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Lauren's Blog

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.

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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To protect your financial future, hand over the keys to your kingdom today

To protect your financial future, hand over the keys to your kingdom today

Money. Depending on your family dynamics, it can be a blessing or a curse—no matter how much or how little you have to call your own. That’s especially true when it comes time to hand over the keys to your kingdom to the next generation. When that transition is managed carefully over time, it can be a natural, stress-free evolution. If there’s limited communication, secrecy, or just no plan at all, it can cause upset, bitterness, and unwanted financial consequences for Mom, Dad, and their adult children.

I spent yesterday afternoon working with Sarah. In her early 50s, Sarah is every aging parent’s dream financial trustee. She’s smart and educated, and she’s thoughtful and diligent about “dotting the i’s and crossing the t’s” when it comes to her mother’s finances. That thrills me because her mother Marion is one of my dearest clients. Sarah and my mission yesterday was to get all of her mother’s accounts connected to our eMoney platform so we can seamlessly work together to monitor and manage cash flow, bills, and investments. In less than an hour, we linked the accounts, agreed to a 6-month plan, and had our next meeting scheduled.

It’s not always so simple. First, not every parent is fortunate enough to have a “wise child” like Sarah to help. Second, not every parent is ready and willing to hand over the keys—even when the transition is long overdue.

Vicky and Rich are perfect examples of what not to do. Now in their 80s, the couple’s three adult children are all clueless about whether Mom and Dad have enough money to fund the remainder of their retirement—or not. They’ve named their son Josh as the executor of their estate, but they’re keeping the numbers a secret even from him. Josh is stressed because he has no idea where they stand financially or if he and his siblings may need to help them in the future. Vicky and Rich are stressed because they feel like Josh is invading their privacy every time he asks about money. My question to them is always the same: “If you don’t trust him with the keys to your kingdom when you’re alive and well, why should you trust him when you’re in a coma?”

Variations on the theme are endless. Melinda puts up appearances of being financially flush, but suddenly she’s out of assets and is ashamed of having to turn to her kids to help fund her remaining (and less-than-flush) “golden years.” Elizabeth notices that her dad, who has dementia, is suddenly writing large checks to his live-in caregiver (thank goodness she has that visibility!). Luci keeps urging her parents to “spend more and enjoy life,” but they (and I, as their advisor) know they’re wisely spending what they can afford.

Handing over the keys to your kingdom can be scary and humbling, and it’s hardly ever easy. But the process is better for everyone when the truth and the facts are out on the table. Take these three steps to ease everyone’s mind in the future—and the sooner, the better!

  1. Name a financial trustee.
    If you have adult children, begin by doing an honest, thorough assessment to determine who should act as your fiduciary. Can you trust them with your money? Do they have the character, the skills, and the time to work in your best financial interest as you age? A child is usually the ideal fiduciary, but you may find that a sister, best friend, or other relative is more suited to the task. Choose intentionally and begin the transition long before it seems mandatory.

     
  2. Communicate and educate.
    Once you’ve identified your “person,” communicate your values, so they have a deep understanding of what matters to you. Knowledge and insight are vital if and when they need to step in to make financial decisions in your place. Discuss how to recognize any red flags that mean you're not acting in your own best interest. Be clear about the details with your trustee and with your financial advisor to be sure everyone is on the same page.

    Next, educate your trustee on the technical aspects of your financial life. Create an inventory of your assets, including bank, investment, and credit card accounts; passwords; insurance policies; safe deposit box information (note that you must visit the bank in person together to add your trustee to your account and ensure access); contact information for your financial advisor and estate attorney; and estate planning documents, including your Healthcare Power of Attorney and Durable Power of Attorney (if these aren’t already in place, make this a top priority). And work with your financial advisor to make your personal documents available in a secure vault like our eMoney platform.

     
  3. Coordinate your team.
    With your trusted person on board, it’s time to arrange a meeting with your entire team, including your trustee, your financial advisor, and all stakeholders involved. Your adult children are a given, but it’s important to include any other beneficiaries of your estate as well. Taking the time to be sure everyone understands your wishes and is clear on who is in charge of what will make things easier for everyone—today and in the future.

The great news is that trusting the right person with the future of your finances can be tremendously freeing. When Marion appointed her daughter as her trustee, she told me how relieved she was. “If I’m forgetting words, I’m sure I’m forgetting to pay some bill or another. I worry about it all the time!” she said. “Now, Sarah is making sure I don’t make mistakes—big or little. What a relief!” Whether you’re 60 or 102, now is the time to hand over those keys and get on track toward an easier, less stressful tomorrow.

