.

He didn’t allow anyone’s opinion to control the inner discussion of his team.

His now famous simple response was: “We’re on to Cincinnati.”

What was Brady’s visible response to throwing both interceptions during the Super Bowl, something everyone couldn’t wait to pounce on him for especially those outside of New England?

Nothing! Instantly on to what he could control which is what he planned to do next.

The result: he completed 13 of 15 passes with two touchdowns on the final two drives of the game against the best defense in the NFL who completely shut down Peyton Manning’s record breaking offense in last year’s Super Bowl.

What Brady and Belichick have learned and taught us so well is they don’t expect everything to go well all the time. They know they won’t have a perfect result on every play.

They anticipate things going wrong and calmly deal with them.

The huge lesson for all of us is not to expect that everything will go perfectly all the time. It never has and it never will.

Anyone who has ever accomplished anything of significance will attest to the fact that the road to that result was anything but a straight line.

A bunch of things went wrong!

The key was they didn’t expect everything to go perfectly, and they built it into their game plan.

Not only did the Patriots provide us with the thrill of another Super Bowl victory, but they also provided us with lessons from their winning formula that we can all apply and benefit from.

Retirement Coach Jack Phelps Publishes New Article Highlighting the Unique Challenges of Retiring Today

Jack Phelps, founder of The Relaxing Retirement Coach, provides the path to developing the financial confidence you need in retirement

Wellesley, MA –January 23, 2015Jack Phelps, founder of The Relaxing Retirement Coach, a Retirement Coaching company, recently published an article on his website (https://www.theretirementcoach.com) spelling out the critical first step you must take in the new year if you want to enjoy a relaxing retirement.

In his article titled “Your Retirement Challenges”,  Jack Phelps writes, “You have to remember that, for anyone other than the super wealthy like the Carnegies and the Rockefellers of the world, the whole concept of retirement, or being able to financially support yourself without having to work, has only been around for about 75 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 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 Blog Illustrating The Dangers of “Rule of Thumb” Investing in Retirement

Jack Phelps, founder of The Relaxing Retirement Coach, answers a couple’s question about “The” right investment allocation for them

Wellesley, MA –January 22, 2015Jack Phelps, founder of The Relaxing Retirement Coach, a Retirement Coaching company, recently published a blog on his website (https://www.theretirementcoach.com) using a case study to illustrate how dangerous it is to follow ‘rules of thumb’.

Jack Phelps writes, “What motivated this couple to see me was the fact that the husband was planning to retire after 30 years with his employer, and they now wanted to get a handle on The right investment allocation in retirement!”

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 blog 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.

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Retirement Coach Jack Phelps Publishes New Article Revealing The Dilemma of “Paying Attention”

Jack Phelps, founder of The Relaxing Retirement Coach, uses a case history of headlines on a random day to illustrate the devastating problem retirees face

Wellesley, MA –December 17, 2014 – Jack Phelps, founder of The Relaxing Retirement Coach, a Retirement Coaching company, recently published an article on his website (https://www.theretirementcoach.com) exposing the fallacy of financial “news” and what retirees should do about it.

In his article titled “The Dilemma of ‘Paying Attention’”,  Jack Phelps writes, “There is a direct correlation between the amount of time individuals spend immersed in all forms of financial media and their level of financial confidence.  However, the correlation is inverted; the more immersed they are in financial media, the less confident they are.”

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.

The Dilemma of “Paying Attention”

As I stated in my recent interview with Moving America Forward host Doug Llewelyn, one of the biggest challenges in anyone’s life is to go from working, receiving a paycheck, and saving money your whole life….to no longer receiving that paycheck for the work you do.

And, to make matters worse, you then have to begin “spending” the money you’ve taken your entire life to save.  That just doesn’t feel “normal” to anyone.  In fact, it feels strange!

What I’ve witnessed coaching retirees over the last 25 years is that in order for you to begin spending the money you’ve saved over your lifetime, and truly enjoy yourself, it requires a lot of financial confidence.

In years past, when guaranteed monthly pensions were the norm, you could retire confidently knowing the precise amount of monthly income you could count on for the rest of your life.

In today’s world, however, guaranteed monthly pensions are almost nonexistent in the private sector.   401(k)s and 403(b)s are the norm today, and it’s your job to determine if you’ve enough saved to provide the income you need for the rest of your life.

It’s then your daily job to manage your money to provide the lifestyle sustaining income you need without running out.

That’s quite a daunting task!

What To Pay Attention To?

In light of this daunting lifelong task, one of the questions I receive a lot as The Retirement Coach is “what should I be paying attention to?”

It’s a very good question that has become more and more prevalent today given 24/7 media coverage of financial markets.

It has become harder and harder to determine what’s relevant, what to pay attention to, and who’s correct!

Let’s say, for example, that you want to “stay on top of things”, a valid desire that many feel they should be doing as a responsible retiree in today’s day and age.

And, in order to do that you read the financial newspapers.  You listen to market updates.  You watch the news on television, and you click in and follow financial websites like Yahoo Finance, Market Watch, and MSN Money.

Had you done this on the random morning of Tuesday, October 28, 2014 and were on The Wall Street Journal’s MarketWatch.com home page, here are the exact headlines and bullet points you would have come across in your quest to satisfy your desire to “stay on top of things”:

  • Stock Futures Up on Hopes for Fed, European Gains

  • S&P to Gain 10% in 12 Months: Goldman Sachs

  • Pursche: After a Drop, Stocks are Going Up

  • What To Make of This Roller Coaster Market

  • 3 Reasons to Expect a 30% Market Meltdown

  • European Stocks Rebound

  • What’s Next for China’s Foreign Reserve Fall?

  • Protect Your Portfolio with These 5 Basic Hedging Strategies

  • Elon Musk Warns of our ‘Biggest Existential Threat’

  • Home Prices See Largest Annual Jump Since 2005

  • Fed Will Hold Market’s Hand as it Ends QE3

  • Don’t Let a Downturn Undermine Retirement

  • Buffet Still Optimistic About America

  • Hulbert: Be Ready for a June Swoon in the Markets

  • Why Dow Transports Index is a Crystal Ball

  • How to Retire Early – 35 Years early

  • 10 Stocks to Buy

  • Best Performing Mutual Funds

Please take a moment to go back and re-read those again.

These are the exact headlines that appeared that morning.  I couldn’t make them up if I tried!

Do you notice a pattern?  If so, what is it?

Pattern #1

If you step back and remove any sense of emotion, and objectively read them for a moment, the first thing you’ll notice is that they’re not facts.

They’re ALL opinions.

Even the first one which states that stock futures are up.  That may be a fact, but suggesting that all stock futures prices are up due to hopes for Fed and European gains is an opinion.

Are there only two potential reasons why millions and millions of investors all around the world have driven up demand for stocks before the day’s trading session begins?

Of course not!  But, they can’t list dozens of potential reasons and fit them into a concise headline as their editors require.

This is a very important point.  Due to space and time limitations, and of course our limited attention spans, all forms of media have to severely condense the information they put in front of you.

By definition, that means they either have to generalize to provide the broadest possible view, or be very subjective and only isolate one facet of the story.

This is a really important point to internalize.  Without giving it much thought, writers’ subjective opinions are interpreted as “fact”.

Because they’re “in print”, we’re conditioned to acknowledge them as fact.

Pattern #2

The second pattern you can’t help but notice is that these headlines are written, individually and collectively, to conjure up a visceral feeling inside of you that the world is completely out of control, that financial markets could come crashing down at any moment without notice, and that, in turn, your financial future is on thin ice.

And, the only rational conclusion you should come to is to continuously “tune in” and pay attention so you don’t miss out and get burned.

Try to read this selection of headlines again without feeling this way:

  • What To Make of This Roller Coaster Market

  • 3 Reasons to Expect a 30% Market Meltdown

  • What’s Next for China’s Foreign Reserve Fall?

  • Protect Your Portfolio with These 5 Basic Hedging Strategies

  • Elon Musk Warns of our ‘Biggest Existential Threat’

  • Don’t Let a Downturn Undermine Your Retirement

  • Hulbert: Be Ready for a June Swoon in the Markets

  • Why Dow Transports Index is a Crystal Ball

Remember that the financial media can choose to say anything they want to say.  Within very broad guidelines, they have total freedom.

If that’s true, why would they choose to write THESE headlines and bullet points over every other possible alternative?

With no disrespect to their way of making a living, the reason is because they’re not in the business of managing money or providing advice.

That’s not how they’re compensated.

All forms of media are compensated through advertising revenue.  Companies around the world pay billions of dollars to run advertisements to market their businesses.  And, they have an infinite amount of choices these days.

How do all of these companies determine where to spend their advertising dollars?

They spend it where they believe they can reach the largest audience.

So, the goal of every financial media organization is to have the largest audience in order to entice every potential advertising customer (company) that they have the largest audience for the advertising customer to reach with their message.

Given this, they pay professional copywriters (not money managers) very, very well to write headlines and “teaser copy” that will continuously capture and maintain your attention.

And, they do a brilliant job of it.  Go back and read the list of headlines again and rate them on a scale of 1 to 10 on their ability to capture your attention.

I think you’ll agree that most of them score a 10!

Next Three Questions

1. As a result of reading these headlines, do you feel as though your desire to “stay on top of things” has been satisfied?

2. Did you reach any financial conclusions that you were able to act on?

3. Have any or all of them helped increase your financial confidence?

I think it’s safe to say that your answers are No, No, and a resounding No!

(If that’s true for you, then you have to really question why you’re paying attention in the first place.)

You have to remember that having you answer “YES” to these questions is not the financial media’s goal.

Their goal is viewership, period!

Increased and sustained viewership means higher ratings.  Higher ratings mean higher advertising revenue.  Higher advertising revenue means higher profit.

I don’t discredit the financial media as a business venture, nor do I question their right to do what they do to make a living as long as they don’t use force or fraud to get their results.

My interests are in helping you develop and maintain the highest possible level of financial confidence so you can do everything you’ve always wanted to do in your retirement years without worrying about money.

Unfortunately, the financial media’s goals are not aligned with your goals.

You have to really ingrain that in your mind at all times if you want to be effective.

The Solution

For maximum effectiveness, the solution to this ‘dilemma’ we’ve been pondering is one I learned from Dr. Maxwell Maltz many years ago.  He summarizes it in the description of his book, Psycho-Cybernetics :

“What we’re striving for is the accurate, calm, and ultimately automatic separation of fact from fiction, fact from opinion, actual circumstance from magnified obstacle, so that our actions and reactions are solidly based on truth, not our own or others’ opinions.”

Take a moment to go back and read that again very slowly.

I couldn’t have said it better if I worked at it for ten years!

The key is to have our actions and reactions 100% based on truth, and not our own or someone else’s opinions.

That’s not always easy to do.  We have to work at it.

When we see someone on television, or hear them on the radio, our conditioning has taught us to blindly believe whatever comes out of their mouth as fact.

In reality, it’s likely just an opinion just like anyone else’s opinion you might hear.

It’s similar to medicine.  When the ‘man in the white coat’ speaks, we’re conditioned not to question it.  He must know.  After all, he’s a doctor!

Protect Your Confidence

As you might have guessed, I’m giving this topic extended time and coverage due to how incredibly important I believe it is to your financial confidence, and in turn, the quality of the rest of your life.

When it all comes down to it, all the money in the world is of no value to you unless you have the financial confidence to spend it without the constant fear that you’re going to run out.

Unfortunately, my experience over the last 25 years continues to demonstrate that most individuals are simply not financially confident enough at this critical stage in their lives.

And, that lack of confidence severely limits their lifestyle, and the quality of their lives.

There is a direct correlation between the amount of time individuals spend immersed in all forms of financial media and their level of financial confidence.

However, the correlation is inverted; the more immersed they are in financial media, the less confident they are.

The less confident they are, the lower their quality of life.

It’s a gigantic Catch 22!

In an attempt to feel more confident, most turn to the financial media.

Unfortunately, this only decreases their confidence due to everything we’ve outlined.

Be very protective of your confidence.  If you’re going to tune into financial media, go right ahead, but do so with your antennae standing straight up!

Why You Must Protect Yourself Now

Warning: This article contains graphic descriptions that might be unsettling.

The smell of Fall is in the air.  There’s nothing like it.

The sun is bright, and the brown, orange, and yellow leaves are falling.

It’s 3:30 on a Saturday afternoon and you’re driving home from your granddaughter’s soccer game so proud of her for scoring the winning goal.

There’s nothing quite like the screams of an excited group of 9 year old girls.

As you’re driving along, you have the Notre Dame football game playing on your radio, but you’re not listening very carefully because you’re still caught up in the buzz of your granddaughter’s soccer game and the beautiful Fall foliage.

Pulling into your neighborhood, you catch the tail end of a breaking news sports update about the Patriots.

Unable to hear it clearly, you reach down to turn up the volume so you can hear the announcement more clearly.

At that very same instant, some neighborhood children are playing soccer in their yard.  As your car approaches, the soccer ball rolls out into the middle of the street where you’re driving and one of the kids chases after it in full speed forgetting to look both ways to see if a car is coming.

Just as you’re reaching for the volume knob on your radio, in the corner of your eye, you see him run out from behind that parked car, so you instinctively jam on your brakes.

But, it’s too late.  You hear the sound you prayed you’d never hear, and he’s now lying on the ground motionless in front of your car.

As the paramedics arrive, the good news is the little boy is still breathing.

The bad news is that he’s not moving as they struggle to keep his body still and place him on the stretcher.

After what seems like an eternity, he’s taken in the ambulance to the hospital and you are left there to talk with the police about what just happened.

Two detectives are snapping pictures of the car and measuring your skid marks in the street.

