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Lauren’s blog covers topics that impact your finances, your family, and your future. Is there a topic you’d like Lauren to tackle? We’d love your suggestions and feedback.

In Your Best Interest: Our Summer 2018 Newsletter

In Your Best Interest: Our Summer 2018 Newsletter

Click here to view the full newsletter, including recent news, important dates, financial tips & tools, and more.


Market Highlights Q2 2018

The second quarter of the year can be called a lot of things, but boring certainly isn’t one of them.

Long before the trade war between the United States and China began in earnest in early July, Trump’s threats of tariffs on Chinese imports began to rattle the world, and threats of retaliation from the Chinese added fuel to the fire. As the battle of words escalated, investors braced for a storm. But while there was certainly some significant volatility, favorable corporate earnings reports helped calm some of the global economic angst, and investors were able to maintain a steady ship and see higher-than-anticipated gains in Q2. Most of the major indexes ended the quarter ahead of their Q1 closing values. The tech-heavy Nasdaq gained over 6.0%, and the small caps of the Russell 2000 grew by almost 7.5%. The S&P 500 also closed the quarter ahead of its first-quarter closing values, and the Dow finished the quarter up by less than 1.0%. Prices for 10-year Treasuries rose by the end of the quarter, pulling yields down by 13 basis points. 

Interestingly, even as Trump’s trade war moved from threat to reality in the first week of July, the market has continued to maintain an upward trajectory, at least for the moment. Trade skirmishes between the United States, China, Canada, Mexico, and the European Union are likely to remain a reality for some time, but those tensions have so far been offset by a strong US jobs market, steady corporate earnings, and increased household spending. Global tensions may be here to stay, but consumers and investors appear to be confident in the economy—and confidence is always a plus when it comes to investor returns.

As we move into the second half of 2018, expect the tensions to continue. Business has accepted the trend towards open markets and reduced trade barriers. The US economy has been strengthened along with our global trading partners. Businesses will eventually adapt to whatever conditions prevail, but current events are disruptive and time and money will be spent to reposition production and sourcing of materials. Outcomes of trade wars are unpredictable, but if the extent of reactions in the past weeks is any indication, the impact will be complicated. Nations are big ships and don’t turn on a dime, but slowly, slowly, we will experience changes in geopolitics. Yet whatever occurs around the globe, our team is monitoring your plan and your investments closely. And if you have any questions or concerns along the way, we’re always here to help keep you on course. 

Click here to read the full newsletter.

 

 

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Ready to help the planet and your portfolio? ESG investing may be the answer

Ready to help the planet and your portfolio?
ESG investing may be the answer

I braved last weekend’s brutal heat wave to meet a friend for Sunday brunch in Corona del Mar. My friend and I wandered into a home décor store and saw some beautiful decorative coral. As someone who loves diving and the sea (see my blog post Security vs. Freedom and the magnificent merits of flying business class), the display made me suddenly sad. We humans have been killing off the reefs for decades through coral mining, overfishing, and human pollution—including our sunscreen. Then I noticed a small sign that said this gorgeous coral was not mined, but farmed. Even better, the profits are used to help save and restore the reefs. A relief? Yes, but there’s much more to worry about.

Devastating heat waves across North America just killed more than 50 people in Quebec. At least 100 people died after record rainfall caused flooding and landslides in western Japan. It’s no wonder Jerry Brown and Michael Bloomberg are so committed to battling climate change through September’s Global Climate Action Summit.

If, like me, you’re feeling that recycling, reducing, reusing, and giving up straws is just the beginning, you may be a perfect candidate for ESG investing. ESG is an excellent way to put your money to work to make a global difference while also potentially improving your returns over the long term.

What is ESG investing?

ESG stands for environmental, social, and governance. Funds that are identified as ESG investments include stocks of companies that adhere to ESG guidelines. While each company’s ESG policy is different, an ESG label generally implies that a fund includes companies that are focused on helping improve environmental and social concerns. Selection criteria also exclude companies that contribute to or are responsible for human rights violations, environmental damage, or other violations of fundamental ethical norms, including the production of weapons that violate fundamental humanitarian principles through their normal use. What is particularly attractive about ESG funds is that they allow you, the investor, to align your investments with your values. 

