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Grandparenting… and striving to age in happiness and health

Grandparenting… and striving to age in happiness and health

When my grandson JJ celebrated his Bar Mitzvah last spring, I asked him what he wanted as a gift from Grandma. His answer: “I want to take a trip with you!” I was thrilled. I love to travel, of course, and I was utterly grateful that this energetic and amazing 13-year-old boy wanted to spend a week with me. It was a wonderful gift for us both. And boy, did we have an incredible time! However, there is one thing I would have changed if I could: my level of health and fitness.

Always the planner, JJ had cleared the idea with his parents long before making his request (I may be Grandma, but Mom and Dad still make the rules!). He had imagined us in Mexico, but after some research and a wonderful travel agent, we settled on Costa Rica. I had never been there, but it has a reputation for being great for families, chock full of activities, and reasonably priced. For my grandson, Costa Rica sounded exotic and exciting. JJ and I were Central America-bound!

As soon as we arrived, I knew we’d made a great choice. The resorts cater to American tourists, so communication is easy. There were lots of families and people of every age, and I loved watching these multiple generations enjoying their time together. The whole atmosphere was relaxed and comfortable, and it felt like the perfect tropical getaway but without the premium price tag. (Aside from the thermal waters in Arenal, complete with a swim-up lounge and a sushi bar which, I can attest, is crazy expensive when you are accompanied by your teenage grandson who happens to have a passion for sushi!) Our trip included a perfect balance of higher-end resorts and activities that took us away from the tourist area and into the surrounding country.

The further we ventured into the country, the more we learned about the people who live there. I loved talking to our driver, who told us where his family vacations (a wonderful rented cabin very near the expensive hotels) and shared that, thanks to the tourism industry, most families earn about $25K/year—a living wage in Costa Rica. With the help of local drivers, we did everything JJ had hoped for. We hurled down a mountain together on zip lines. We explored the Costa Rican jungle from river rafts. We snorkeled from a catamaran. We trekked over mountain terrain on ATVs. Whenever there was an hour or two to spare, JJ had a new plan—none of which included letting Grandma lounge in a hammock or read a book! Though I was able to get through the trip thanks to sheer willpower, I know it would have been a lot easier and enjoyable for me if I were in better shape. My sedentary lifestyle has taken its toll, which means I needed more time and more help to climb in and out of the jeep, climb to the top of the zip line, and even just walk wherever we wanted to go.

On the flight home, I couldn’t help but think back on how challenging it had been for me to keep up. Yes, JJ is 13 and has boundless energy, but there is no excuse for my physical state. When I stumbled across this list of 30 ThingsYou’ll Regret When You’re Old, number 7 hit home: Failing to make fitness a priority.I don’t consider myself “old”—at least not quite yet!—but I’m done with regret! It’s time to take health and fitness seriously. It’s time to make a change. I talk constantly to clients about ways to build better, happier lives as they age. In my blog, I’ve written that living a joyous life is as much about having financial freedom as it is about being mentally and physically healthy so you can enjoy every minute. It’s time I practice what I preach.

My late Uncle Joe was everyone’s favorite uncle—whether they were related to him or not. Years ago, he told me that the secret to meaningful relationships is sharing one-on-one experiences with others. Children. Adults. People you love, and people you wanted to like better. It’s some of the best advice I’ve ever received. However, Uncle Joe had gotten something else right too: a lifelong Manhattanite, his daily walks kept him fit and healthy as he aged.

My younger granddaughters Noa and Zoe are 11 and 9 respectively. A new goal of mine is to take similar trips with them when they celebrate their Bat Mitzvahs. However, this time, I plan to be fit enough to run circles around them. I've begun working with Nancy S—my new personal trainer. (If RBG can do it, so can I.)  I’m changing how I eat and how I live. My body is going to be with me for the rest of my life. I’ve finally decided to give it the attention it deserves. So get ready to try to catch me, Noa and Zoe, because your new and improved Grandma is on her way!

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Wall Street has gone wild! Is it finally time to change your investment strategy?

Wall Street has gone wild! Is it finally time to change your investment strategy?

It’s a strange time for investors.

Consider this: Just last week Gerry, a 65-year-old recent retiree, asked me if she should take on more risk in her portfolio. “The market is doing so well,” she said. “I feel like I’m missing out on all that growth.” My answer was simple. “No!” I explained that her strategy had been very carefully built to support her long-term financial goals—not just to grow her invested funds. It was an important conversation, and wow, is it a good thing she has an advisor to talk her out of emotional decision-making! Just imagine if she’d decided to gamble with her assets and take on more risk just a few days ahead of Monday’s volatility.

Of course, in the face of this week’s rather wild ride in the stock market, you may be asking yourself the opposite question: “Have I taken on too much risk?” My answer to you is the same today as it was for Gerry just one week ago. No! That is, of course, if you have a well-constructed financial plan already in place.

Whether the market is flying high or taunting your emotions with new lows and some bumpy volatility, here are four things every investor should keep in mind:

  1. Investing is not a stand-alone activity.  When the stock market is in the news (which it almost always is), it’s easy to forget that investing is just one piece of your overall financial life. A good financial advisor will work with you to look at that and everything else. What are your goals? What does your personal balance sheet look like? If you haven’t already, how soon do you plan to retire? How long can your existing portfolio provide a reasonable income? How much debt do you have? Do you have a sufficient emergency fund? The answers to these questions determine how much risk you can afford to take when investing. When a new client tells me she only wants to talk about investments and not the rest of her financial life, I know we have some important work to do! (Learn more about focusing on your financial big picture in my blog, Cold, hard cash! (Are you paying attention?).
     
