Hiring a Band For Your Funeral?

FAMILY UPDATE

My daughter made the varsity lacrosse team at Sarasota High School. They have a whopping 22 games this year. We try to attend the home games. It's fun to see her training and getting into great shape. She didn't score a goal last year, but we have a good feeling that's going to change.
We are spoiling our mini Goldendoodle. He really likes eggs, so now when we are frying some up we make an extra one for him. The food we buy him is almost as pricey as our human food. Nobody told me how incredibly expensive pets can be.

The details of this tale come from a few of my client’s stories, not one individual couple, and all of the names have been changed. But every single example I’ll give I’ve seen play out during my career. John and Linda never considered themselves wealthy. They worked hard, lived below their means, and saved what they could. By the time they finished up their careers, they found themselves living on $4000 a month of Social Security income. With no debt and a habit of reasonable spending, the Powers found that Social Security alone easily covered their monthly budget. The Powers had also learned to "pay themselves first" throughout their careers. They maxed out their 401k contributions and created a healthy savings account at the bank. Now retired, their net worth totaled nearly $700,000. "Linda," John asked, "When do we start spending this money? What is it for? We don’t really need anything." Linda smiled back, "John, I think this money was given to us for a reason. I don’t want to hoard this abundance and then die with a bunch of money. The kids would be appreciative, but I don’t think a large inheritance dumped in their laps is a good idea. You know Bobby. He’d be driving a Lamborghini in no time." Jim and Linda decided to take a stand. Instead of worrying about outliving their money, they put together a spending plan that would allow them to use the perfect amount now. Not too much, and not too little. Taking a stand and making a plan. First order of business? Jim and Linda took their three kids and five grandkids to the Grand Canyon. After a week of family bonding, Jim and Linda found themselves at their kitchen table again wondering aloud…. "That was wonderful. I can’t believe how precocious little Suzie has become. Ok, so…… now what? We don’t need a new kitchen, we don’t have any real interest in traveling internationally. What do we do next?" A lightbulb went off in Jim’s head. "You know what? Our kids are all in tough financial situations. Between starting new careers, raising their own kids, and buying homes they’re barely balancing their budgets each week. Why don’t we give them a little money each month now, when they actually need it? When we pass away they could be retired! I think five hundred dollars a month for each kid could work. That’s $18,000 a year which fits perfectly into our financial spending plan." "Maybe they can afford special tutoring for little Suzie and tennis for Joey. That is a great idea!" Linda replied, getting excited. The golden, and generous, years. As Linda and Jim grew older their generosity continued. They began donating $10,000 a year to various charities but did it in a different fashion. Each year, the entire family — grandkids and all — gathered to discuss what causes they wanted to support. The seeds of charity and giving were planted in their growing