2 Weeks Later

A few weeks have now passed.  The shock of what happened has not gone away, but it has come into perspective.

The boy has just returned home from the hospital.  Several bones in his body were broken, and after 3 separate surgeries, the doctors are confident that he’ll be able to walk just fine after a good 6 months of physical therapy.

However, the permanent damage done to his right leg may prevent him from playing competitive sports for the rest of his life.

What Does This Mean For You?

As if dealing with the emotional torment of accidentally injuring a young boy wasn’t enough, now comes the worst part.  The police reports come back concluding that you were driving 36 miles an hour in a 30 mile an hour zone.  And, because of that, you’re considered to be 100% at fault for negligence.

You didn’t mean to hit the child.  You’re a careful driver.  You’ve never had an accident in your life.  Your driving record proves it.

But, all of that doesn’t matter right now because unfortunately, you’re going to be at the wrong end of a very expensive lawsuit.  You can expect that within a few weeks, you will be summoned by an aggressive attorney requesting, among other things, a listing of all your income and assets.

And, the only form of compensation the attorney will get from the case will be from receiving a percentage of the damages collected from you.

And, it probably won’t be a small number.

Where Will This Money Come From?

The question for you is where will this money come from to pay for you to hire an attorney and to pay the eventual damages that will be brought against you?

It’s taken 40 years to build up enough money for you to be able to retire.  You’ve given up so much in order to save for your future.

And, now, you’re finally reaping the rewards of your lifetime of hard work and disciplined savings.  You’re retired and enjoying life like never before.

But now, everything you’ve worked your entire lifetime to save could be taken from you in an instant.

This Week’s “Strategy”

This is a horrible story that I hope never happens to you. And, I would prefer not to have to share it with you.

However, as you can see, it can happen to anybody, so I’m telling it to you to motivate you to protect yourself.

The strategy and solution in most circumstances is to have the highest liability limits on your auto insurance possible.  But, even more importantly, because potential damages could easily exceed the limits on your auto insurance, is to have a separate Personal Catastrophe Insurance Policy, otherwise known as an “Umbrella” Policy, also known in small circles as Lawsuit Insurance.

In most cases, if you have a quality policy with a quality insurance company, the combination of these 2 policies can protect you from the financial devastation of this horrible occurrence.

It won’t help in dealing with the emotional toll of injuring someone, but it can save you from the financial fallout, and preserve what you’ve taken your entire lifetime to accumulate.

And, the good news is that it’s inexpensive.  Each million dollars of umbrella liability coverage costs only about $250 per year.

That’s a small price to pay for the peace of mind it can provide for you in case this ever happened to you.

Visit with your property and casualty insurance agent today and coordinate your homeowners, auto, and umbrella liability insurance.  Discuss precisely what each policy covers and what it doesn’t.

This may take only 30 minutes but it could turn out to be the most important 30 minutes you’ve ever spent on your finances.

Retirement Coach Jack Phelps Publishes New Blog Discussing Market Bubbles and Corrections

Wellesley, MA –September 28, 2014  – Jack Phelps, founder of The Relaxing Retirement Coach, a Retirement Coaching company, recently published a blog on his website (https://www.theretirementcoach.com) clarifying what makes share prices rise and fall over time so you can become a more educated and accomplished long term investor.

Jack Phelps writes, “Given the trajectory of stock market prices since March of 2009, it sounds reasonable.  But, only if you buy into the belief system that stock prices are random, irrational, unstable, rigged, and certainly not governed by any objectively verifiable standard.”

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 blog can be found at https://www.theretirementcoach.com/blog/are-we-experiencing-a-market-bubble-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.

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Retirement Coach Jack Phelps Publishes New Blog Discussing Market Bubbles and Corrections

Wellesley, MA –September 28, 2014 – Jack Phelps, founder of The Relaxing Retirement Coach, a Retirement Coaching company, recently published a blog on his website (https://www.theretirementcoach.com) clarifying what makes share prices rise and fall over time so you can become a more educated and accomplished long term investor.

Jack Phelps writes, “Given the trajectory of stock market prices since March of 2009, it sounds reasonable. But, only if you buy into the belief system that stock prices are random, irrational, unstable, rigged, and certainly not governed by any objectively verifiable standard.”

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 blog can be found at https://www.theretirementcoach.com/blog/are-we-experiencing-a-market-bubble-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.

Retirement Coach Jack Phelps Publishes New Blog Exposing a $367,000 Income Tax Mistake

Jack Phelps, founder of The Relaxing Retirement Coach, illustrates how a $367,000 income tax mistake could have been completely avoided.

Wellesley, MA –July 25, 2014Jack Phelps, founder of The Relaxing Retirement Coach, a Retirement Coaching company, recently published a blog on his website (https://www.theretirementcoach.com) sharing a horrible story of a gentleman who was referred to him who made a $367,000 income tax mistake.

Jack Phelps writes, “He was very angry, not only at the company where his parents’ IRA was held, but at himself for not knowing any better.”

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 blog 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.

What You Choose to Focus On

Assuming today is just an average day in 2014, 10,000 Americans will turn age 65.

This is extremely significant because the first baby boomers (those born in 1946) began celebrating their 65th birthdays three years ago.

And on average, ten thousand Americans will achieve this milestone each and every day through 2020.

There has never been another statistic like it (in sheer numbers, and as a percentage of the population) in our history. In all probability, there will never be anything like it again.

Think about it: ten thousand people trying to retire every day for ten years!  A staggering number!

The Defining Financial Issue

If you’re reading this right now, it’s highly likely that you’re in the middle of this statistic, or you’re just beyond it, and thus, retired.

Think about the critical defining financial issue in each of these folks’ lives who are reaching 65, and, more importantly, in your life.

Hint: it’s not the battle brewing right now between Fed Chairwoman Janet Yellen and markets over inflation pressures.

And, it’s certainly not Argentina’s debt fight in U.S. courts.

Over your nearly three-decade retirement life, these issues not only won’t matter, but it’s highly likely that they will not even be remembered. (Try and remember what the media’s ‘financial crisis’ headline was fifteen years ago today without Googling!)

THE defining issue in your financial life, and in the lives of today’s and tomorrow’s ten thousand 65-year-olds is simply this: will you outlive your money, or will your money outlive you?

Everything else is secondary and takes a back seat.

Are You in Control of This Defining Question?

What may surprise you is the extent to which you, and the daily insurgence of ten thousand new 65 year olds, control the outcome of this defining question.

It feels, and it is sold to you in the media, that the outcome is completely out of your control.

After 25 years coaching retirees, however, I can say unequivocally that it is much more in your control than you may think based on the choices you make.

The blunt and simple question you and everyone else have to ask is: what would cause you to run out of money?

The simple answer: when your cost of living exceeds your income and you have to invade a diminishing Retirement Bucket™ in order to sustain your lifestyle.

The key to understanding the nature of this problem is to realize that your income needs are a moving target.

Even at historical inflation rates of three percent per year (and, as you know, I recommend projecting higher for your safety), the dollar of goods you need today will cost about $2.40 in the thirtieth year of your retirement.

So, if you need $7,500 per month to support your lifestyle right now, you will need $18,000 to sustain the “same” lifestyle!

Not a better lifestyle!

Now, I believe it’s critical to pause for a moment and read that last sentence again.

Notice that I didn’t say it would be “nice” to be able to have an income that will rise in the future to keep pace with your rise in costs from $7,500 to $18,000 per month.

I’m saying that it’s a MUST!

And, unless you have a strategy in place for creating an income stream that has some credible historical record of matching that upward curve of your living costs, your expenses may at some point begin pulling away from your income. And that’s a formula for eventually running out of money!

What Will You Choose To Focus On?

Given these unavoidable facts, the key question is what will you choose to focus on?

Will you choose to focus on “protecting your principal” or will you choose to focus on the primary problem, which is “protecting your purchasing power?

In my experience, your answer to that question, and your actions that follow as a result, will determine your success in battling the defining question of running out of money or not.

They will lead you to carefully analyze, plan, and strategically allocate your hard earned money where it has the highest probability of earning the rate of return you need to earn in the long run.

And, more importantly, despite short term movements in market prices which will cause the overwhelming majority of the 10,000 baby boomers (a day) to lose their focus and tragically run out of money during their lifetime as a result.

Keep your focus!

Retirement Coach Jack Phelps Publishes New Blog Exposing Insurance Agents’ Desires To Have You Keep Paying Unnecessary Premiums

Jack Phelps, founder of The Relaxing Retirement Coach, provides the solution for retirees who overpay for insurance they no longer need.

Wellesley, MA –July 9, 2014Jack Phelps, founder of The Relaxing Retirement Coach, a Retirement Coaching company, recently published a blog on his website (https://www.theretirementcoach.com) helping retirees evaluate the risks in their lives still worth insuring. 

Jack Phelps writes, “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 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 blog 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 Demonstrating The “Marathon Mindset” Required By Retirees

Jack Phelps, founder of The Relaxing Retirement Coach, draws incredible analogies after watching his wife train for and run another Boston Marathon.

Wellesley, MA –June 11, 2014Jack Phelps, founder of The Relaxing Retirement Coach, a Retirement Coaching company, recently published an article on his website (https://www.theretirementcoach.com) highlighting the critical lessons all retirees can learn by carefully observing what it takes to run a marathon.

In his article titled “Your Marathon”, Jack Phelps writes, “Well, if you stop and think about it, there’s a perfect analogy to investing at this stage in your life. And, there’s a ton we can all learn by the discipline and stamina necessary to complete a marathon.”

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.

Your Marathon

As has become the norm in our household, we had a front row seat watching my wife Colleen train for and run the Boston Marathon last Monday along with 39,000 other runners.

Fortunately, her training paid off and she had a good day.

Every year while I’m watching, I can’t help but think that there is so much we can all learn by closely observing the Boston Marathon.

The analogies to your retirement stage in life you’re experiencing right now are so compelling, and the lessons from studying it are too important not to take note of.

What has always been so interesting to me is how differently you have to physically and ‘mentally’ prepare for a marathon vs. a 5k (3.1 miles) or a 10k race (6.2 miles).  The preparation for each of them bears very little resemblance, even though you’re running in both situations.

When you know you only have 3.1 or 6.2 miles to run, you can really let loose and run at a faster-than-normal pace because you know you don’t have too far to run.  Even if you’re out of your ‘comfort zone’ the entire race, you know it will be short lived so you can manage it.

The BIGGEST Difference Between a Marathon and a 5K

With a marathon, everything changes drastically.

26.2 miles is a long way to go by anyone’s standards.  And, accordingly, your strategy and mindset have to be completely different or you’ll never finish.

To begin with, this is NOT a race.

It’s a marathon.

You can always tell the amateurs at any race because they all sprint right out of the gate.  They get so caught up in the emotions of the Boston Marathon that they lose sight of the goal which, first and foremost, is to finish.

  • You have to prepare and have a long term pacing strategy.  You do this by knowing what pace you can comfortably run for long distances.  You develop this over months of short, intermediate, and long distance runs where you time yourself so you have a measuring stick.  During the race, you have to constantly be checking your pace so you can make sure you’re not running too fast, or too slow.
  • You have to prepare to deal with the “elements”.  In some years, it’s the rain.  In others, a head wind.  This year’s Boston had a brutally cold and blustery training season, and then a mild to warm marathon day.  If you were starting in the last corral, and you were still running near 4:00 p.m., it was over 65 degrees near the finish!  Normally, that wouldn’t be a huge issue.  However, after training in sub 20 degrees all winter, the contrast is a very challenging adjustment for your body.
  • Finally, you’ve got to deal with injuries.  This means preventing them from occurring in the first place by training correctly, and dealing with those that occur anyway.  Injuries are inevitable if you’re going to run a marathon.

The Strategy

So, how do the intimate details of training for and running a marathon help you?

Well, if you stop and think about it, there’s a perfect analogy to investing at this stage in your life. And, there’s a ton we can all learn by the discipline and stamina necessary to complete a marathon.

Like a marathoner, you’re in this for the long run.  The money that you’ve so carefully saved and built up over your working years must now support you for the rest of your life.

That requires a great deal of preparation and stamina.  It doesn’t just happen by accident.

If you get caught up in the “emotions” of stock market reporting each day (i.e. “the elements”), and you don’t have the correct mindset and long-term strategy, you could very well run out of money.

With rapidly increasing technology and the proliferation of the mass media through television, talk radio, newspapers, magazines, and the internet, it’s easy to lose sight of the long term and get distracted.

It requires serious restraint, discipline, and stamina on your part.

The challenge for you is that, for all intents and purposes, the race to save more money is over.  Chances are great that you’re not going to add too much more to your Retirement Bucket™.

Instead, you’re now going to be withdrawing some of the money you’ve saved to live on.

From my 25 years of coaching so many of you, I can tell you that making that transition requires a significant amount of confidence.

And, it doesn’t matter how much money you have.  It just doesn’t feel normal for anyone!

That’s why it’s so important to have a disciplined, well thought out “system” of decision making about your money at this stage in your life.

Now, it’s true that following a carefully thought out, disciplined, custom-designed plan is not as glamorous as reading about the latest trendy investment and wondering why you’re not invested in it.

Or, checking out where the market is 3 times per day, or listening to pundits on television or talk radio argue over what’s the “best” thing for “everyone” to do (and believing that it applies to your unique situation).

However, you can’t afford to be tantalized by all of that at this stage in your life.

You, too, are running a marathon. And, that requires a very specific “marathon mindset”.

Retirement Coach Jack Phelps Publishes New Blog Exposing The All Too Common Tragedy That Occurs When Retirees Finally Sell Their Home

Jack Phelps, founder of The Relaxing Retirement Coach, provides the solution which will help you avoid surprises and deal killers when selling your home.