That said, investing in this way hasn’t always been easy, nor did it necessarily reward investors. ESG investing grew out of a movement called Socially Responsible Investing—or SRI—that focused primarily on excluding companies that were considered ‘morally undesirable.’ The problem: there was little or no focus on economic value. The result: many of these investments didn’t qualify as much more than feel-good investments that were used by a niche group of investors: Millennials, liberals, and anyone who put their hearts far above their wallets. For these reasons, our team at Klein Financial Advisors has steered clear of SRI and ESG—until now.

For those of us who are concerned about environmental, social, and corporate governance issues and our wallets, new research shows that the approach to ESG investing has evolved to make it a viable and more potentially profitable investment option.

Thisis precisely why we are now pleased to offer our clients a selection of ESG funds as part of our carefully selected menu of available investment options. While we have not elected ESG investments in every asset class, we have approved ESG options in domestic core, small-cap value, international large-cap, and emerging markets. Each of these funds selects stocks based not only on a company’s ESG policy but also on how that policy adds value to the company’s offering. I’m not the authority on ESG investing, but I rely on solid information, research, and analysis from experts. I believe choosing ESG investments based on value makes sense.

If you’re one of our clients, we’ll be sharing these options with you at our next meeting. (Feel free to reach out sooner if you want the details right away!) Otherwise, I urge you to talk to your Certified Financial Planner (CFP) to get clear, independent guidance on ESG investing. Carefully choosing advisors and investments ensures your dollars impact issues that matter to you and that your investments offer potential for growth over the long term. After all, driving global change and investing are both all about the future.

In the past 50 years, we’ve come a long way in reducing carbon emissions. In 1970, there were 22.5 tons of carbon emissions per person per year. Today, that number is down to 16. The Paris Climate Agreement has set a target of 2.1 tons of carbon emissions per person. Unless we make individual and collective efforts to support change, we risk undoing that past progress and creating further, irreversible damage to the planet.

Making changes isn’t easy. I know. I drive a gas guzzler (but I drive it as little as I can). I had the air conditioning blasting the entire weekend (but I don’t think I would have made it to Monday if I hadn’t!). And I’m taking a long flight to Tanzania on Wednesday (if I could get there any other way but by plane, I would!). However, I am taking little steps. I make sure my fruit is from California. I buy eggs from a local farm. I’ve broken myself of the habit of using straws. I have a long way to go, but I try a little every day. If you, too, want to make a difference, look at specific actions you can take. Vote for representatives committed to combating climate change. Watch the live broadcast of the Global Climate Action Summit. And consider including ESG investing as part of your investment strategy. If you have any questions or are looking for suggestions, we’re always here to help.

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Not ready for retirement? It’s only too late if you don’t start now!

Not ready for retirement? It’s only too late if you don’t start now!

Years ago, I hit a major crossroads. I had been restructured out of a corporate job I loved, and while I was shell-shocked by the reality of being a victim of workplace ageism, I knew in my heart that I had something important to do in my life. There was a mission I had yet to find; it was out there, somewhere, waiting for me to uncover it.

Thankfully, I stumbled across Barbara Sher’sbook: It’s Only Too Late If You Don’t Start Now: How to Create Your Second Life At Any AgeOf the many books I’ve read, this guide was one of the most transformative. It empowered me, and it gave me the fierceness I needed to take charge of my life. I soon found my mission that had been lurking in the shadows, and Klein Financial Advisors was born.

Last week, I found myself sharing that story with Susan and Scott. My newest clients, they are on their own urgent mission: to build a nest egg… starting at age 57.

When we first sat down together, I could feel their apprehension. It was no surprise. They had told me they had minimal savings and were unprepared for retirement. Smart, responsible people, they had been dealt a tough hand financially. With three kids to raise and aging parents to care for, they were among the many who lost their homes in the financial crisis. As an independent contractor, Scott’s income had ebbed and flowed, and Susan had left her job at a local university to wrangle three teenagers and help her mother with some health issues. Since then, they’ve been focused on staying out of debt (cheers to that!), and even though Susan is now back at work, they haven’t been able to save a dime for retirement. Today, they’re ready to do something about it. Susan was blunt: “Are we just too late?”