family. Their daughter-in-law lost her mother to breast cancer, so she always asked that some of the money go to research. Their son had a soft spot for children and "adopted" several kids from around the globe through a global outreach organization. Their other son preferred to keep it local, supporting mental health nonprofits in his city. This generous and creative giving continued as the Powers grew older. Linda’s niece got involved in a nasty divorce and found herself debt-ridden and jobless. Linda helped her get through that trial. Their oldest grandson, Peter, had the opportunity to study Shakespeare in London for a summer. Without his grandparent’s help, Peter would have spent the summer playing video games and eating Taco Bell burritos. The Powers tipped their servers generously. Sometimes they even left a 50% tip with a note that read, "You’re doing a great job. You work so hard. You deserve it." A legacy of living and giving. As the Powers grew into their 80s they began to consider their legacy plans. Even though they had used a good bit of money during their retirement years, their net worth still remained at around $700,000 due to their portfolio’s investment gains. Linda had her own lightbulb moment. "Jim, I have an idea. Let’s set up a plan to divvy up the money. Instead of a lump sum now, why not give a little bit each year? We could also include a different message each year in the letter that accompanies the money." Once Jim and Linda passed money would always arrive on December 1st, as a sort of Christmas present from heaven. With each annual payment a letter was included, written beforehand, that would instill an important value or share a vital life lesson. Jim and Linda’s legacy would last long after they were gone. The Powers both passed away in their late 80s. So many people attended their funeral they had to put extra chairs in the church. One by one, people stood and spoke about what wonderful and kind people the Powers were. But their son, Paul, stole the show. "Mom and Dad," Paul started, voice breaking, "were the most generous people I have ever known. Not only were they generous with their money but also with their time and wisdom. I learned patience and kindness from their everyday actions. I learned to support those in a time of need. They taught me that life was too short to worry, and that it was okay to pursue your dreams, loving people along the way." Paul became so emotional he had a hard time speaking. "I’ll never forget the time Mom and Dad had a repairman come to their house. He was clearly distraught and Mom couldn’t help but ask what was wrong. It turned out that he had just lost his home because he couldn’t afford the rent after his son was diagnosed with leukemia. Without missing a beat Mom told him that she would pay the first six months’ rent at his new apartment. They even brought them meals from time to time during his son’s treatment." "Mom and Dad always reminded us what was important in life. They showed us that family, friends, and relationships should always be first on the priority list." For the Power’s final act of kindness, they had prepaid their wake — which was more a celebration of life. They even had a band. That’s a legacy. That’s a life. This story — and all the empowering, fulfilling, joyous stories I hear from my clients, inspire me every day. I hope this one inspires you, too. Be Blessed, Dave