Wellesley, MA –May 29, 2014Jack Phelps, founder of The Relaxing Retirement Coach, a Retirement Coaching company, recently published a blog on his website (https://www.theretirementcoach.com) sharing a real life tragedy that a couple went through when selling their home, and what you can do to prevent it.

Jack Phelps writes, “Finally, after two days of back and forth negotiating, they withdrew their offer and walked away.  Now, you have to start all over again.”

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 blog 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 Revealing How Retirees Get Themselves Into Big Trouble By Not Distinguishing Between Which “Hat” They’re Wearing

Jack Phelps, founder of The Relaxing Retirement Coach, reveals a common struggle that retirees face, and precisely how to avoid it.

Wellesley, MA –May 14, 2014Jack Phelps, founder of The Relaxing Retirement Coach, a Retirement Coaching company, recently published an article on his website (https://www.theretirementcoach.com) noting how retirees get themselves into serious trouble because they don’t clarify which “hat” they’re wearing.

In his article titled “Do You Have the Right Hat On?”, Jack Phelps writes, “During periods of turmoil and above average market volatility, I’ve noticed a very distinctive habit that all successful retirees have formed.  That habit is making a clear distinction between which “hat” they’re wearing, and properly managing their “state” to match 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 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.

Do You Have The Right “Hat” On?

During periods of turmoil and above average market volatility, I’ve noticed a very distinctive habit that all successful retirees have formed.

That habit is making a clear distinction between which “hat” they’re wearing, and properly managing their “state” to match it.

Let me give you an analogy first.

In life, we all wear many hats.  For example, a few of them for me are:

  • Father
  • Husband
  • Business
  • Retirement Coach
  • Brother
  • Son
  • Friend
  • Youth Sports Coach

To be effective, each of these roles requires me to have a certain mindset or “state”.

However, the correct mindset for one is unlikely to be the correct mindset for another.

For example, if I’ve been intimately engaged at the office all day, I had to have my “Retirement Coach or Business Hat” on in order to be effective.

And, that requires a certain mindset or “state”.

However, when I’m home with Caroline and Michael on a Saturday, for example, in order for me to be the father I want to be, I need to have my “Father Hat” on.

If I still have my “Retirement Coach or Business Hat” on when I’m home with them, how effective am I going to be?

For reasons I’m certain you can visualize, it’s going to be a disaster!

How Does This Apply to You?

Let’s now carry that same analogy forward to another example.

In life, due to our experiences, education, and interactions, we all develop our own unique set of belief systems.  And, over time, those belief systems morph into our own personal philosophies which, in turn, govern the way we feel about and the way we react to various situations.

As an example, each of us has a belief system about justice and the way things “ought to be” when it comes to the role government and business in our lives.  This certainly flares up right around tax time.

Let’s label this your “justice consciousness” hat!

As such, when we sit back and listen to any political figure on either side of the aisle, or Janet Yellen (Federal Reserve), discuss the economy or unemployment with our “justice consciousness” hat on, each of us has beliefs about what’s wrong, who’s to blame, and how it should be fixed.

Some more strongly than others!

At the same time, each of us has developed an “investor” hat.  Hopefully, that’s based on a very specific, rational, long term formula like we use in our Relaxing Retirement Coaching Program™.

And, in order to be effective, you wear that “investor” hat, and the proper mindset that comes with it, when making investment decisions.

When Things Get Ugly

Now, here’s distinction…..

When things are good financially, i.e. no big crisis going on, cash flow is good, and markets are moving in a positive direction, it’s easier to make the distinction between which “hat” you should wear to be effective at which time.

It’s easy to be rational and look at the big, long term picture.

However, when things get ugly, i.e. a crisis brews, markets turn sideways, the media outlets pile it on thick, and our reptilian ‘fight or flight’ mechanism flares up,  it becomes much harder to draw the line as to which “hat” we should wear.

The result during times like this is an inability to distinguish between which hat we’re wearing, and with it, the inability to be effective in any area of our lives.

For example, if a crisis of some level ensues and you’re watching wall to wall coverage on television, it’s highly likely that your “justice consciousness” hat is on your head.

That’s normal and perfectly effective for the moment.

However, it becomes dangerously ineffective when all of the emotions and fight or flight triggers that come with it are carried over to your investment decisions.

And, that’s what happens to the overwhelming majority of retirees.

Everything’s fine while markets move in a positive direction.  However, when markets correct and move the other way (as they’ve always done and always will in the future), their rational, educated, long term “investor” hat gets thrown out the window.

In contrast, the retirees who achieve the best results are those who make a very clear distinction between the two and are very conscious as to which “hat” they’re wearing at all times.

This allows them to make consistent, disciplined, and effective decisions that are in line with their carefully drawn out plans.

The Strategy

So, the Strategy is to be very aware and conscious of which “hat” you’re wearing at all times.

There’s nothing wrong with wearing any of them.  The challenges come when you mix hats, or wear the wrong hat for the wrong situation.

Retirement Coach Jack Phelps Publishes New Blog Addressing the 60 Minutes Claim That “The Stock Market is Rigged”

Jack Phelps, founder of The Relaxing Retirement Coach, peels back the curtain 60 Minutes latest campaign

Wellesley, MA –May 7, 2014Jack Phelps, founder of The Relaxing Retirement Coach, a Retirement Coaching company, recently published a blog on his website (https://www.theretirementcoach.com) analyzing the recent 60 Minutes episode claim that the stock market is rigged by high frequency traders.

Jack Phelps writes, “given their claim, and the fact that each and every one of us owns stock, how can anyone resist the temptation to tune in and find out how we’re all getting ripped off!”

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 blog 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.

Happy Anniversary!

We’re going to take a short break in the action in order to wish you an emphatic HAPPY ANNIVERSARY!

I’m serious.

There’s actually a spectular strategic lesson imbedded in it so it’s not all celebration.

What anniversary are we celebrating you may be asking?

Well, unlike you or I forgetting our wedding anniversaries and getting into hot water with our spouses, if THIS anniversary doesn’t immediately pop into your head, that’s a good thing.

Five years ago, Sunday, March 9, 2009, marked “the bottom”.

On that day, the value of the broad stock market index, the S&P 500, hit its bottom during the housing crisis led market “crash”.

To be specific, after the collapse of Lehman Brothers in early September, 2008, the value of the largest companies in the world (as measured by the S&P 500 Index) fell to 752 on November 20, 2008.

(If you’ve been a Relaxing Retirement member for a while, you may recall our Fall 2008 “Let’s Make a Deal” Member Event at The Marriott starring me as Monte Hall right in the middle of the crisis.)

Right after the event, the value of the S&P Index proceeded to climb back to 903 to close out 2008, only to plummet back down again and hit bottom at 677 on March 9, 2009.

Do you remember what was splattered all over the news back then?

As you may recall, it was nothing but second-by-second chaos and predictions of the world as we had known it up until that moment ending.

Try and remember exactly how you felt back then.

Did they scare you enough to get you to fold your tent and sell your carefully orchestrated ownership of the great companies of the world as it did for millions of retirees across America?

The reason I ask is that if you fast forward five years to last Friday, March 7, 2014, the value of the same S&P 500 Index stood at 1,878! (Remember that the price back on March 9, 2009 was 677)

That represents a price increase of 177% over that five year span.  And, this doesn’t include the dividends you would have received for maintaining ownership during those years which represented approximately 2% more in return per year.

Over that same time frame, the small cap Russell 2000 Index grew 250%.

Now, this is not about rubbing salt into wounds or about saying “I told you so”.

There’s a lesson and a very important strategy involved that is critical to you experiencing the relaxing retirement you desire and deserve.

The key lesson and strategy is that if (and only if) you’ve done your homework and prepared properly, then you have the structure in place to weather a storm like the events that led up to March 9, 2009, and maintain your financial confidence, i.e. confidently spend and invest.

Now, what does it mean to have “done your homework and prepared properly”?  What this means is:

  1. 1.    you’ve determined the amount of money you need to withdraw from your Retirement Bucket™ each year for your spending needs,
  2. you’ve calculated the investment rate of return you need to earn to produce the lifestyle sustaining income you need to withdraw without running out of money,
  3. you’ve set aside funds in short term instruments to satisfy your withdrawal needs for several years so you’re not forced to sell at inopportune times because you “need” the money to support your cash flow needs.
  4. you’ve carefully selected ‘which’ accounts you’re going to draw from so you pay the least amount of income taxes you’re legally obligated to pay,
  5. you’ve strategically allocated and diversified your long term holdings among a carefully orchestrated mix of asset classes with full knowledge that they will each perform differently during various market conditions over your lifetime,
  6. you’ve strategically planned ‘where’ you’re going to hold your various investment holdings to take advantage of lower capital gains tax rates vs. higher ordinary income tax rates, and
  7. you assess the allocation of your holdings on a strict timetable and objectively rebalance with the full understanding that market price corrections have always been and will continue to be a normal and regular occurrence in your investment lifetime.

If you follow and adhere to this Relaxing Retirement Formula, then the ugly events that took place leading up to March 9, 2009 are a short term annoyance, but not something that causes you to abandon and dismantle your ownership of what you’ve carefully planned to provide the lifestyle sustaining income you need for the rest of your life.

You simply go to step 7 (above) and take advantage of the opportunity to own more inflation fighting investments at bargain prices.

Now THAT’S something worth celebrating!

Retirement Coach Jack Phelps Publishes New Blog Alerting Retirees What NOT to Invest

Jack Phelps, founder of The Relaxing Retirement Coach, makes a critical distinction that all retirees who live off of their investments much come to grips with.

Wellesley, MA –April 1, 2014Jack Phelps, founder of The Relaxing Retirement Coach, a Retirement Coaching company, recently published a blog on his website (https://www.theretirementcoach.com) alerting retirees how to maintain sanity with their investments so they don’t commit investing sin.

Jack Phelps writes, “Or, stated more accurately: you’ve put yourself in a position where you were forced to “sell low”.”

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 blog can be found at 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 Blog Clarifying WHY We Invest

Jack Phelps, founder of The Relaxing Retirement Coach, makes a critical mindset distinction to help retirees remain focused in retirement

Wellesley, MA –Feb. 18, 2014Jack Phelps, founder of The Relaxing Retirement Coach, a Retirement Coaching company, recently published a blog on his website (https://www.theretirementcoach.com) outlining the importance of understanding why retirees are investing before determining what to invest in.

Jack Phelps writes, “The reason you invest, and why you’re investing in what you’ve chosen, will remain clear in your mind so you maintain investment discipline in ever-changing markets.”

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 blog 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 Recalling a Very Volatile Year

Jack Phelps, founder of The Relaxing Retirement Coach, breaks from the crowd and clarifies, once and for all, that volatility does not equal risk

Wellesley, MA –Jan. 29, 2014Jack Phelps, founder of The Relaxing Retirement Coach, a Retirement Coaching company, recently published an article on his website (https://www.theretirementcoach.com) clarifying the critical difference between volatility and risk.

In his article titled “A Very Volatile Year”, Jack Phelps writes, “In my opinion, the biggest fallacy perpetuated by the dominant financial media today, which is causing more long term damage to retirees than anything else, is equating and getting you to buy into the concept that volatility equals risk, i.e. that they are one and 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 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.

A Very Volatile Year

As we move into a new year together, it’s always a good idea to take an intelligent look at the most recent year for some historical perspective.  Especially since it was such a volatile year.

Interestingly, I haven’t heard anyone, in any venue, describe 2013 as volatile.

Interesting because broad domestic equity prices went up roughly 30%.  Yet, nobody referred to 2013 as volatile.

Had market prices fallen 30%, I suspect everyone would have labeled that as “volatile”.  And, therein lies a great lesson in disguise for all of us.

Subjective Definitions

Most Americans have a subjective definition of volatility, a challenge which has proven to be extremely detrimental to anyone with a strong desire for a relaxing retirement where their income keeps pace with ever rising costs during their lifetime.

Most define volatility as down a lot in a short period of time without realizing that what we just experienced in 2013, which was a rapid price increase, was equally volatile, just in the opposite direction!

The dictionary defines the term ‘volatility’, with respect to prices, as “tending to fluctuate sharply and regularly”.

Note that there’s no reference to down vs. up in the definition.

The reality is that equity market prices have fluctuated sharply and regularly throughout history.

Since 1980 alone, the S&P 500 Index has experienced the following declines: 27%, 34%, 20%, 19%, 49%, 57%, and 19%.  Pretty darn volatile.

Yet, the price of the S&P 500 Index was about 106 in 1980, and it closed 2013 over 1,800!

Volatility vs. Risk

So why are we focusing on volatility?

In my opinion, the biggest fallacy perpetuated by the dominant financial media today, which is causing more long term damage to retirees than anything else, is equating and getting you to buy into the concept that volatility equals risk, i.e. that they are one and the same.

(As a quick aside, their perpetuated fallacy serves their purpose of getting you to tune into and be mesmerized by daily volatility).

Once and for all, volatility is not risk.

Volatility, as defined earlier, is simply rapid price fluctuations (in both directions).

Risk is the measured likelihood of a desired outcome.  (please re-read that again)

For you, the #1 risk you face is not that the value of your investments will go up and down over your lifetime.

Not only is that phenomenon not a risk, it’s a virtual certainty.

The #1 risk you face is your investment assets not appreciating fast enough during your lifetime to support your rising lifestyle costs, leading to you running out of money.

Given this, it’s not a luxury in any way for your money to grow.  It’s a bare necessity given inevitable rising prices.

Why Subject Yourself to the Volatility of Equities?