My answer was simple: “It’s only too late if you don’t start now.” With that, we rolled up our sleeves and settled in for some serious planning. And it all began with making these four important promises to themselves:

Promise #1: Claim Social Security at age 70 (not a day earlier!)
Smart Social Security claiming is an absolute must. While most everyone is eligible to begin receiving Social Security payments at age 62, between age 62 and FRA (Full Retirement Age) at age 66 or 67 (depending on your birth year), your benefits increase 5% each year.Even better, between FRA and age 70, your benefits increase by 8% each year you delay, plus an annual cost of living adjustment. Therefore, if your monthly benefit at age 62 is $750, waiting to file until your 70th birthday nearly doubles your monthly check to $1,320. Plus, because spousal benefits are based on the other partner’s benefit amount, by waiting until age 70 to claim benefits for the highest earner both spouses’ benefits are increased by 8% per year. Your goal is to secure a higher monthly income over the long term, and delaying Social Security is one of the most effective ways to do it.  

Promise #2: Rethink your retirement age.
Most of us grew up with the idea that we would retire at 65… or earlier if we could swing it. It’s time to relegate that 20th century idea to the history books. People are living much longer. In 1970, the average U.S. lifespan was 67 for men and 74 for women. Today those averages have climbed to 76 for men and 81 for women.[1] That means that here in Lake Wobegon (where we’re all above average), your investments must meet your needs for an extra decade—at least. Instead of making your retirement goal 65, banish that idée fixe and put a plan in place to keep earning into your 70s.

Promise #3: Focus on building enough cash reserve to make work optional.
Saving cash can be challenging, but only because we’re usually rooted in habits and behaviors we’ve been honing for decades. Building a nest egg in your later years can be done, but it takes focus, diligence, and sacrifice. Get rid of debt first. More than anything else, debt has the power to hurt your future self.  Reconsider adopting your parents’ or grandparents’ depression-era frugality tips. You may have laughed then, but thrift serves your goal to eventually to make work optional. Again, it’s only too late if you don’t start some serious thriftiness today. Build that cash reserve dollar by dollar.

Promise #4: Don’t give away your future to your children.
Saying no to adult children isone of the biggest challenges you’ll face. For decades, the #1 priority for parents is to take care of their kids. You’ve been holding their hands since they opened their eyes for the first time. How can you stop now? You can. And you must. Especially when your retirement savings is lacking or nonexistent. (For more on this hot topic, see my blog post Money Rules.) If you haven’t saved for college tuition for your kids, work with them to create a plan that doesn’t put your future at risk. If you have 20-somethings living at home—a common scenario these days—they should be contributing financially to the household. When your adult child needs money, he or she really does have other resources. It’s time to stop being “the bank of Mom and Dad” and start making your future your new #1 priority.

Recognize that it is not too late, as long as you start now! I just read this great NPR article that talks about getting kids to pay attention, something Mayas in Guatemala are doing better than most. The writer quotes psychologist Edward Deci at the University of Rochester, who says that one of the most important ingredients for motivating kids is autonomy. In his words, "To do something with this full sense of willingness and choice." It’s a lesson in motivation at any age.

Susan and Scott have made that choice. They are catching up on savings through IRAs. They’ve stopped financing their kids. Susan is considering increasing her income with a better paying job or a side gig. They are both committed to right-sizing their lives so they can build the nest egg they will need in the future. They have a plan, and they are building momentum every day.

Whether you are just starting to build your retirement nest egg or your savings is not where you need it to be, make the choice today to actively create a financially secure “second life.” It’s only too late if you don’t start now.

[1] According to the National Center for Health Statistics 2016 data.

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From smart homes to smart finances, it’s time to learn some new tricks!

From smart homes to smart finances, it’s time to learn some new tricks!

My recent trip to Amsterdam was great in many ways. I explored a new culture with an old friend and had time to reflect on how to live a great life here at home. My first step: to (finally!) get a ‘smart’ home. If you saw this blog post I wrote back in May, you know that I’ve been living in technology hell for quite a while. My tools were outdated and, quite honestly, I didn’t know what I didn’t know. I had a problem I knew I couldn’t solve alone.

Thankfully Jason, my tech guru, was just a phone call away. After I landed in Southern California, I scheduled time for him to come to my house and do some serious diagnostics. What he found was a collection of technology—some great, others not so great—that wasn’t even being put to use. I had an Alexa that I barely used. I had decade-old TVs that weren’t connected to the Internet. I had a fancy tuner that, while it was once all I needed for great sound quality, couldn’t do the job anymore. As technology had advanced, my trusted tuner had quickly become a dinosaur. While I listened to Jason explaining all of the things we could do to make my home smarter, I realized it was time for this old dog (me!) to learn some new tricks.