I am now doing virtual Social Security webinars each Saturday at 10:00 AM. If you know someone that should attend send them to www.SocialSecurityRSVP.com. Thanks!

 

Something Worth Dying For

FAMILY UPDATE

Video games are becoming more and more realistic. The other day my wife was watching a soccer match for a few minutes with us. She couldn't believe it when we told her that she was actually watching a soccer video game that the kids were playing. I can't imagine what video games will look like ten years from now. They will be indistinguishable from the real thing.
January is peak orchid season. My orchid garden is blooming everywhere. I went to the Sarasota Orchid Show last week with my mother-in-law. I was probably the youngest person there by fifteen years.

When I say "life insurance salesman," what image comes to your mind? Probably nothing positive. I spent a short part of my career selling life insurance and it was miserable. Why? Nobody wants to buy life insurance. The application process is difficult and complicated. Worse, the very concept of life insurance forces you to think about something most would rather not: your own death. Once you get your life insurance, you never want to see your agent ever again. They are an unwelcome reminder of your mortality. When the agent does come around again, you probably won't see them. Because you are dead. I have great respect for the sales warriors out there who tirelessly get people to insure their own life. It is a thankless job, but incredibly important. Without getting nudged along, most people will never obtain it, and the consequences could be devastating. Whenever someone dies, it is deemed inappropriate to ask, "Did he/she have life insurance?" But for many people the answer to this question could change the rest of their lives. If a mother is at home raising three children, and her husband, who was making $70,000 a year, were to die, she is suddenly in a dire situation. I can’t emphasize this enough. She could go from a normal life to a life of poverty. Actually, let me stop right here for a very important public service announcement: If you have a child younger than twenty-one, you need life insurance on the life of both parents. Period. End of story. It is remarkably irresponsible to live without this safety net. If you have grandchildren, call their parents right now and make sure they are protected. If you are at home raising children, your death would put a financial strain on the household, as the children would need care going forward. You still need life insurance even if you are not making an income. How much insurance do you need? If you die, life insurance needs to be able to replace your income. Not just for one year, but for the foreseeable future. If you are making $50,000 a year, you need to get $1,000,000 of insurance. Why? Remember it’s appropriate to withdraw 5 percent from your portfolio of stocks and bonds each year. So if you make $50,000 you need $1,000,000 of insurance. If you pass away, your spouse or beneficiary can (and should!) take the million bucks, invest it, and take a yearly distribution of $50,000. It might seem like a big number, but it’s just simple math. We will talk soon about how remarkably inexpensive life insurance can be. There are basically two kinds of life insurance. The kind that lasts forever and the kind that lasts for a limited term. The "lasts forever" kind is far more expensive. With this kind of insurance, the insurance company knows that, at some point in time, they will have to pay up … unless you live forever. The far more popular "term insurance" is, in my estimation, the right solution 98 percent of the time. Term insurance is simple. For example: $100,000 of 20-Year Term Life Insurance means that if you die during the first 20 years, the company pays $100,000 tax-free. If you live longer, the policy ends. This kind of insurance is far cheaper because most of the time the insurance company doesn’t have to pay anything. The term ends before you die. To give you an idea of how inexpensive these policies are: A healthy 25-year-old man can get a $1,000,000 policy for twenty years for $40 per month. (How could young parents not buy these policies?) A healthy 30-year-old woman can get a $1,000,000 policy for twenty years for $30 per month (it’s cheaper because women live longer). A 50-year-old man can get a $1,000,000 policy for twenty years for $150 monthly. The insurance company starts to get a little nervous that you will die during the twenty-year period. A 70-year-old man can get a $1,000,000 policy for twenty years for $2,000 per month. Now the company is really afraid that you’ll die during the term. Whenever you buy life insurance, you have to go through an underwriting process. This is where the insurance company checks you over. You will have to turn over medical records, and someone will come out to your house to take blood, urine, and other vital statistics. These examples above all assume you are in good health. If you have pre-existing conditions the price could double or triple. In fact, many people can’t qualify at all. If you’ve had cancer, a heart attack, or a stroke, you might never be able to get insured. The bottom line is this: If someone is financially dependent on you, you need life insurance. I know it's not fun to think about. Don't think about your death; think about your beneficiaries and their protection. Don’t make this more complicated than it is. Now go out and get those grandkids protected. Be Blessed, Dave

I am now doing virtual Social Security webinars each Saturday at 10:00 AM. If you know someone that should attend send them to www.SocialSecurityRSVP.com. Thanks!

 

I Predict You’ll Be Fooled

FAMILY UPDATE

My niece got married to a very nice man from India. This weekend we went to the Hindu marriage ceremony (they are officially getting married in a church this summer). We all dressed up in Indian garb as a show of support.
It was very interesting. His side of the family was huge. Do you know how many people live in India? 1.4 BILLION. I don't know anything about their culture except that I like their food.