The reason we maintain an ownership stake in quality companies, and subject ourselves to the volatility of equity/stock prices, is because they’ve delivered the most effective hedge against rising costs in history, thus allowing their ‘owners’ to maintain their purchasing power, and their desired lifestyle.

In other words, they’re in a class by themselves when it comes to solving the #1 risk you face as noted above.  No other asset class even comes close.

And, given that interest rates have no place to go but up, bonds are less likely than they’ve been in the past to do the job in the long term.

Volatility is simply the name we give to the uncertainty of equity investment returns over the short to intermediate term.

However, it’s the long term (your lifetime) that is the risk you face given that the average lifespan of a non-smoking 62 year old couple is 30 years!

Over the long term, as the numbers I shared with you earlier indicate, the historical trend line of equity prices is quite certain.

And, that’s where our focus has to be if we are to effectively deal with the #1 risk you face.

Goal vs. Market Focused

The successful investors in retirement who I’ve witnessed were relentlessly goal-focused.

The unsuccessful ones were anxiously market-focused.

In light of this, if your mix of investments was built in pursuit of your goals, and your goals haven’t changed, then it’s rarely a good idea to radically change the mix regardless of current events.

Retirement Coach Jack Phelps Publishes New Blog Exposing The Growing Financial Confidence Deficit

Jack Phelps, founder of The Relaxing Retirement Coach, outlines a formula for eliminating the growing financial confidence deficit

Wellesley, MA –January 22, 2014Jack Phelps, founder of The Relaxing Retirement Coach, a Retirement Coaching company, recently published a blog on his website (https://www.theretirementcoach.com) highlighting the series of challenges facing retirees today, and the formula to overcome them.

Jack Phelps writes, “There’s no long history, and very few good examples of individuals who have reached and maintained financial independence over a long life.  You have to remember that, for anyone other than the super wealthy like the Carnegies and the Rockefellers, the whole concept of retirement, or being able to financially support yourself without having to work, has only been around for about 75 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 blog 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 Blog Exposing Two Deadly Destructive Actions Many Retirees Are Falling Prey To Right Now

Jack Phelps, founder of The Relaxing Retirement Coach, discusses “Profit Taking” vs. Performance Chasing

Wellesley, MA –December 15, 2013Jack Phelps, founder of The Relaxing Retirement Coach, a Retirement Coaching company, recently published a blog on his website (https://www.theretirementcoach.com) illustrates two destructive responses to recent stock market growth.

Jack Phelps writes, “The rational long term investor must then ask the question, “and then what??”  Given that I’m planning to live another twenty years, and my money has to keep pace with inflation so I don’t run out of money, what do we then do with our money after selling and “locking in profits”?

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 blog 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 Highlighting A Case Study of Easily Correctable “Strategic” Mistakes Retirees Continue to Make

Jack Phelps, founder of The Relaxing Retirement Coach, shares the 2013 DALBAR Study Results and Its Conclusions

Wellesley, MA –November 20, 2013Jack Phelps, founder of The Relaxing Retirement Coach, a Retirement Coaching company, recently published an article on his website (https://www.theretirementcoach.com) outlining the disturbing, massive difference between healthy long term market returns and average investors’ real life returns.

In his article titled “They Can Afford To Retire, But…”, Jack Phelps writes, “After carefully evaluating Ron’s spreadsheet of their investment activity, the gigantic “BUT” I had to report to them was if they continued doing what they had been doing, there was a high likelihood that they’d run out of money within 8 or 9  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 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 Blog Answering The Question To Buy or Rent a Vacation Home

Jack Phelps, founder of The Relaxing Retirement Coach, walks you through the questions you must ask yourself to arrive at a confident answer

Wellesley, MA –November 14, 2013Jack Phelps, founder of The Relaxing Retirement Coach, a Retirement Coaching company, recently published a blog on his website (https://www.theretirementcoach.com) outlining the process to use to decide whether to rent or buy a vacation home.

Jack Phelps writes, “I’ve recently had in depth discussions with two different Relaxing Retirement members who are weighing buying a much desired second home vs. renting one.  This happens every year around this time so I thought I’d provide you with the same checklist I shared with them to help them evaluate and arrive at a rational conclusion based on their individual desires.”

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 blog 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 Blog Sharing The Big 26th Anniversary Lesson

Jack Phelps, founder of The Relaxing Retirement Coach, takes us back to October 19, 1987 for a remarkable distinction.

Wellesley, MA –October 18, 2013Jack Phelps, founder of The Relaxing Retirement Coach, a Retirement Coaching company, recently published a blog on his website (https://www.theretirementcoach.com) where he walks us through the unthinkable progress which has taken place 26 years after the value of companies in America fell 25% in one day.

Jack Phelps writes, “As is always the case with financial reporting, it seemed to most that it was the end of the world…or, at least the end of our financial system as we knew it.  Who could possibly withstand a 25% drop in one day?”

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 blog 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 Outlining The Key Strategy For Retired Investors

Jack Phelps, founder of The Relaxing Retirement Coach, provides a critical analogy to help you deal with constant negative financial news.

Wellesley, MA –October 11, 2013Jack Phelps, founder of The Relaxing Retirement Coach, a Retirement Coaching company, recently published an article on his website (https://www.theretirementcoach.com) sharing a completely different way to view investing that is critical to success for all retirees who want to maintain lifestyle sustainable income for the rest of their lives.

In his article titled “The Apocalypse du Jour and McDonalds”, Jack Phelps writes, “So, what is the difference between you owning a McDonald’s franchise as I’ve described vs. you owning any investment you currently own?”

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.  TheirRelaxing 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.

The Apocalypse du Jour and McDonalds

I hope you’re appreciating the reporting of the current ‘Apocalypse du Jour’ (i.e. the federal government shutdown) as much as I am.

We now have yet another reason to be scared out of our wits and run for cover.   Financial markets can’t possibly withstand yet another crisis!

Or can they?

Before answering that, take a moment to recall this brief list of recent “crises” which, at some point during the last two years, has each been widely reported as a crisis worthy of your attention, and worthy of a change in your investment strategy by the financial media:

  • S&P Lowers U.S. Bond Rating…No Longer AAA
  • Anemic GDP Growth
  • High Unemployment
  • The European Debt Crisis (Greece, Italy, etc.)
  • The “Sequester”
  • Debt Ceiling Crisis (2012)
  • The “Fiscal Cliff”
  • Our Syrian Invasion Post Chemical Weapons Attacks
  • The Fed’s ‘Quantitative Easing’ Program
  • The ‘Timing’ of the Fed’s ‘Quantitative Easing’ Taper

Please take a moment to seriously recall the tenaciousness of the reporting of each issue on this list and how dire everything sounded when they were reported on.

Now ask yourself a very important question: is the value of the overwhelming number of companies you own today higher or lower compared to their market value when each of these issues was reported?

And, a more important follow-up question to that: did you personally sell any of your positions in the companies you own when any of these events were first reported?

If no: why?

If yes: why?

For Perspective

As you’re pondering those last questions for a moment, think about this:

Let’s assume for a moment that twenty years ago, you took the carefully thought out leap of faith to borrow the necessary funds to buy and operate a McDonald’s franchise (certainly a business we’re all familiar with).

Quite a leap of faith as all of your friends and co-workers thought you were crazy.  Not to mention your spouse!

After attending Hamburger University, and then  suffering through a lot of bumps and bruises over the next ten years, you reached the point where profits were good enough, and you had the confidence to purchase a second McDonald’s franchise.

Over the most recent ten years since then, you’ve run your stores exactly as McDonalds suggests, you’ve carefully studied your marketplace, you’ve come to really understand and develop a level of confidence with each store’s cash flow during good and challenging economic cycles, and your profits, while not explosive or in a straight line, have continued to rise over the years.

While it’s been anything but easy, you’re happy with your decision thirty years ago as owning these two McDonald’s franchises has provided a very nice lifestyle sustaining income for you and your family.  And, it certainly appears to be able to do so in the future.

Your Big Question

What if the person I just described who owns these two McDonald’s franchises was YOU?

Imagine turning on your television to any one of the reported ’crises’ over the last two years that I spelled out earlier.  Or, to these recent headlines from Yahoo Finance:

  • ”China’s Credit Levels Echo U.S. Crisis”, or
  • “No Country Is Safe From Emerging Market Meltdown”, or
  • “Traders Struggle with Perfectly Terrible Jobs Number”

Here’s your BIG Question: Would you scramble and search for the phone number of a local business broker so you could put your two McDonald’s franchises on the market to sell?

After all, the economic landscape going forward doesn’t sound too good.  What if the government shuts down for a week?  A month?  A year?

What if unemployment figures never improve?

What if the Fed continues its Quantitative Easing Program forever?

Or worse, what if they suddenly, and without any warning, stop?  What then??

Would your McDonald’s franchise survive?  And, if it survives, doesn’t it sound like a sure thing that the value can’t go anywhere but down in the future?

Wouldn’t it be smarter to just sell the franchises and wait this thing out?  Then, when everything settles down and gets back to ‘normal’, you can buy another one.

Your Likely Answer

Given everything I’ve shared with you about the owner of these two McDonald’s franchises, I’m confident that you’re laughing right now and shouting out a resounding “NO WAY”!

If that’s true for you, why not?  Why wouldn’t you sell your franchises?

Well, to start with, you’re an owner!  You didn’t buy your McDonald’s franchises so you could buy and sell in and out of them in order to gain some sort of short term profit.

Second, you’ve lived through a lot over the last twenty years.  You know what you own.  You’ve seen how they perform during different market cycles, and your experience tells you that the long term impact on your business from any and all of these reported ‘crises’ is highly likely to be next to nothing.

Why?

Because they’ve never turned out to be an issue in the long run before.

What’s the Difference?

So, what is the difference between you owning a McDonald’s franchise as I’ve described vs. you owning any investment you currently own?

Please take a moment to pause and really give some thought to this.

The only difference is if you choose to ‘operate’ the McDonald’s franchise, i.e. “work in the business” on a day to day business.  However, many franchise owners own multiple units and don’t work “in” the business at all.

Aside from that, it’s exactly the same.

When we all invest, what are we doing?  We’re all buying pieces of companies (shares).  That’s what investing is…ownership.

And, we own and accumulate shares in many companies because we need to own assets that can rise in value over time and produce increasing levels of income (dividends) in order for us to maintain our lifestyle in a continuously rising cost world.

This is such a critical distinction for your future.

When we listen and watch the financial media on a day to day basis, and we listen to friends, family members, and co-workers talk about investing, this is NOT what we hear.

We hear them talk about “the stock market” as if it’s this mysterious and scary thing.

The “stock market” is simply a mechanism to buy and sell pieces of companies.  That’s it.

It’s a collection of thousands of enterprises whose value and dividend levels will each rise and/or fall based over time based on their ability to produce profit and income for their “owners”.

So, when you invest, you’re not ‘buying’ a market.  You’re buying an “ownership” stake in one or more companies just like buying a McDonald’s franchise.

And, buying and owning pieces of well run companies is a lifelong venture for everyone who has a goal of producing continuous lifestyle sustaining income.

Retirement Coach Jack Phelps Publishes New Blog Clarifying ‘Gifting’ Rules To Avoid Paying Taxes

Jack Phelps, founder of The Relaxing Retirement Coach, clears up many common misperceptions surrounding making a gift to a family member or a charity

Wellesley, MA –September 19, 2013Jack Phelps, founder of The Relaxing Retirement Coach, a Retirement Coaching company, recently published a blog on his website (https://www.theretirementcoach.com) de-mystifying the whole issue of gifting so you can confidently make gifts without worrying about paying taxes.

Jack Phelps writes, “After our recent discussion about using a revocable living trust to help your family avoid the sizable cost and delays of probate, questions have come up about the tax implications of making a gift during your lifetime.  A lot of this has changed in the last few years, so let’s take the opportunity to clarify some things surrounding the issue of ‘gifting’.”

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 blog 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.

Will Your Kids Lose 45% of Your IRA??

Having to deal with the emotional and psychological effects of losing a spouse or parent is always difficult.

Having to also deal with their financial affairs and the tax implications is enough to put you over the edge.  The consequences of making a wrong decision are enormous.

Landmines are everywhere, especially when your family inherits your IRA and/or 401(k).

If they’re not informed, almost half of your IRA could get lost to taxes in one fell swoop!

Doesn’t  sound too inviting!

Let’s walk through an example of how your children and grandchildren can make an “informed” decision when they inherit the IRA that you’ve taken your entire lifetime to build.

Ron and Rose

Ron and Rose been married for 40 years, and have 3 children who are all out of college and in the workforce.

After Ron retired, he rolled over his 401(k) and pension plan to an IRA where he named his wife Rose as his primary beneficiary and his 3 children as secondary (or contingent) beneficiaries in equal shares.

Two years into retirement, Ron suffers a heart attack and passes away.  (Sorry for the blunt shock value of the story, but it’s necessary to make the point)

When Ron passes away, as Ron’s spouse and beneficiary, Rose may transfer the money that was in Ron’s IRA into her IRA without paying any taxes.  (Key point: ONLY spouses can do this.)

Now, let’s fast forward ahead 3 more years.  Rose gets sick, and after a long battle, she passes away.

At this point, Rose’s children have some decisions to make as the beneficiaries of their deceased mother’s IRA.

In far too many situations, here’s what happens:

They call the institution where the IRA was held (bank, investment firm, insurance company, etc.) to inform them that their mother has passed away and to find out what their options are.

Depending on who receives that phone call, here’s the answer that they’re likely to hear:

“We’re very sorry to hear about your loss.  We’re going to send you out an IRA distribution request form.  Please each sign the form and return it to us along with a certified death certificate and we’ll get the checks out to you within 7 to 10 business days.”