I gave Jason the green light to transform my house, and we had a blast doing it together. He installed three new Amazon Fire TVs that I control with a Firestick and an Alexa voice remote. I have a Nest thermostat to control the temperature in every room of my house and Lutron switches to control my lights. Jason used some of my old beloved equipment—my favorite speakers—to support the new technology, so now all I have to do is tell Alexa what to play, and I have better sound than ever. I’m finally on my way to achieving my dream of true technology nirvana.

Being me, I have to compare my own technology planning to my world of financial planning. Just as I resisted solving my technology problems, many people resist doing what’s necessary to transform their financial lives. Why? I hear the same reasons over and over again from our clients who finally took the plunge after years or even decades of procrastination:

"I was embarrassed to show someone else the details of my money.”

"I knew I had a problem, but I didn’t know the cause. I didn’t know what I didn’t know!”

"My brother told me I should do it myself.”

"I thought it was just about investing.”

"I had no idea what to expect from a financial advisor.”

"I didn’t know how to find a financial advisor I could trust.”

"I didn’t realize how much professional help could change my financial life.”

Every reason is valid. Luckily, they can all be solved with just a little bit of knowledge.

If you’re embarrassed about sharing your finances, know that financial advisors have seen it all! Our mission is to help you gain greater confidence and reach your goals—not chastise you for past mistakes. It’s okay to ask for help when you know you have a problem. Even better, ask for help when you see a financial opportunity… or expect there may be one lurking in the unknown. Yes, an advisor can help with that, too.

When working with a financial advisor, every firm’s approach is different. At Klein Financial Advisors, we use a consultative process that focuses on your own goals, priorities, and values, and gives you a clear roadmap to get you from where you are today to where you want to be tomorrow. Don’t be intimidated by the process. A good advisor will hold your hand every step of the way. Just know that we are here to do one thing: help.

If you don’t know how to find an advisor you can trust, I recommend reading the Pursuit of a Financial Advisor Field Guide from NAPFA, the National Association of Personal Financial Advisors. From decoding advisor credentials and walking through compensation models, to outlining the elements of financial planning and understanding the importance of the Fiduciary Standard, the Field Guide is packed with the information you need to select the right advisor for you.

How much can working with a professional help change your financial life? Just ask anyone who has taken the plunge. The change is often dramatic—sometimes in riches, and almost always in the newfound financial confidence that goes hand in hand with having a personalized, long-term plan.

Financial planning is vastly more important than creating a ‘smart home,’ but it can be just as fun and satisfying. Like any new venture, there will also be benefits you could never anticipate. My new smart home came with a bonus: a new friendship. Jason is a quintessential millennial, which makes him quite a contrast to my usual circle of friends. When Jason saw my scuba gear in the garage, he told me diving was something he’s always wanted to do, but never acted on. I shared the name and number of a great scuba coach in the area. In the 12+ hours we were planning, shopping, and working together, we shared great restaurants nearby, pondered the challenges of living alone, and even ‘tested’ out one of my new TVs by watching videos of dogs riding on Roombas (yes, that’s a thing, and yes, we laughed our heads off!). The experience made me realize how much I miss hanging out with younger people and how enriching those relationships can be.

Perhaps my next personal challenge will be to foster intergenerational relationships. (You can read more about how others are making it happen in this article in the Harvard Business Review.) If you’re not already working with a financial advisor, I hope you make that your own next mission. Trust me; an old dog really can learn new tricks. And the benefits are well worth the effort.

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Could I live here? Exploring the dream of retiring abroad

Could I live here? Exploring the dream of retiring abroad

I’m in the middle of a dream trip to Amsterdam right now. What a vibrant city! It is walkable and bikeable, and it has a magnificent menu of great restaurants to choose from (my friend Lily and I are doing our best to try them all!). It’s a truly cosmopolitan city that is accessible to all of Europe.  The Dutch are tall, healthy, handsome people who all speak fluent English. There’s great public transportation, museums, a symphony... what’s not to love?

