|CASE STUDY 3 67 YEAR OLD TOLD TO GO BACK TO WORK
A lady comes into my office and at the moment she is hot in a "happy place". It seems that her stock broker
has told her that in order to have the income that she wants she should go get at least a part time job.
Fortunately for her, her son told her she should come see me and see if I agreed with the assessment. I did
not and here is why.
The lady told me that she wanted her investments to provide her with about $500 of income a month and
that her stockbroker told her that to be sure that she never ran out of money she couldn't take more than
4% out of her account per year. Because of future inflation later on, he didn't even want to let her start
doing that now so she better go back to work.
Stockbrokers just don't get it. They have been taught, brainwashed if you will, into believing that what we
are all worried about is how much money we have left when we check out. They are wrong, what we all
worry about is if we have enough to get to the end. It never ceases to amaze me that the stockbrokers are
always telling us how the market averages about 10% per year, but their standard answer to make your
money last is always, you can only spend 4% of your money per year. The reasons they say this are 3:
1. They are paid by how much money they have under management (AUM). So it is their job to keep as
much of your money in those accounts as possible.
2. They don't believe in products that produce a lifetime income that can't be outlived because it means
they would lose control over those assets.
3. They have to leave themselves a lot of "wiggle room" because they know at least once every 10 years or
so, sometimes more often than that, that if your money is with them you are going to lose somewhere
between 20% and 50% of your money.
So here is what we do. We develop for each client a personalized spreadsheet that shows what income the
person wants or needs and then we increase that on a yearly basis using a 3% inflation factor, Then we
take all the assets and show how they would work in different accounts and how they will grow and be used,
using very conservative projections. The people end up with a picture that shows them both the balances
of their accounts and the amount of money they will have for spending on a yearly basis for the next 20 to
30 years. We then get together with the people again and make adjustments according to the clients
wishes. Some people want more money in the earlier years while they are young enough to enjoy it and
then less later on. Others might want to make sure they leave something for the next generation. We really
do listen to what our clients want and then work towards those goals.
In this particular case we were able to show this lady that she not only could have the extra $500 per month
but that she could actually start by taking $600 a month so that she would have a little extra cushion per
month and she was still going to be ok to her mid 90's and after that we couldn't keep up with inflation
anymore but she would still have a reasonable income.. She said that was good enough for her and so we
put the plan into action.
|WHAT I LIKE BEST
ABOUT MY JOB !
The most fulfilling part of my
job is seeing plans that I
helped people put together
15 or more years ago are
still working as planned,
WHAT I HATE MOST
ABOUT MY JOB !
Seeing people who came to
me 3 or 4 years ago but
decided at that time to stick
with their then current
stockbroker or advisor at
that time. Now coming back
stating that everything I said
would happen has
happened, they now have
30%, 40% or even 50% less
money but could I sill help
them. It is so sad for me
seeing these people losing
tens of thousands of dollars,
knowing how much better of
a retirement they could
have had if they still had
|Scroll Down For Case Study 4
CASE STUDY 4 COUPLE PAYS $1,500 TOO MUCH IN TAXES
A lady calls one day stating that her and her husband have been doing their own income taxes but the
husband thinks there might be a mistake and could I look over the tax return. The people have used one of
those do it yourself programs that advertise that you can get EVERY deduction that you are entitled to and
the largest possible refund. Those programs ask a lot of questions, but not always the right ones or the
appropriate follow up questions. Furthermore, she had already taken the return to one of the big national
tax preparation chain offices and they looked at it and said it looked ok to them. To make matters worse the
office she took it to was supposedly one of their premier offices where they have someone available year
round who knows what they are doing and they also sell some other financial services.
property and I asked her why they weren't depreciating that property. She told me that the boxed software
said she couldn't. I said that didn't make sense. She explained to me that the rental house was the house
that her and her previous husband had lived in, but after through the divorce she got the house and turned
it into a rental. The ex-husbands name was still on the house because of the loan, but the house was 100%
hers. The boxed software had asked if "someone else could claim the depreciation", since he was still listed
on the title the woman answered yes, so the software didn't allow her to take the deduction. Unfortunately
the software didn't go on to ask if that other person was actually claiming any or all of the depreciation, since
he wasn't because of the divorce decree, the lady was actually entitled to the deduction. How or why the big
national firm representative didn't see this I have no idea, I imagine it was just a lack of knowledge in such
refund for each of those years. There is no substitute for 30 years experience and a commitment to making
sure your clients always pay the least amount taxes allowable by law. It's somewhat ironic that one of the
firms that advertises that they find so many mistakes that others have made are in and of themselves one of
the firms with which we find the most mistakes, including their saying that this return was correct.