Sounds simple enough, right?

Wrong!

What just happened?

Income Taxes Now Due on the ENTIRE IRA

The children just paid income taxes on the entire balance of the money in the IRA!

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!

Let’s suppose that each of their shares in their mother’s IRA was $500,000.  That means that as much as $225,000 would instantly go to pay federal and state income taxes!

Imagine that.  You work your entire life.  You diligently save your money.  You select sound investments.  You do everything right and with one phone call to an uninformed company representative, 40-50% of your hard-earned savings is gone in one shot!

Depressing!

What Should They Have Done?

Each of the kids actually had another option with their share of their mother’s IRA.  One option was to just cash it all out.  But, as I mentioned, that has enormous tax consequences.

The second option, which is all too often omitted from the discussion, is to “re-title” their portion to an Inherited IRA, leaving their deceased mother as the deceased owner of the IRA and them as the beneficiary.

By doing this, they are only required to withdraw and pay taxes on a small amount of the money from the IRA each year, leaving the rest to grow tax deferred for the rest of their lives if they wish!

The amount of money saved in the short term and the long term is staggering.

Now, in order to qualify for this “Inherited IRA” tax deferral plan, there are certain IRS requirements that they have to fulfill in order to make it work.

Stay tuned to discover the steps required by the IRS that your children and grandchildren have to follow perfectly in order to qualify.

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 Blog Clarifying How to Calculate Your Capital Gains Tax Burden When Selling Your Home

Jack Phelps, founder of The Relaxing Retirement Coach, walks you through a case study so you don’t overpay your tax bill.

Wellesley, MA –August 26, 2013Jack Phelps, founder of The Relaxing Retirement Coach, a Retirement Coaching company, recently published a blog on his website (https://www.theretirementcoach.com) demonstrating the step-by-step process you’ll need to use when selling your home so you don’t overpay your taxes.

Jack Phelps writes, “This is a question that’s in the forefront of many of our Relaxing Retirement members’ minds whom I speak with every day.  One of their stumbling blocks is in not knowing what the tax implications will be if and when they sell their home vs. keeping it and passing it on to their children.”

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 blog 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.

The Financial Media Salivates

Here’s Wall Street’s Market Watch on Monday, June 24th at 10:18 a.m.:

Headline: “U.S. Stocks Slide on China-Led Global Selloff”

Monday’s selloff comes after last week’s bruising selloff on Wall Street…European stocks tumbled and Shanghai stocks melted down….”

After quite a run so far this year with very few down days, equity prices cooled off toward the end of last week and now into this week.

Not good or bad news for all of us, but GREAT news for the financial media who’s been starving for a hiccup to start the chorus of alarm bells to garner your wavering attention.

After all, it’s no fun being in the financial media business when market price volatility is only on the up side. In order for them to put their best copywriters to work, they need some down side too!

Notice the terminology in the headline and first paragraph:

▪   “Selloff”

▪   “Tumbled”

▪   “Melted down!”

Doesn’t the term “selloff” just scare the heck out of you?

Have you ever thought about the term “selloff”? What exactly does that mean?

It sounds like everyone who’s ‘in the know’ is selling, thus you’re missing the boat by not doing so too.

The reality is there’s a fixed number of shares circulating out there. For every share of a given company that is sold, there is another person on the other end of that transaction who’s “buying”.

We have to always remember that!

Couldn’t they just as easily say, “….Global Buyoff” because for every person “selling” their shares, there’s an equal number of shares being “bought” by someone else.

In other words, for every person who chooses to sell (for whatever reason they have for doing so), there’s another person on the other end celebrating their good fortune because someone’s willing to sell them shares in the company they want to own at the price they’re willing to pay for them!

I know this sounds so simplistic, but it’s so important to protect your confidence and not allow brilliant terminology used by top financial media copywriters to influence your carefully prepared long term plans.

Reality Again

The reality of what’s happening to prices of companies (stocks) right now is “this is normal”!

As a rational, long term owner of shares of the great companies of the world, prices temporarily cooling off does not, and cannot qualify as news.

Nor does it qualify as an event worthy of discontinuing your ownership, i.e. selling!

Why?

Because market prices retreating 5-10% is nothing new. Just as market prices rising 15+% earlier this year didn’t alter your plans.

If you’ve never heard this statistic before, here’s a terrific one to plant in your memory during cooling off periods like this: the average peak to trough “intra-year” drop in the price of the S&P 500 Market Index is 14%.

Let me repeat and clarify that for a moment because it’s a very, very important fact:

In any given year, the average percentage drop that we’ve experienced at some point during that year is 14%. In other words, if you take a look at the high and low points of each year, you’ll see an average price drop of 14%.

What we can take away from that is that it’s completely “normal” for the stock market to have cooling off periods during any given year.

It shouldn’t necessarily give you the “warm and fuzzies” and lead you to celebrate, but it also doesn’t qualify as a phenomenon worthy of panic.

Unfortunately, this is not how the overwhelming majority of retirees think and behave. They spend their lives in constant reaction to everything which leads them to make the same costly mistakes over and over again.

Feel proud of the fact that you’re not one of them.

Are We Due?

“The stock market’s at an all-time high.  There’s no way it can keep this up.  We must be due for a big correction.”

With the stock market’s solid run to an all-time high recently, this is the comment I hear the most lately which is undoubtedly due to what everyone hears in the press who continues to be angry at their inability to explain it.

The underlying question then is, “are stock prices out of line and, thus, due for a big correction?”

It’s a very good question that I’ve done some research on to provide you with an educated answer.

The best way to answer this is by taking a closer look at the last two times when stock market prices reached its current level.  And, while doing so, develop some very important clarity on what ultimately drives the price of a particular company or index which is earnings.

As a reference point, let’s use the S&P 500 Index since it encompasses about 80% of the publicly held common stock in America, and so offers a more complete and accurate picture than the thirty stocks in the Dow.

Let’s examine the relative valuation of the S&P 500 Index, which at the moment is priced at around 1,540, vs. the valuations during the other two times the S&P was in this price range.

The first time the market reached these levels was in March 2000. That year, the earnings of the S&P 500 Index were $56 and the dividend about $16.25. At its peak at that time, the Index was trading at just over 27 times its current-year earnings. (Please keep this very important number in your mind)

At that time, stocks were also competing with the 10-year U.S. Treasury bonds which were yielding close to 5.8% at the time.

The second time prices were where they are today was the all-time high in October 2007 when the S&P 500 reached 1,565.

That year’s earnings were $82.54 and the dividend $27.73.  If you quickly do the math, you’ll see that the price of the S&P was about 19 times earnings. (As a reference point, the yield on the 10-year Treasury was around 4.5% at that time.)

Before we come to today, you can already see that the S&P was quite a bit cheaper in terms of earnings at the peak in 2007 than it had been at the top in 2000.  And, that they were also somewhat more attractively priced relative to competing bond yields.

Now let’s move to March 5, 2013—the day the Dow made its new all-time high—when the S&P 500 closed just below 1,540.

The earnings of the S&P 500-Stock Index last year (not even this year when they’re higher) were over $102, and the dividend is approximately $30.44.  Doing the math again demonstrates that the S&P 500 was selling at about 15 times the last year’s earnings. And, perhaps more importantly, the 10-year Treasury was yielding 1.89%.

What Does This All Tell Us?

If you’ve followed right along, you’ll see that at roughly the same price level it was 13 years ago in March 2000, the S&P 500 is selling for pretty nearly half the multiple of earnings it was then ($102 vs. $56). The dividend yield is almost twice what it was then ($30.44 vs. $16.25). And, both the earnings and the dividend compare much more favorably to bond yields than they did then.

Given this, it’s impossible to objectively argue that stock prices are expensive today relative to company earnings, and relative to bonds.  And, especially compared to where they were the last two times the market peaked in the 1,500s.

Now, does this mean that prices will continue to go up? No.  There’s no prediction whatsoever in this quick and dirty analysis.

I simply want to suggest, as I always do, that we draw conclusions based on fact and NOT based on what the “consensus” appears to be in the mainstream media.

My guess is that you can’t find one media outlet who has provided the quick historical perspective that I just revealed.  There’s a reason for that.  It doesn’t “sell”.

I hope this has been helpful.  Please feel free to quote these numbers when you hear friends and family members repeat what they hear on the news every night.

Retirement Coach Jack Phelps Publishes New Article Outlining What Everyone Must Think Through Way Before Discussing Long Term Care Insurance With An Agent.

Jack Phelps, founder of The Relaxing Retirement Coach, notes that most individuals begin discussing the bells and whistles of long term care insurance because that’s what agents sell.

Wellesley, MA – May 30, 2013  – Jack Phelps, founder of The Relaxing Retirement Coach, a Retirement Coaching company, recently published an article on his website (https://www.theretirementcoach.com) spelling out the thought process that must take place “before” discussing long term care insurance with an agent.

In his article titled “Your Long Term Care Insurance Conversation: Part II”, Jack Phelps writes, “If you don’t do that first, and become crystal clear on your own unique situation, you will be at the mercy of any commissioned insurance agent who comes knocking at your door.  And, that’s no position to be in. “

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/your-long-term-care-insurance-conversation-part-ii.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.

Your Long Term Care Insurance Conversation: Part II

Last week, we identified what everyone must think through way before ever discussing long term care insurance with an agent.

Now, let’s move on to the second critical thought process that must take place before you enter the long term care conversation.

Let’s begin by recapping what we know so far about our case study involving John and Mary:

  • We know that John and Mary are each retired and they need $10,000 per month to support their lifestyle
  • They receive $5,000 per month from social security and pensions, so their level of Retirement Bucket Dependence is $5,000 per month or $60,000 per year.
  • Their Retirement Bucket™ has $2 million dollars of investments in it. (a nice round number to work with)
  • And, most importantly, we’ve determined that this amount is enough to provide them the income they need for the rest of their lives (including cost of living adjustments to compensate for inflation) without having to earn a crazy rate of return in order to make it happen.

Now, that’s terrific news assuming everything goes according to plan.

However, as we all know, rarely does everything go according to plan, so we have to closely examine the risks.

And, one of those “risks” is your health.

What’s Your Risk?

If you objectively take a step back for a moment, one of the conclusions you’d arrive at is that the downside “financial” risk of you passing away decreases over time, thus decreasing your need for life insurance.

However, on the flip side, the “financial” risk of caring for your health increases dramatically with age.

Once you’ve reached age 65, statistics illustrate that there’s a 30% chance that either you or your spouse will need to receive long term care in one of five ways:

  • In your Home,
  • In an Assisted Living Facility,
  • In a Nursing Home,
  • In an Adult Day Care Facility, or
  • In Hospice

A 30% chance!!!  That’s a pretty big number.

Now, if we remove the emotional aspect of the care for a moment and strictly evaluate the financial risk that you face, it becomes a pretty daunting thought.

“Managing” Your Risk

So, what we’re after here is assessing and then “managing” the risk.  And, whenever you’re confronted with a risk, there are three questions that you must ask yourself (as we alluded to a few weeks back):

  1. “What’s my potential financial loss?”  (Assuming you don’t have insurance already to protect yourself)    So, you have to actually put a number on it.
  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?”

Let’s start with #1: what’s the potential loss?  The cost to receive care in your home or to move into a nursing home in many areas in and around the Boston area now exceeds $10,000 per month.

Given that the average length of stay is 2.9 years, that’s a total “potential” risk of well over $300,000 for each spouse.

Now, before we move on to anything else, let’s stop and think about that potential risk for John and Mary from our case study.

Remember that their Retirement Resource Forecasters™ looked fine given their need to withdraw $5,000 per month from their Retirement Bucket™.

However, if either John or Mary gets sick, hopefully not both, and it costs $10,000 per month for care, they now need to withdraw $15,000 per month from their Retirement Bucket™.

$5,000 for income and $10,000 for health care.

Clearly, if they continue at that pace for long, their Retirement Bucket™ won’t be able to handle it for very long and they’ll run out of money.

This is financially devastating for the healthy spouse who still needs the money to live.

The key is to know just how financially devastating for you personally.  In other words, what does their scenario look like if one of them needs care for three years?

For five years?

For seven years?

You need to define what your personal risk exposure is so that you can make an educated decision for yourself.

Please notice that all of this has to be worked out before you even think about how to ‘manage’ the risk.

How Do John and Mary Deal With This Dilemma?

At the risk of throwing cold water on the situation, let’s be blunt.

There are two ways to approach this problem.  The first is to take on 100% of this risk themselves.

In other words, if John or Mary need care, they’d assume 100% financial responsibility and deal with the extenuating consequences.

In my opinion, as long as they do this after a complete assessment of the risk, and the costs of passing some or all of that risk on to some other entity, I believe that’s fine.

After all, the chances are in their favor that they won’t need the care.

However, if their family’s health history is not great, or if they’ve personally witnessed hundreds of thousands of dollars walk out the door to pay for the care of a family member, they may have second thoughts about assuming 100% of this risk.

If that’s the case, John and Mary have two alternatives:

  • pay for it themselves, or
  • have the government pay for it through Medicaid

Qualifying For Medicaid Assistance

To be very clear about this, in order to have the government pay for their care though Medicaid, John and Mary have to qualify.

And, that involves relinquishing all control over all of their assets and giving them away to their family.

Or, they have to place their assets into an irrevocable trust (a decision they can’t change after they make it)

If their assets have been out of their ownership and control for five years, they may be able to qualify for help from Medicaid (which is government assistance for the poor).

In order to qualify for Medicaid (government assistance), you have to have virtually no assets in your name for five full years.