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From technology hell to financial nirvana, connecting the dots is the key

From technology hell to financial nirvana, connecting the dots is the key

I confess, I’ve been in technology hell for months. It’s not the first time. As a woman of a certain age, I wasn’t born into a tech-driven world like the Millennials. I don’t speak this language well— at best, I can converse with a thick accent, and I’m by no means fluent. Yes, I own an Alexa (Amazon’s allegedly life-changing device that can, according to my son Adam and my tech guy Jason, do just about anything I could ask). To date I’ve asked “her” to do two things for me: tell me the weather forecast, and set a timer for 10 minutes.I’m clearly missing the boat! But I just don’t get it.

I suppose that’s why I listened with a bit of guilty satisfaction when my friend Lily recently told me her saga of buying and installing a fancy new video doorbell and her own hell trying to get it installed. Long story short: it took 4 or 5 different people to help before Lily was able to see the person on the other side of her door. At least I know I’m not alone in my suffering and frustration! It does help, but it also has me wishing there were professional “technology planners” out there—someone to help me, Lily, and everyone else who doesn’t speak the language of technology get all of these potentially great tools to work together so we can, finally, use them to our advantage. That would be pure technology nirvana!

It makes me happy to realize that the role we play in most of our clients’ lives is to help connect the dots of their financial lives to create at least some level of financial nirvana. If you’re not yet there (or at least on your way), asking yourself these three questions may nudge you in the right direction:

  • Are you holding on to solutions that were great 5 years ago, but that aren’t adding value today?
    I have a box of “old technology” at home that I can’t get myself to throw away (that 5- pound laptop was wonderful in its day!), but deep down I know there’s no reason to keep it. In just a few years, everything in technology has changed. The same is often true in your financial life. Transitions—marriage, divorce, job change, retirement, losing a spouse, relocating—all of these things and more can have a dramatic impact on how you should be saving, spending, and investing. New financial products may be available today that didn’t exist five years ago. Are you using a Health Savings Account (HSA) to save for future medical expenses tax-free? Is your investment strategy aligned with your current goals and time horizon? Has your tax strategy changed to address the new tax law? Now is the time to let go of the old and bring in the new to connect all the right dots.

     
  • Do you understand the language of money?
    When we moved our office systems to the cloud, I wasn’t even sure what “cloud” meant. All I really knew was that it could protect client data and keep our software up to date with the latest versions. I drove our technology provider crazy. I asked a lot of questions so I could communicate in their language: the language of technology. Like technology, money has its own specialized vocabulary. Do you speak the language? Do you know the difference between good debt and bad debt? Do you understand compounding? Do you know what a CD is and its role in your portfolio? (If not, start by reading my blog When did it become ok to be financially illiterate?) The more you understand the language of money, the easier it will be to connect every aspect of your financial life.
  • Are you reaping the rewards of a fully connected financial life?
    Alexa can be used to manage your music, your thermostat, the lights in your house, and more—but only if the device is properly connected to everything else (or so they tell me!). Connecting all the pieces of your financial life is just as vital. Your investments, taxes, savings, budget, estate plan, and insurance are all interrelated. A “connected” strategy is the key to growing and protecting your assets over the long term. A great first step is to start connecting your financial life using an online app like eMoney. It’s a great tool that gives you a birds-eye-view of what you own and what you owe so you can both manage your finances and collaborate even better with your advisor.

I’m a firm believer in the importance of “knowing what I don’t know” and doing everything I can to learn more. To get there, I get help wherever I can find it. That includes hiring a professional to help me find a way out of my current technology hell. We may have moved everything to the cloud, but there are still some disconnects. Suddenly my scanner button isn’t working, two of my apps won’t open, and Skype thinks I don’t have a camera on my computer. Ugh! But I have a tech team coming to the office today, and I’m counting on them to fix what’s broken and to help me understand how to keep everything connected moving forward. We’ll be one step closer to technology nirvana.

I urge you to do the same when it comes to your finances. Ask questions. Get answers. And get the help you need to create a fully connected financial life that takes you one step closer to your financial nirvana—however you define it. That’s one thing I’m pretty certain Alexa can’t do for you… yet!

 

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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 >