Our visit has been so spectacular that I keep finding myself playing the perennial travel game called “could I live here?” It doesn’t seem so far-fetched. Lily and I rented an apartment for over a week, and after a few days of being tourists and checking off the boxes of must-see attractions, we’ve now settled into a leisurely pace. It’s easy to imagine staying longer, combining work and travel and even (dare I say it?) joining the ranks of the growing number of Americans who have chosen to retire abroad.

But would it be my retirement dream?

Because I’m having fun with my little fantasy, I did some googling and read differing opinions about the feasibility of retiring abroad. In this Ric Edelman article, he writes that “retiring abroad is inappropriate for almost everyone.” Despite the plethora of articles on the joys of international living and lists of the “best international cities to retire,” it seems that turning the dream into reality is often thwarted by things like higher-than-expected real estate costs, lower-than-expected tax savings, unstable currency exchange rates, missing your family and friends, and more. Ugh. My bubble burst before it had begun to float.

But not everyone agrees with Ric’s dismal outlook. According to the Social Security Administration, more than half a million people who live outside the United States receive some kind of Social Security benefit. Plus, many retirees living abroad have their checks mailed to a US address, so the total number of American retirees is believed to be much higher. Even more surprising: those numbers are nearly twice what they were a decade ago. Awhole lot of people are finding a way to live the life of an expat retiree. I decided more research was in order.

Next, I came across this article in Money magazine, The Secret to Retiring Richer Than You Actually Are. It highlights Bob and Rose, a couple from Fairfield, CA, who retired to Ambergris Caye, an island off mainland Belize where I went diving in 2017. The numbers were compelling—their housing costs dropped from $6,000 a month in California to $1,100 a month to rent a two-bedroom condo with a “million-dollar Caribbean view”—and they apparently couldn’t be happier. “Bottom line, we’re spending easily half of what we were in the States, and in return we have our lives back.” As I read those words, I found myself gazing over the Amsterdam treetops from my balcony and drifting back to my expat daydream. That could be me!

Of course, like most life decisions, there are a million pros and cons to consider before leaping to life in a foreign country. Some considerations are purely financial. What is your budget? What is the cost of living in your dream destination, including housing, healthcare (a significant consideration for any aging retiree), and local income taxes? Like all financial planning puzzles, most criteria are less about money and more about how you want to live. Here are just a few questions to ponder if you’re considering such a move:

  • Are you ready to pack up—and give up—your life where you live today?
    Moving to a new, exotic location can sound thrilling, but packing up the life you’ve built can be cataclysmic. If your life includes spending time with your adult children or grandchildren, will you be happy so far away? If you have a strong circle of friends, are you someone who can easily rebuild that vital network in a new community?

     
  • Are you comfortable living in the “new”?
    New experiences can be wonderful… for a while. And yet I know how great it feels to finally climb into my own bed after a long and exciting trip. Sure, it’s likely you’ll be able to rebuild that sense of “home” after some time, but it’s important to be confident that you’ll be happy enough even in the midst of the transition—and that your new adventure gives you enough joy to outweigh the longing for your old life.

     
  • Are you prepared to become an expat?
    I recently heard an interview with a university professor who had retired in the south of France. While her French was passable, she said that one of her most significant hurdles was the fact that she may never be accepted as a true local by her new friends and neighbors. That’s just one aspect of becoming the resident expat. There are also the practical aspects. Can you get a residence visa? France, Ireland, and Canada are just a few places clients have told me don’t issue residence visas. Are you able to buy real estate? Can you maintain your US passport? And will you miss July 4th picnics and Thanksgiving dinners more than you could have ever imagined?

I love imagining retiring abroad. Yet, for me I know it is not the right choice—at least not for the foreseeable future. Maybe I’ll go to Europe for an extended stay, perhaps for a month or three to work and play and experience a different culture. I expect that Southern California will always be “home.” If you feel differently, I urge you to do your research, look closely at the financial pros and cons, and look inward to determine if life as an expat is the life for you.

Have fun exploring your dream, and if you want some guidance to help decide if you really could “live here” for good, we’re happy to help!

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All written content on this site is for information purposes only. Opinions expressed herein are solely those of Lauren S. Klein, President, Klein Financial Advisors, Inc. Material presented is believed to be from reliable sources and we make no representations as to its accuracy or completeness. Read More >