Your Other Option

On the flip side, if John and Mary don’t like that alternative and thus choose to pay for their long term health care themselves, they can purchase money at a discount to offset the potential costs, and that’s what long term care insurance is all about.

Although I’m a believer in using insurance as a last resort after you’ve exhausted all of your other options, I’ve yet to find anything that does what long term care insurance does.

Long term care insurance is nothing but a tool in your toolbox to help you “manage” this huge financial risk.

  • It can be used to protect your spouse’s lifestyle in case you get sick and need care,
  • It can protect your assets that you’ve worked so hard to build up over your lifetime for your kids.  And, finally
  • It can provide you with options for your care. This is very important!  If you rely on the government’s Medicaid program to pay for your care, then you’re at their mercy to determine what care you will receive and where you will receive it.

So, if you’ve reached this point, and you believe you’d like to push some of this substantial financial risk on to another entity like an insurance company, now you can begin to intelligently talk about long term care insurance.

Can you see how absolutely critical it is to go through the thought process we’ve walked through these last two weeks?

If you don’t do that first, and become crystal clear on your own unique situation, you will be at the mercy of any commissioned insurance agent who comes knocking at your door.

And, that’s no position to be in.

You want to be in complete control so that you can custom tailor a plan that covers what’s most important to you personally.

Retirement Coach Jack Phelps Publishes New Article Answering Pre-Retiree’s Question: “Should We Pay Off Our Mortgage?”

Jack Phelps, founder of The Relaxing Retirement Coach, cuts through all the dogmatic beliefs about carrying a mortgage into retirement.

Wellesley, MA– April 29, 2013Jack Phelps, founder of The Relaxing Retirement Coach, a Retirement Coaching company, recently published an article on his website (https://www.theretirementcoach.com) settling, once and for all, the debate about carrying a mortgage into your retirement years.

In his article titled “Paying Off Your Existing Mortgage”, Jack Phelps provides the answer to the question he often receives about mortgages: “My answer always involves asking a lot of questions, so I thought I’d share those with you today in the hope of helping you arrive at a good answer in your unique situation.”

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/paying-off-your-existing-mortgage-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.

Paying Off Your Existing Mortgage

One of the questions I receive all the time, predominantly from new Relaxing Retirement members, is “should we pay off our existing mortgage”?

That’s a really good question which has no cut and dried answer to it.  My answer always involves asking a lot of questions, so I thought I’d share those with you today in the hope of helping you arrive at a good answer in your unique situation.

To begin with, I find that folks ask this question for many different reasons.

One of them stems from the dogmatic belief that you should never have a mortgage in retirement!  It was drilled into their minds growing up and it’s never left.

That may actually be a very good belief to carry around in the majority of situations.  However, it’s certainly not an absolute as you’re about to discover.

Let’s take a look at some factors you’ll want to consider when evaluating if you should pay off an existing mortgage you have.

Factors to Consider

Factor #1: Do you have enough liquid money to pay off the mortgage?  In other words, for simplicity sake, if your mortgage balance is $200,000, do you have $200,000 readily available to use?

You’d be amazed at how many ask this question when they don’t have the $200,000 readily available.

By readily available, I mean do you have to pay taxes or penalties to get at the money?   For example, is all your money tied up in IRAs and/or tax deferred annuities?

If so, there’s a tax bill to pay first in order to free up the necessary money.  In the example I gave, in order to free up the $200,000 to pay off the mortgage, you’d have to withdraw approximately $275,000 from your IRA.  After paying roughly $75,000 in taxes, you’d have your $200,000 with which to pay off the mortgage.

For obvious reasons, this pretty much answers the question for you if all your funds are tied up in IRAs.

Factor #2: What’s the interest rate on the mortgage, and how long will that rate remain?  In other words, is it an Adjustable Rate Mortgage (ARM) where the rate will increase after a certain period of time?

Let’s start with the second part of that question.  If you have an ARM, the rate will adjust after a certain period of time.  If that’s in a year or two, you have to make some serious assumptions about what the interest rate will be.

For the purposes of this discussion, let’s assume you know what the rate will be throughout the remaining life of the loan.

What this all comes down to is can you “earn” a higher rate of return with the funds you have set aside than the bank is charging you in interest on the loan.

For example, if your outstanding balance again is $200,000 and your mortgage interest rate is 4%, the question is “can you earn more than 4% with the $200,000 you have on the sidelines that you would use to pay off the loan”?

If CD rates were much higher than they are today, 6% for example, this would be a no-brainer.  You’d keep your $200,000 in the bank CD earning 6% or $12,000, and continue making mortgage payments at 4% ($8,000 per year and declining).

To use a fancy term, this is a form of arbitrage and it’s used to make millions of dollars in the marketplace every day.

The challenge comes, however, in times like these where you can’t earn 6% on a CD.  You may very well be able to earn more than 4% in a diversified portfolio in the long run. (I sure hope you can)  However, there’s no guarantee.  So, in essence, you’re taking a gamble one way or the other.

It then comes down to how long you have to play the game, and how strongly you feel that you can “out-earn” the mortgage interest rate over that period of time.

Factor #3: The third factor is tax deductibility.  Because mortgage interest is potentially deductible, carrying a mortgage has another benefit.

The question is whether the mortgage interest is deductible for you.  Mortgage interest is only deductible for mortgage amounts lower than $1 million.

Second, it’s only valuable to you if you are itemizing deductions on Schedule A.  If you have virtually no deductions on your tax return, and you currently file using a Standard Deduction, the interest deduction from your mortgage is not helping you (unless the interest from the mortgage throws you over the top into using Itemized).

Another small factor, but still important, is maintaining some liquidity.  If you will have to use up all of your liquid funds to pay off your mortgage, you may want to give some thought to that.

The final Factor stands alone because it’s something I’ve discussed many times with members.

I can make all of the financial and economic arguments in favor or against keeping an existing mortgage (like in the examples above).  However, at the end of the day, if you have knots in your stomach, or you just can’t stand making mortgage payments, or if being “debt free” has been your lifelong goal and you have the means to pay off your mortgage, just go ahead and pay it off.

I’ve actually suggested this in many situations. I’m a big believer that you have to be able to sleep at night.

Finally, you’ll note that I’ve reserved my comments for evaluating paying off an existing mortgage.  I have some thoughts about entering into a new mortgage in retirement which I’ll share with you in the next issue.

Stay tuned!

Retirement Coach Jack Phelps Publishes New Blog Highlighting The Critical Importance of Being Objective.

Jack Phelps, founder of The Relaxing Retirement Coach, discusses a very important step in The Relaxing Retirement Formula™.

Wellesley, MA –April 25, 2013Jack Phelps, founder of The Relaxing Retirement Coach, a Retirement Coaching company, recently published a blog on his website (https://www.theretirementcoach.com) outlining the critical step in The Relaxing Retirement Formula™ of OBJECTIVE vs. SUBJECTIVE rebalancing.

Jack Phelps writes, “In essence, what are you doing here?  You’re buying “low” vs. buying “high”, exactly what an intelligent, objective investor would do.”

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 blog can be found at https://www.theretirementcoach.com/blog/how-to-objectively-rebalance-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.

Retirement Coach Jack Phelps Publishes New Article Revealing One of the Most Destructive Theories and Behaviors Among Retirees.

Jack Phelps, founder of The Relaxing Retirement Coach, reveals the consequences of trying to be too smart.

Wellesley, MA – March 12, 2013  – Jack Phelps, founder of The Relaxing Retirement Coach, a Retirement Coaching company, recently published an article on his website (https://www.theretirementcoach.com) revealing one of the most destructive theories and behaviors among retirees.

The article, titled “STOP: A Brief (But Very Important) Detour” illustrates why market timing is such a bad idea for retirees.   Jack Phelps writes, “Today, however, before I provide you with Principle and Guideline #4, I’m going to take a brief detour and discuss what I’ve witnessed to be one of the most destructive theories and behaviors I’ve personally witnessed among retirees over the last 24 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/stop-a-brief-but-very-important-detour.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.

STOP: A Brief (But VERY Important) Detour

While dissecting The Relaxing Retirement Formula™ over the last few weeks, and sharing the first three Principles and Guidelines to follow to help you answer the question of where to position your investments to produce the long term rate of return you need to earn while experiencing less volatility and paying less taxes to the government, I’ve focused on what TO DO as opposed to what NOT to do.

Today, however, before I provide you with Principle and Guideline #4, I’m going to take a brief detour and discuss what I’ve witnessed to be one of the most destructive theories and behaviors I’ve personally witnessed among retirees over the last 24 years.

In short, in order to clarify a principle, sometimes the most effective way to do so is to contrast it with what NOT to do.

Today’s Strategy is an example of that.

Whenever the stock market experiences a correction, investment discipline gets seriously tested.

It’s no picnic! Experiencing a 20-30% market correction at this stage in your life, where the money that you’ve built up over the years must now support you, is tough to take.

The emotional temptation is to fold up your tent and “wait it out” on the sidelines, i.e. sell everything and move it to cash.

This temptation is what is known as ‘market timing’ pure and simple. As much as folks don’t want to admit that they’re timing the market, there is no other way to classify it.

It stems from a belief, rational or irrational, that you know what markets are going to do in the short run and the long run.

By selling everything and moving your investments into cash, you’re making the assumption that market prices will continue to go down until some period of time in the future when things “settle down”. And, when things settle down, then you’ll get back in.

Much of this thinking and strategy stems from the notion that there is a small group of people out there who are “in the know”, who are outsmarting markets. They have a sixth sense and know when to get out and when to get in. They don’t suffer these losses like us “average” folks. They’re too smart for that.

Do you believe that? Unfortunately, too many people do.

If it was true, then how could John Paulson, famous for making hundreds of millions of dollars betting on the collapse of housing prices in 2008, have lost over 50% for his investors in 2011?

How could Harvard University’s massive endowment fund, run by world renowned money managers, have lost over $10 Billion during the 2008-2009 market drop leading to a complete change of direction for the most prestigious university in America, including sizable staff layoffs, discontinued programs, and cancelled projects?

Why Market Timing Is a Bad Idea

In theory, the concept of market timing sounds like the way to go. However, there are many reasons why engaging in the practice of market timing is a bad idea. Let me illustrate a few for you:

  1. Selling out after the market has suffered a downturn virtually insures that you will sell low and then buy high, the opposite of what you want to do. Why?

Let’s say that a sharp decline in the equity prices leads you to sell off your stock based investments due to your fear that their prices will continue to drop.

The question to ask yourself is what will have to happen in order for me to feel comfortable enough to invest my money back into my equity investments”?

The typical answer is “when the market settles down and isn’t in a downward ‘trend’ anymore.”

Well, in order for that to happen, the market will have to have several consecutive days or weeks of price appreciation.

In short, in order for you to feel comfortable enough to get back in, the market will have to have demonstrated sustained appreciation over time.

However, by the time that happens, you will have missed the appreciation and bought back in at the high! You will have been out of the market when the appreciation occurred.

In short, you will have sold low and bought high, the opposite of what you want to do.

  1. Historically speaking, there are typically 8 to 10 days in a year where market movements really influence your overall rate of return. In other words, during most days in the market, movement is up or down 1% or less.

However, there have typically been 8 to 10 days in a year where that movement is greater than 1%. And, those are the days that really influence whether you’ll have a poor year, an average year, or a really good year.

If you sell everything and move onto the sidelines after a market downturn has taken place, you run the risk that you will miss one or more of those days on the upswing.

And, missing those days could be the difference between you achieving your “needed” overall rate of return or missing it. Consistently missing it could mean running out of money too soon.

  1. Most importantly, once you start down the road of market timing, you can’t stop.

You will have bought into the theory that watching and reacting to daily or minute-by-minute moves in the market is the solution to your long term investment goals.

Your investment decisions will be 100% based on emotion, not a carefully thought out, disciplined, long term strategy.

Discipline and rational thought goes out the window and you will spend your life in reaction.

All of the legends of investing disagree with market timing. They have instilled in all of us to have a long term strategy in place and to remain disciplined in spite of short term movements in the market.

This doesn’t mean having “blind faith”. What it does mean is, if you’ve done your homework and you have a carefully thought out, custom tailored plan, i.e. The Relaxing Retirement Formula™, proactive discipline is the solution.

Proactive Discipline

At this stage in your life, where the money you’ve saved is now supporting you, your approach has to be rooted in “proactive” discipline:

  • The discipline to tally up the amount of money you need to withdraw from your investments each year over and above what you receive from social security and your pension, i.e. your “level of Retirement Bucket™ Dependence
  • The discipline to calculate the investment rate of return you must earn in order to produce lifestyle sustaining income (that keeps pace with inflation)
  • The discipline to set aside the money you’ll need to spend over the next few years in short term instruments which are not subject to market volatility (even when the market has just jumped up and you feel as though you may be missing out)
  • The discipline to properly allocate your investments among many different styles of investments, each with its own goal, as opposed to being lured by what is supposedly “hot” or “doing well” at the moment
  • The discipline to strategically plan ‘where’ you’re going to hold your various investment holdings to take advantage of lower capital gains tax rates vs. higher ordinary income tax rates
  • The discipline to consistently evaluate the allocation of your investments and make unemotional, rational adjustments
  • The discipline to objectively monitor the performance of each individual investment vs. its peer group, and make adjustments when necessary

As I hope you’re seeing, it’s imperative at this stage in your life’s “retirement game” that you have a system of decision making with regard to everything that happens in your financial life.

Without it, you’re at the undisciplined mercy of the “news of the day”, or the latest sales gimmick.

Don’t fall prey like the undisciplined masses.

Next week, let’s move on to Principle and Guideline #4.