Harry and Wanda Johnson were watching the evening news when a story came on about the stock market. Their hearts sank as red numbers filled the screen showing a 3% loss in the stock market for the day. "I know Dave keeps telling us that the ups and downs don’t matter. But they sure feel like they matter. With the country the way it is now, it just feels like things will get worse," Harry said. "But Harry," Wanda interjected, "remember how Dave showed us that most time periods feel unprecedented but investing in stocks and bonds has never failed?" Harry rushed to the internet and searched for stock market prognostications. The first article popped up: "‘Dr. Doom’ Nouriel Roubini says a severe recession will cause stocks to drop 25%—and warns zombie companies are in danger." Harry said to himself, this guy is an economics professor. This is terrible! And what in the heck is a zombie company? The next article was titled: The world’s top stock strategist says an ‘earnings recession’ is coming for markets—and it could be similar to what happened during the 2008 financial crisis. A top stock strategist said this? Oh no! Harry thought. I’m calling Dave. It seems like the market drop is almost guaranteed, he thought. "Harry," Dave said on the other side of the phone. "I am going to send you an email that might help you from derailing your long-term financial health." Harry opened the email. It showed a list of predictions from the past. Time Magazine, September 1974: "A Gallup poll published last month found that 46% of adults feared a depression similar to the classic one of the 1930s." Yeah, that never happened. Business Week, August 1979: Cover story, "The Death of Equities." Here’s a sample from the article: "The old attitude of buying solid stocks as a cornerstone for one’s life savings and retirement has simply disappeared … The death of equities is a near-permanent condition." Just three years later, a roaring bull market that lasted twenty years got underway. Forbes Magazine, July 1993: Cover story, "Bearish on America." Morgan Stanley’s Barton Biggs advised readers to sell domestic stocks, saying Bill Clinton’s policies were bad for the country. What actually happened: The S&P 500 index delivered a compound return of 18.5% over the next seven years. Business Week, March 1998: "The year 2000 is a unique and unprecedented event .. the first economic disaster to arrive on schedule." Whatever happened to that Y2K disaster? It ended up being quite a yawn, didn’t it? Fortune Magazine, September 1998: Cover story, "The Crash of ’98: Can The U.S. Economy Hold Up?" Fortune columnist Joseph Nocera wrote, "This time it is different. This time the market won’t be so quick to bounce back … Who can look at the world and not conclude that things have changed dramatically?" Um, not so much. Markets rocketed upward for the next three years. Money Magazine, April 2004: "Apple's share of the worldwide personal-computer market has shrunk to 2 percent from 3.2 percent five years ago … It's unclear what Jobs can do or plans to do to turn around Apple's fortunes." Yeah, Steve Jobs’ return to Apple didn’t work out well at all, did it? "Dow Could Crash to 3,000 in 2013" is the title of a piece from 2011. This outlandish prediction came from Harry Dent, CEO of economic research company HS Dent and the author of the ambiguously titled book "The Great Crash Ahead." Dent predicted in 2011 that the Dow would have a tough 2012 and eventually crash to 3,000 in 2013; the index has not been that low since the early 1990s. It’s hovering around 34,000 today. Think Advisor, April 2022. Market Crash Has Begun; ‘Fireworks’ to Blow by June. Nope. No fireworks. Dave’s Take: As I’m writing this I’m getting more and more frustrated. All these fund managers and economists and professors spouting out complete nonsense. They are coming from such a place of authority that it is hard to see through the smokescreen. I have very well-educated clients who still fall for this stuff. Nobody can escape it. I can’t say this more clearly. If anyone, and I mean anyone, predicts anything about the direction of the stock market they are guessing. The whole concept is illogical. Let’s say that there is an expert out there that consistently predicts the direction of the markets. Guess what? Every person in the world would know this person’s name. People would be throwing billions of dollars at him, begging just to get on board with his all-knowing brain. Why would there need to be investment managers at all? If one person has all the answers, the rest of the "experts" would no longer exist. So if someone forwards you an email today about an imminent financial catastrophe send it to the junk folder. Be Blessed, Dave

I am now doing virtual Social Security webinars each Saturday at 10:00 AM. If you know someone that should attend send them to www.SocialSecurityRSVP.com. Thanks!

 

This is a Really Bad Time to Invest

FAMILY UPDATE

Happy New Year! I haven't stayed up until midnight on New Year's in years. But this time two of my kids wanted to try. It wasn't easy, but I made it! At exactly 12:02 I was in bed.
Desmond the dog rolled around in something gross and smelly. Below you can see how we cleaned him.

The world seems extra uncertain and crazy right now, doesn’t it? 1. Rampant inflation 2. Stock market volatility 3. Incredible political divisiveness 4. Terrorism, both domestic and global 5. Worldwide pandemics 6. Foreign proxy wars This stuff is downright scary. How could you not be thinking to yourself, "This is a bad time to invest. I had better wait until things cool down." I can’t blame you for having those thoughts, but allow me to gently plant a seed: This way of thinking could devastate your long-term financial well-being. So this week I want to give you some perspective. Let’s all jump into my handy time machine. We're headed back to early in the 20th century. (Buzz. Whirr. Beep. Clunk.) We've arrived! 1. The year is 1941. Hitler is marching across Europe. The war is clearly working in his favor. The reality of World War II can be seen on every American’s face. News just hit that Pearl Harbor has been bombed by the Japanese. Boys are going to war. American citizens are very realistically thinking to themselves, "THIS time is different. The stock market could collapse and never recover. Heck, there may not even BE a stock market in a few years. We may all be speaking German." If you invested $100,000 in 1941, ten years later you'd have $483,014. Let's jump ahead a few years. Next stop, 1951! 2. The year is 1951. Harry Truman orders the development of the hydrogen bomb. Russian expansionism has become a giant concern. The Korean War begins when North Korean Communist forces invade South Korea. Why in the heck would you invest your money at this time in history?! A new "red" menace has appeared from the wreckage of WWII. The world is an uncertain and scary place. If you invested $100,000 in 1951, ten years later it would be worth $446,944. Buckle up, because our time voyage still has a few more stops. 3. The year is 1962. The Cold War begins to really heat up. The USSR has plans to build missile bases in Cuba capable of launching nuclear warheads. As a side note, the Russians had, the year before, successfully tested a 50-megaton hydrogen bomb. The American populace is gripped with fear. Schools run nuclear attack drills for students. The possibility of a new World War is staring us in the face. You would have to be completely nuts to invest your money facing such uncertainty. The possibility of worldwide nuclear Armageddon would get any investor a bit nervous. If you invested $100,000 in 1962, ten years later it is worth $257,778. Let's jump ahead to the seventies. Groovy, man. 4. The year is 1974. The Watergate scandal has rocked the country, leading to the resignation of Richard Nixon. The Arab oil embargo, which began the year before, has had a deep effect on the economy. Unemployment reaches historic highs. Cars line up for miles at the gas pumps. Society—economically, politically, and socially—is experiencing some of the worst struggles since the Great Depression. Investing your hard earned savings at this point in history is ludicrous. The economy is in shambles with no relief in sight. If you invested $100,000 in 1974, ten years later you would have $397,874. You know what? Let's take the expressway past the eighties. Here we go! 5. The year is 1991. Saddam Hussein invades Kuwait. A new Middle-Eastern menace has appeared on the scene. George Bush initiates Operation Desert Storm. Racial tensions explode in Los Angeles following the Rodney King verdict. What a crazy time to be alive! For the first time, the news stations report on the war in real-time, broadcasting frightening images of bombs exploding and tracers filling the air from anti-aircraft guns. Investing during such upheaval would be nothing short of irresponsible. If you invested $100,000 in 1991, ten years later its worth would be $337,272. Two more stops on our way back to present day. 6. The year is 2003. The September 11th attacks have radically changed the way Americans view the world. The USA PATRIOT Act and Department of Homeland Security come into being. Hundreds of thousands of troops are called up. The U.S. invades Iraq. The threat of radical Islamic terrorism seemingly comes from nowhere. Tension fills the hearts and minds of the American public. Why would anyone invest their savings amid such uncertainty? If you invested $100,000 in 2003, ten years later it would have grown to $204,207. Last stop on our Time Travel Express! 7. The year is 2008. The housing market plunges. Banks are hit hard, most of them slashing dividends to near zero. Respected institutions such as Lehman Brothers, Washington Mutual, and Countrywide go bankrupt. The stock market goes into free fall. The "Great Recession" is upon us. If you invested $100,000 at the end of 2007 (before the stock market crash), ten years later it is worth $225,863. I think you get the point. The phrase "This is a bad time to invest my money" can have dramatic consequences. The world will always seem unstable. Don’t let it derail your financial independence. Be Blessed, Dave

I am now doing virtual Social Security webinars each Saturday at 10:00 AM. If you know someone that should attend send them to www.SocialSecurityRSVP.com. Thanks!

 

Final Exam

FAMILY UPDATE

We had a big Christmas party. My wife comes from a large family and everyone lives in the area. It took three hams to feed them.
This family keeps getting bigger and bigger. As nieces and nephews (nine of them) start to get married and have kids, these parties are going to have to be held at a banquet hall.
Our adorable pets all turned one this week. Desmond is the dog (Mini Goldendoodle). Hemi and Coconut are the Ragdoll cats. They've added so much to the family. Happy Birthday pets!