Don’t miss it!

Retirement Coach Jack Phelps Publishes New Article Revealing The Answer You Must Have First Before Investing in Retirement.

Jack Phelps, founder of The Relaxing Retirement Coach, discusses the consequences of investing without parameters.

Wellesley, MA – February 15, 2013  – Jack Phelps, founder of The Relaxing Retirement Coach, a Retirement Coaching company, recently published an article on his website (https://www.theretirementcoach.com) revealing the answer to a question that all retirees must have before they can invest with confidence.

The article, titled “The Answer You MUST Have First” draws a terrific analogy to medicine today and why most advisors would be sued for malpractice if they were doctors.   Jack Phelps writes, “This is THE biggest distinction between investing during your working years and your retirement years, and it’s the point that I will continue to help you focus on.”

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/the-answer-you-must-have-first.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.

The Answer You MUST Have First

We’re getting there!

Over the last few weeks, I’ve exposed you to the first steps in The Relaxing Retirement Formula™ which were all developed to help you determine your level of Retirement Bucket™ Dependence (the amount you need to withdraw from your investments each year, over and above social security and pensions, in order to live exactly the way you want).

You’ve done this by getting crystal clear on all of your income sources, and what it costs you to support the exact lifestyle you want.

This is THE biggest distinction between investing during your working years and your retirement years, and it’s the point that I will continue to help you focus on.

Every “retirement calculator” discussion or article I read begins with you assuming an investment rate of return you either want or think you can earn.

This completely puts the cart before the horse.  It’s what gets so many people into trouble, and what causes so much confusion and anxiety.

Once you’re past the first steps in The Relaxing Retirement Formula™, and you know just how dependent you are on your Retirement Bucket™, the next question is, “what rate of return do I need to earn on my investments?”

That rate is NOT chosen arbitrarily.  It’s the rate of return that allows your money to keep pace with inflation and remain intact year after year while allowing you to continue to spend what you want.

Consequences

When you’ve reached the stage where the money you’ve saved must now support you for the rest of your life, when you’re dependent on your money to “live” as opposed to receiving a paycheck from the work you do, you have to think very differently about how you’re investing your money.

This is no longer a game.  It’s no longer a race.  You can’t afford to lose this time because, if you do, you’ll be forced to do one of two things:

  1. make drastic cutbacks in your lifestyle (who wants to do that after working all these years in preparation for this stage in your life where you get to reap all the rewards of being a diligent saver), or
  2. you will have to go back to work to make up for the losses, something your health could prevent you from doing in the future.

Neither of those sound like very good outcomes, so that’s why you have to think very differently about investing at your stage in life.

And, it’s why you have to know the investment rate of return you must earn, as opposed to randomly investing your money in whatever appears to be the ‘hot’ thing at the moment.

The Medical Analogy

To draw an analogy, it would be like you taking a new medication without a doctor first analyzing your symptoms and doing a thorough examination to determine if you even need any medication at all.

When asked why you’re about to take this new potent drug, the doctor tells you that it’s a really popular drug right now.  It’s all over the news and everyone’s taking it.

Now, if that sounds ridiculous to you, you’re right.  However, this is how millions of Americans select their investments in retirement.

They don’t have a carefully calculated rate of return they’re aiming for.  And, because they don’t, they’re at the mercy of the next salesperson who sells them whatever makes that salesperson the most money, or whatever appears to be “hot”.

For all the reasons I mentioned above, this is extremely dangerous.  Don’t be lazy and fall into this trap.  Take the time to figure out the rate of return you need to earn first.

Then you can go about crafting an investment matrix with specific investments that have the highest likelihood of getting you that rate of return over the long run.

However, before we move on to that crucial step, we have to determine the investment rate of return that YOU need to earn.

We’ll do that in the next issue of The Retirement Coach Strategy of the Week!

Retirement Coach Jack Phelps Publishes New Blog Discussing What NOT to Invest.

Jack Phelps, founder of The Relaxing Retirement Coach, delves into the significant mindset shift that must occur to successfully invest in retirement.

Wellesley, MA – February 12, 2013Jack Phelps, founder of The Relaxing Retirement Coach, a Retirement Coaching company, recently published a blog on his website (https://www.theretirementcoach.com) answering the all-important question of where to invest in retirement. The blog, titled “How Much and When”, provides the first of four Principles and Guidelines, which must be adhered to for a successful investing experience in retirement.

Jack Phelps writes, “This is one of the main reasons why the overwhelming majority of retirees continue to have horrible investment experiences and remain financially DEPENDENT during their 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 blog can be found at https://www.theretirementcoach.com/blog/how-much-and-when.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.

Retirement Coach Jack Phelps Publishes New Article Questioning The Use of “Rules of Thumb”

Jack Phelps, founder of The Relaxing Retirement Coach, discusses why Rules of Thumb leave you lacking financial confidence.

Wellesley, MA– January 18, 2013Jack Phelps, founder of The Relaxing Retirement Coach, a Retirement Coaching company, recently published an article on his website (https://www.theretirementcoach.com) discussing decision making in retirement.

The article, titled “Are You Making Decisions Based on Rules of Thumb?” illustrates how dangerous generalized ‘Rules of Thumb” can be to your financial health.

Jack Phelps writes, “If the consequences of blindly following rules of thumb like this weren’t so costly and dangerous, I’d settle for just saying they’re silly. But, the stakes are just too high.”

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/are-you-making-decisions-based-on-rules-of-thumb.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.

Are You Making Decisions Based on ‘Rules of Thumb’?

As we begin the new year together, it’s a the perfect time to integrate and install each step in The Relaxing Retirement Formula so you can continue to maintain the financial confidence you need to live exactly the way you want without worrying about money.

Before we do that, however, I’d like to share a conversation I recently had which I believe will be very instructive, while also serving as a great starting point for our discussion.

Last September, I was referred to a very nice couple by one of our Relaxing Retirement members.

They were very well read and brought a lot of questions to the table which I really appreciate.

What led them to come in to see me was the fact that the husband was planning to retire after 35 years with his employer, and they now wanted to get a handle on “THE” right investment allocation in retirement.

They had done a lot of reading and the theory that made the most sense to them was the “100 minus your age” rule of thumb.

What this theory suggests is that the percentage of your overall allocation you should invest in equities (stock market based investments) is 100 minus your age.

So, for example, if you’re 65 years old, you should allocate 35% to equity based investments. (100 – 65 (age) = 35%)

Based on that theory, everyone who is 65 years of age should invest 35% of their holdings in stock based investments.

It doesn’t matter what your circumstances, priorities, or tolerance for risk are.

This is what is known as a classic “rule of thumb”, and as you can probably imagine, I have significant challenges with it for you.

Rules of Thumb

For starters, why do ‘rules of thumb’ exist?

They exist to provide a broad guideline to the biggest audience possible.  They have nothing to do with you personally.

If the consequences of blindly following rules of thumb like this weren’t so costly and dangerous, I’d settle for just saying they’re silly.

But, the stakes are just too high.

The question to ask yourself is ‘am I willing to bet my financial future on a broad ‘rule of thumb’ created for the masses’?

Before you answer, think about this.  If you have a serious medical condition, potentially life or death, do you base your actions on what is presented as a good ‘rule of thumb’ in medical publications?

Or, do you prefer to have a prescription designed for you personally after a series of tests and evaluations?

I would wager a lot of money that it’s the latter for you.

Why It’s Different in Retirement

As you’ve heard me say more than once, when you’ve reached the stage in life you’re experiencing right now (where you’re dependent on the money you’ve saved to support your lifestyle), your overall “strategy” has to drastically change because the stakes are so high now if you fail.

Although it would certainly be more convenient if there was ‘one’ answer to “THE” right allocation question in retirement, there simply is not.

Here’s why…

How Dependent Are You?

Let’s take a look at two couples, both age 65.  Each couple has $2 million dollars in investments, the same social security retirement income, and the same pensions.

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

Ron and Rose Reactionary still have $260,000 outstanding on a second mortgage 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 both drive high end cars.  And, while their home is very nice, after 29 years, it’s starting to look “tired” and could use some upgrades.

What’s the Difference?

The difference in this example is what it costs each couple to support their lifestyle.

The income that will be required by Ron and Rose will be much greater than John and Mary.

Consequently, Ron and Rose will need to withdraw a much bigger amount each year from their investments than John and Mary.

In short, even before looking at anything else, it’s clear that Ron and Rose Reactionary are much more dependent on their investments than John and Mary Independent.

Without knowing anything else, if the both couples have the same amount of money saved, but Ron and Rose need to withdraw much more each month than John and Mary, don’t Ron and Rose need to earn more on their investments to support these greater withdrawals?

Don’t they require a greater rate of return than John and Mary in order to have their funds remain intact?

Of course.

Following that same train of thought, if they require a greater rate of return, shouldn’t they allocate their investments where they have a better chance of achieving that higher rate of return?

Certainly.

If that’s true, then how can they use the “100 minus their age” rule of thumb as a guideline for investing?

The obvious answer is they can’t.  It would be foolish.

This rule of thumb can’t possibly be appropriate for John and Mary AND Ron and Rose.

Their level of dependence on their investments is so drastically different for that to be possible.

What I’d like you to take away from this week’s Strategy is an understanding that while it might appear entertaining, and feel like you’re pushing the “Easy Button” when you read “rules of thumb” like this put out there for the masses, relying on them in your own situation can be dangerously simplistic.

It would be nice if “the” solution was that simple.  It would make our work together that much more simple.

However, after 24 years of working hands-on helping our members seamlessly transition to retirement, I can tell you that it never is.

Next week, we’re going to begin building The Relaxing Retirement Formula™, i.e. “the missing structure” you need to develop unstoppable financial confidence during this critical stage in your life.

Retirement Coach Jack Phelps Publishes New Blog Discussing Living and Functioning with Uncertainty

Jack Phelps, founder of The Relaxing Retirement Coach, delves into three critical question you must answer to benefit from The Lesson of 2012.

Wellesley, MA –January 16, 2013Jack Phelps, founder of The Relaxing Retirement Coach, a Retirement Coaching company, recently published a blog on his website (https://www.theretirementcoach.com) discussing an important lesson we can all learn from 2012.  The blog, titled “Living and Functioning with Uncertainty”, provides three important questions you can use to discover if you learned the key lesson that 2012 provided.

Jack Phelps writes, “The future, by its very nature, is filled with uncertainty.  There’s just no way of getting around that fact.  However, living and functioning with uncertainty is the dominant prerequisite to successful investing.  And, it’s the difference between those who allowed these ‘crisis issues’ to derail them vs. those who remained rational and calm.”

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 blog can be found at https://www.theretirementcoach.com/blog/living-and-functioning-with-uncertainty-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.

Retirement Coach Jack Phelps Publishes New Article Discussing Tax Strategy In Relation To The “Fiscal Cliff”

Jack Phelps, founder of The Relaxing Retirement Coach, discusses tax strategy for 2013.

Wellesley, MA – December 31, 2012Jack Phelps, founder of The Relaxing Retirement Coach, a Retirement Coaching company, recently published an article on his website (https://www.theretirementcoach.com) discussing tax strategy in light of the current fiscal cliff debate. The article, titled “2012-2013 Fiscal Cliff Tax Strategy” helps his readers make sense of the changing tax code and plan accordingly.

Jack Phelps writes, “There are steps you can and should be taking right now to prepare yourself for one key area of the budget where you still retain some control: Capital Gains Tax Rates.”

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/2012-2013-fiscal-cliff-tax-strategy-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.

Retirement Coach Jack Phelps Publishes New Blog Offering A Possible Solution For Retirees Who Wish To Travel But Fear Being Away From Their Doctor

Jack Phelps, founder of The Relaxing Retirement Coach, introduces a helpful resource for retirees.

Wellesley, MA – December 30, 2012Jack Phelps, founder of The Relaxing Retirement Coach, a Retirement Coaching company, recently published a blog on his website (https://www.theretirementcoach.com) offering a resource for retirees who wish to travel but are afraid to be far from their doctors. The blog, titled “Liberate Your Travel Plans If You Fear Being Away From Your Doctor” sheds light on a program known as MedjetAssist.

Jack Phelps writes, “You’ve reached the point in your life where you’ve earned the right to “own” your schedule instead of your schedule owning you like the overwhelming majority of Americans. What a great position to be in! However, during my intimate conversations with all of you over all these years, I also know that a number of members choose not to travel.”

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 blog can be found at https://www.theretirementcoach.com/blog/liberate-your-travel-plans-if-you-fear-being-away-from-your-doctor.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.

Retirement Coach Jack Phelps Publishes New Article Discussing A Common But Costly Investing Mistake

Jack Phelps, founder of The Relaxing Retirement Coach, explains that by focusing only on the tax consequences of an investment decision, investors often lose sight of the bigger picture.

Wellesley, MA – December 17, 2012Jack Phelps, founder of The Relaxing Retirement Coach, a Retirement Coaching company, recently published an article on his website (https://www.theretirementcoach.com) discussing investment strategy. The article, titled “Are You Letting The ‘Tax Tail’ Wag the Dog?” explains that tax consequences of investment decisions, while certainly important, should not be the only factor considered.

Jack Phelps writes, “This is a classic example that I’ve personally witnessed time and time again. And, it’s one of the great lessons of why the average investor not only doesn’t beat market averages, but instead, as statistics have now shown, earns 55% LESS.”

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/are-you-letting-the-tax-tail-wag-the-dog-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.

Are You Letting The ‘Tax Tail’ Wag the Dog?

Last month, I revealed an incredible statistic reported by DALBAR, Inc., a Boston based research firm.

They revealed the fact that while the S&P 500 Stock Market index earned 7.81% per year over the last 20 years, the average investor who invested in the stock market earned only 3.49%!

Go ahead and re-read that last sentence to let it sink in!

This means that that average investor earned 55% less than the market index, a measure of average returns, not above average!

55% less each and every year!

Since then, I’ve revealed several big reasons why this is the case.

In this article, I’m going to finish off by revealing a huge contributor to this massive underperformance problem.

And, it may very well come as a surprise to you.

Letting the Tax Tail Wag the Dog

Let me explain what I mean by walking you thru a real life Case Study of an employee of GE:

  • Charlie was an employee of GE for 42 years
  • He purchased GE stock shares through payroll deduction during entire career
  • As a result of purchases and stock splits, when Charlie retired in January 2002, he owned 27,000 shares!
  • At $41 per share, the value of his shares was $1,100,000
  • What’s important to note is that these GE shares represented 63% of Charlie’s investments!
  • The next important fact was that his cost basis in the GE shares (i.e. what he paid for them) only $50,000

Question #1 to Contemplate: Is it a good idea for Charlie to have 63% of his investments tied up in any one stock?

Question #2: If Charlie had $1.1 million in cash today, should he buy $1.1 million of GE stock?

Question #3: If the answer is NO, why would Charlie then hold on to them and not diversify?

The Answer: Taxes!

Because his cost basis was only $50,000, if he sold the shares back in 2002, he would have paid $210,000 in capital gains taxes, and walked away with $890,000.

Charlie’s focus was on the $210,000 he had to pay to free up the money and diversify.

He would have been far better off focusing on the fact that he had to part with 20% in order to free up the other 80%.

It sounds a lot better.

So, what did Charlie do?

Like the overwhelming majority of people, Charlie hung on to the GE shares to avoid paying any taxes.

Now, let’s take a look ahead to today and see how good of an idea that was.

  • If Charlie sold the shares back in 2002, paid the tax, and reinvested the remaining $890,000 in a generic diversified S&P 500 Index Fund like Vanguard’s, from January 2002 to November 2012, the value would have grown to approximately $1,339,000.
  • However, he would then have to pay capital gains taxes again of $90,000, so in November, 2012, he would have ended up with $1,249,000 after taxes if he had sold his shares back in 2002, paid the taxes, and reinvested in a basic diversified equity index fund instead.

Let’s now look at where Charlie is now since he didn’t sell his GE shares back in 2002 in order to avoid paying taxes.

  • If he continued to hold GE shares, including reinvesting the dividends, his shares, in November, 2012, his shares are worth $825,000.
  • When he sells them, he still has to pay the capital gains taxes that he’s been trying to avoid all along. Those would total approximately $155,000 leaving him with a “net” balance of $670,000.

To recap, had he sold, paid the taxes, and reinvested, he would have $1,249,000 (the after tax proceeds of the 500 Index fund shares sold in November 2012).

However, because he let taxes drive his investment decision back in 2002, today he only has $670,000 (the value of his GE shares today minus capital gains taxes).

The Penalty for Letting the Tax Tail Wag the Dog

If you do the math, that’s $579,000 that Charlie lost because he “Let The Tax Tail Wag The Dog” instead of using sound, rational judgment.

Charlie focused on the dollar amount that he had to pay in taxes back in 2002, i.e. $200,000. I agree that’s extremely painful (and the fairness of it is another topic we won’t touch today).

However, by focusing on that dollar cost, he drastically increased his risk and lost more than twice as much!

This is a classic example that I’ve personally witnessed time and time again. And, it’s one of the great lessons of why the average investor not only doesn’t beat market averages, but instead, as statistics have now shown, earns 55% LESS.

Stay out of the trap! Evaluate the tax consequences and the investment consequence simultaneously!

Retirement Coach Jack Phelps Publishes New Blog Offering A “Year End” Financial Checklist For Retirees

Jack Phelps, founder of The Relaxing Retirement Coach, provides helpful information for retirees as 2012 draws to an end.

Wellesley, MA – December 13, 2012Jack Phelps, founder of The Relaxing Retirement Coach, a Retirement Coaching company, recently published a blog on his website (https://www.theretirementcoach.com) offering year-end financial advice. The blog, titled “2012 Closeout Checklist” provides a number of suggestions to help retirees close out 2012.

Jack Phelps writes, “We all lead a busy lives and managing your financial life isn’t always at the top of your list that you draw up each and every morning with your cup of coffee. Given that, if you haven’t already, here are some strategies to be thinking about and acting on before December 31st.”

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 blog can be found at https://www.theretirementcoach.com/blog/2012-closeout-checklist-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.

The Underlying Problem

Earlier this month, I shared the grim and disturbing findings revealed in DALBAR’s annual report.

To refresh your memory, here’s what the report revealed for last year, i.e. 2011:

  • The S&P 500 Stock Market Index earned 2.12% (including dividends reinvested) in 2011
  • Over the same twelve month period, the return of the “average” investor who invested in the stock market (not an investment, but an investor, i.e. a person) was -5.73%.

However, anyone can have a bad year and this is too small of sample size, so Dalbar also presented their findings for the last 20 years ending on December 31, 2011:

  • The Average annual return of the S&P 500 Stock Market Index from 1992 – 2011 was 7.81% (including dividends reinvested)
  • However, the average annual return of the “average” equity investor (not an investment, but an investor, i.e. a person) over the same 20 year period was 3.49%

What these numbers tell us is that, while the S&P 500 Market Index delivered a strong average annual return over those 20 years of 7.81%, the average stock fund investor (a person, not an investment) only achieved 3.49%!

That means that the average equity investor’s return was 55% less than the broad market index each and every year!

Now THAT is a sad statistic!

The Underlying Problem

There is no ONE reason or one strategy you can use to close this gap.

However, over the last 23 years, there are several “strategic behavioral mistakes” that I’ve personally witnessed that I’d like to share with you that you can instantly employ.

Today, I’d like to discuss what I refer to as “The Underlying Problem”.

First, a statistic for you that you may have heard me share with you before: the average retirement age today in America is age 62.

If you are a 62 year old couple (and each of you does NOT smoke), insurance company mortality tables tell us that at least one of you will live to be 92 years of age!

Please take a moment to go back and read that last paragraph before going on.
That means that, if you’re age 62, you’ve got 30 years with which to provide lifestyle sustaining income.

30 years!

Not five.

Not ten.

Not even just twenty.

But 30 years!

The Goal: Lifestyle Sustaining Income

By “lifestyle sustaining”, I mean income that keeps your standard of living the same even when prices rise.

Let me put that into perspective for you.

In 1932, a first class stamp cost 3 cents.

In 1971, it was 8 cents.

In 1980, it was 15 cents.

Today, it’s 44 cents and rising!

Not to send a “better” letter, or even get it there faster as you’ve recently observed, but the same letter.

While there are very few guarantees in life, one that I believe we can take to the bank is the fact that life will continue to get more and more and more expensive.

As I just illustrated, the price to mail the exact same letter costs you three times what it did just 30 years ago.

That’s extremely instructive given the 30 year lifespan of a 62 year old retiring couple.

Protecting Principal vs. Protecting Purchasing Power

Now, here’s the problem from an investment standpoint…what is the dominant underlying governing issue among the overwhelming majority of retirees?

Protecting Principal!

If there’s a loss that everyone tends to focus on managing, this is it. Above all else, “we have to protect our principal.”

And, this governs their investment decisions.

Well, in reality, the biggest financial issue, as I’ve just illustrated, is the protection of your “purchasing power”, or your ability to sustain the same standard of living.

This has nothing to do with wanting “more” for yourself.

It’s about sustaining the same lifestyle.

Even if inflation is only 3% over the next 30 years, and I would strenuously caution you against using that low of a number, but even if it is only 3%, you’ll need $2.44 (2 dollars and 44 cents) to pay for the same goods and services that the dollar in your pocket pays for right now.

That means that if groceries currently cost you $100 per week, they’ll cost $244 for the exact same groceries.

Again, this is not a bonus to protect your purchasing power.

It’s a bare necessity! Yet, the overwhelming majority of retirees have as their #1 goal to protect their principal, when in fact it has to be the protection of their lifestyle sustaining income.

I can’t stress enough how important it is to clearly distinguish between those two goals if you want your hard earned money to be there for you for the rest of your life.

Next week, we’re going to continue on and discuss the second biggest contributor to horrific investment results among retirees, and what you can do about it right now.

Retirement Coach Jack Phelps Publishes New Article Discussing The Importance Of “Lawsuit Insurance”

Jack Phelps, founder of The Relaxing Retirement Coach, shares a chilling story which highlights the importance of “lawsuit insurance”.

Wellesley, MA – November 19, 2012Jack Phelps, founder of The Relaxing Retirement Coach, a Retirement Coaching company, recently published an article on his website (https://www.theretirementcoach.com) warns that a single mistake could cost a retiree dearly if he or she is not protected. The article, titled “Should You Have ‘Lawsuit’ Insurance” shares an instructive story with his readers..

Jack Phelps writes, “In most cases, if you have a quality policy with a quality insurance company, the combination of these 2 policies can protect you from the financial devastation of this horrible occurrence. It won’t help in dealing with the emotional toll of injuring someone, but it can save you from the financial fallout, and preserve what you’ve taken your entire lifetime to accumulate.”

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/should-you-have-lawsuit-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.

Should You Have “Lawsuit” Insurance?

Warning: This article contains graphic descriptions that might be unsettling.

The smell of Fall is in the air. There’s nothing like it.

The sun is bright, and the brown, orange, and yellow leaves are falling.

It’s 3:30 on a Saturday afternoon and you’re driving home from your granddaughter’s soccer game so proud of her for scoring the winning goal.

There’s nothing quite like the screams of an excited group of 11 year old girls.

As you’re driving along, you have the Notre Dame football game playing on your radio, but you’re not listening very carefully because you’re still caught up in the buzz of your granddaughter’s soccer game and the beautiful Fall foliage.

Pulling into your neighborhood, you catch the tail end of a breaking news sports update about the Red Sox.

Unable to hear it clearly, you reach down to turn up the volume so you can hear the announcement more clearly.

At that very same instant, some neighborhood children are playing soccer in their yard. As your car approaches, the soccer ball rolls out into the middle of the street where you’re driving and one of the kids chases after it in full speed forgetting to look both ways to see if a car is coming.

Just as you’re reaching for the volume knob on your radio, in the corner of your eye, you see him run out from behind that parked car, so you instinctively jam on your brakes.

But, it’s too late. You hear the sound you prayed you’d never hear, and he’s now lying on the ground motionless in front of your car.

As the paramedics arrive, the good news is the little boy is still breathing.

The bad news is that he’s not moving as they struggle to keep his body still and place him on the stretcher.

After what seems like an eternity, he’s taken in the ambulance to the hospital and you are left there to talk with the police about what just happened.

Two detectives are snapping pictures of the car and measuring your skid marks in the street.

2 Weeks Later

A few weeks have now passed. The shock of what happened has not gone away, but it has come into perspective.

The boy is still in the hospital, but will be coming home soon. Several bones in his body were broken, and after 3 separate surgeries, the doctors are confident that he’ll be able to walk just fine after a good 6 months of physical therapy.

However, the permanent damage done to his right leg will probably prevent him from playing competitive sports for the rest of his life.

What Does This Mean For You?

As if dealing with the emotional torment of accidentally hurting a young boy wasn’t enough, now comes the worst part. The police reports come back concluding that you were driving 36 miles an hour in a 30 mile an hour zone. And, because of that, you’re considered to be 100% at fault for negligence.

You didn’t mean to hit the child. You’re a careful driver. You’ve never had an accident in your life. Your driving record proves it.

But, all of that doesn’t matter right now because unfortunately, you’re going to be at the wrong end of a very expensive lawsuit. You can expect that within a few weeks, you will be summoned by an aggressive attorney requesting, among other things, a listing of all your income and assets.

And, the only form of compensation the attorney will get from the case will be from receiving a percentage of the damages collected from you.

And, it probably won’t be a small number.

Where Will This Money Come From?

The question for you is where will this money come from to pay for you to hire an attorney and to pay the eventual damages that will be brought against you?

It’s taken 40 years to build up enough money for you to be able to retire. You’ve given up so much in order to save for your future.

And, now, you’re finally reaping the rewards of your lifetime of hard work and disciplined savings. You’re retired and enjoying life like never before.

But now, everything you’ve worked your entire lifetime to save could be taken from you in an instant.

This Week’s “Strategy

This is a horrible story that I hope never happens to you. But, as you can see, it can happen to anybody, so I’m telling it to you to motivate you to protect yourself.

The strategy and solution in most circumstances is to have the highest liability limits on your auto insurance possible. But, even more importantly, because potential damages could easily exceed the limits on your auto insurance, is to have a separate Personal Catastrophe Insurance Policy, otherwise known as an“Umbrella” Policy, also known in small circles as Lawsuit Insurance.

In most cases, if you have a quality policy with a quality insurance company, the combination of these 2 policies can protect you from the financial devastation of this horrible occurrence.

It won’t help in dealing with the emotional toll of injuring someone, but it can save you from the financial fallout, and preserve what you’ve taken your entire lifetime to accumulate.

And, the good news is that it’s inexpensive. Each million dollars of umbrella liability coverage costs only about $250 per year.

That’s a small price to pay for the peace of mind it can provide for you in case this ever happened to you.

Visit with your property and casualty insurance agent today and coordinate your homeowners, auto, and umbrella liability insurance. Discuss precisely what each policy covers and what it doesn’t.

This may take only 30 minutes but it could turn out to be the most important 30 minutes you’ve ever spent on your finances.