I've had a lot of good feedback on the quiz I sent a couple months ago, so I figured, this week, I am going to test your wits again. I don't want you cheating by peeking at the answers. There is a string of letters after each question. The third letter will reveal the correct answer. 1. The Full Retirement Age, according to Social Security, for someone born 1960 or later is: A. 65 B. 66 C. 67 D. 70 Answer: ADCBACC (the answer is C because it is the third letter in that string of letters) 2. You can work and receive Social Security at the same time: A. If you at least you 62. B. If your income is less that $19,600. C. If you are at least 70. D. If you work for the federal government. ACBDADA 3. The Cost of Living Adjustment for Social Security this year is: A. 8.7% B. 11.1% C. 5.9% D. There is no increase AAACDCD 4. What is an "S&P 500 Index Fund"? A. A mutual fund that is actively managed by investment managers. B. A basket of stocks that holds the 500 biggest companies. C. An investment you should only use inside an IRA. D. A basket of stocks that holds the companies inside the Dow Jones. BABDCDC 5. What was the total return during the worst five year period in the stock market's history? A. -18.1% total return B. -35.4% total return C. +3.4% total return D. -2.3% total return DBDCDAC 6. Which of the following is NOT a kind of bond? A. Government Bonds B. Municipal Bonds C. Large Cap Bonds D. Corporate Bonds BDCACBC 7. Who can best predict the direction of the stock market? A. Economists B. Market Analysts C. Finance Professors D. Absolutey no one CDDCABC 8. Are we headed into a recession in 2023? A. I know, but I'm not going to tell you. B. Yes, if inflation continues to rise. C. Nobody knows. People are always predicting recessions. D. No, the economy is so strong that we can get through these times. BCCDAA 9. In 1981 the world poverty rate was 42%. What is it now? A. 8.6% B. 30.2% C. 40.9% D. 15.4% ADADCA 10. At what age are you too old to invest your money in stocks? A. 80 B. 90 C. 65 D. Never ACDDDCA 11. Which of these statements is true? A. Most spending happens during the first few years of retirement. B. You have to have $1,000,000 to retire comfortably. C. You should look at your portfolio once a month. D. You must have your house paid off before you retire. ABACDA 12. Currently the Dow Jones is around: A. 38,000 B. 30,000 C. 25,000 D. 33,000 BCDDCAB 13. At the depths of Covid the Dow Jones fell to: A. 30,000 B. 21,000 C. 32,000 D. 25,000 ADBDABA 14. From 1800-1900 the stock market averaged: A. 5% B. 10% C. 3% D. 8% AABACD 15. If your child started investing $100/mo at age 20, how much would they have at age 65? A. $130,000 B. $560,000 C. $860,000 D. $948,000 ABDBADA 16. For many the biggest expense in retirement is: A. Car repairs B. Prescriptions C. Dental care D. Taxes ADCDACA 17. How much do you pay in payroll taxes (that go to Social Security)? A. None B. 6.2% C. 8.9% D. 3.4% AABDBAC 18. When you pass your IRA on to your children at death, what happens? A. They have to pay taxes on the proceeds immediately. B. They have to take a little bit out each year for the remainder of their lives. C. They have ten years to take distributions. D. The IRA is not taxable once passed down. CCCDADC 19. Buying a rental home to fund your retirment is: A. An easy way to create income. B. A very safe way to keep your money growing. C. Very risky with home prices where they are now. D. Probably a bad idea. Do you really want to be a landlord? BCDBACD 20. My favorite sports team is: A. The Philadelphia Eagles B. The Pittsburgh Steelers C. The Cleveland Browns D. The Buffalo Bills CDBCABC How did you do? Let me know! Be Blessed, Dave

I am now doing virtual Social Security webinars each Saturday at 10:00 AM. If you know someone that should attend send them to www.SocialSecurityRSVP.com. Thanks!