  2. A balanced portfolio will rarely perform as well as the DJIA—or as poorly.  The Dow Jones Industrial Average (DJIA) is an average comprised of just 30 stocks out of a universe of thousands. In contrast, your portfolio includes a diverse menu of different asset types that each play a particular role within your portfolio. Stocks address your need for growth. Bonds address your need for stable income. Cash addresses your need for liquidity. How those assets are balanced—or allocated—in your portfolio depends on how long it will have to serve as your retirement paycheck, how much you’ll have to draw each month to sustain your lifestyle, how many years your assets have to grow, your legacy goals, and more. If your IRA goes down as stocks go up, don’t despair. Rest assured that your portfolio is balanced and diversified to meet your needs.
     
  3. Your best investment in any market is to pay off debt.  Debt is a huge problem in the US. According to this study by WalletHub, the average indebted household held $8,600 in outstanding credit card debt in 2017, and total household debt broke a new record of just under $13 Trillion.[1] If your portfolio is what makes your financial life secure, debt is what does the opposite. While “good debt” such as a home mortgage, student loans, and business loans generate benefits over time, “bad debt” poses serious risk to your financial health. Credit cards, auto loans, and other revolving debt reduce your income, add no value to your wealth, and force you to pay more every month for an item that is losing value. If you are carrying bad debt, use a debtsnowball to reduce and eliminate the debt you have today and avoid taking on more debt in the future. (For more on how debt can impact your future, read my blog There’s no such thing as an unexpected expense.)
     
  4. Your goal is to make work optional and sleep peacefully at night—not make as much money as possible.  It’s so easy to forget the endgame. We see the stock market hitting record highs or taking record dives, and it distracts us from the real goal of financial planning. Ultimately, everyone wants to have enough assets to support themselves and their family comfortably for the rest of their lives. While the definition of “enough” varies widely (check out John C. Bogle’s fantastic book, Enough: True Measures of Money, Business, and Life, for more on that important topic), a comprehensive financial/life plan can remove money stress by giving you the confidence that work will be optional someday and you can sleep peacefully knowing that your finances are secure today and tomorrow—independent of market volatility.

I have a colleague who likes to joke that he has the gift of “20/20 hindsight.” Don’t we all? It’s so easy to say, “I knew it all along!” Knew that the market was overvalued. Knew that you should have held on to Apple stock. Knew that your friend’s new boyfriend was a creep. The truth is you didn’t know it all along; you only feel as though you did now that the outcome is in plain sight.

No one—not even Warren Buffett—knows which way the stock market will go tomorrow. One thing we can anticipate is that we may have returned to more “normal” volatility. After years of historically low volatility and record highs, it may feel a bit unfamiliar, but with a solid plan in place, you can trust that you are safe. If you’re not certain you have a smart plan that’s working toward your long-term goals, let’s chat. As always, we’re here to help.



[1]The Center for Center for Microeconomic Data, Q3 2017

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When risk is a good thing, embrace it!

When risk is a good thing, embrace it!

Risk. It’s a word that makes most of us feel uncomfortable—at best. Even if you’ve been blessed with an appetite for adventure, when it comes to taking risks with money, you may find your stomach feeling a bit queasy. While I can’t recommend skydiving or cliff jumping (especially for my retired clients!) taking the right amount of risk with your money isn’t a bad thing. In fact, it’s often the best way to help grow your assets to meet your retirement goals.

Anne is one of my favorite examples of a smart risk-taker. She loves (and I mean loves!) Las Vegas. She loves pitting the thrill of victory against the agony of defeat—even when it is her money at stake. And yet, despite her penchant for slot machines, she’s clearly not much of a true thrill-seeker. She has had the same gambling budget since the first day she walked into a casino over 30 years ago, and she’s never lost more than she can afford to lose. “I started with $100 of ‘play money’ in my wallet, and I promised myself I’d never let myself dip below my $20 reserve,” she says with a smile. And she does have something to smile about. Over the years, Anne has won (and lost) thousands of dollars, just playing the slots. “For me, it’s my favorite form of entertainment,” she says. “It’s a ‘safe’ risk that makes my adrenalin go crazy!”

A ‘safe’ risk. What an interesting term.

The dictionary definition of risk—“exposure to danger, harm, or loss”—sends a pretty clear message that risk is something we should avoid if at all possible. And yet, as counterintuitive as it may sound, when it comes to investing, risk is the one thing that drives reward. In fact, in a capitalist economy like ours, investors are paid to take risk. It’s that simple. Every time you invest in a company you are, in essence, assuming ownership of that company and are entitled to the rewards that owners receive. When earnings grow, you reap the rewards. If the company fails, your investment will fail as well. That’s the risk.

In skydiving, the risk is pretty clear—particularly if your parachute doesn’t open! In investing, risk is a bit more complicated. To understand why investment risk is something to embrace, let’s look at the three basic kinds of risk:

  • Credit risk. When a bank loans money to a borrower, there is a risk that the borrower may default on the loan. If that happens, the bank loses the principal of the loan, and the interest associated with it. That’s credit risk. Your own credit rating dictates your ability to borrow money and the interest you pay, and the same is true for bonds. Lower-yield Treasury bonds are “safer,” so they pay less than high-yield or “junk” bonds. That means that, as a bond investor, when you take more risk by lending to less credit-worthy borrowers, you get paid more interest.  
     
  • Term risk.When you buy a bond or CD, you are lending money for a fixed period. When the bond is due, your money is repaid. When you lend money for a few days, that’s a short term. When you lend money for ten years, that’s clearly a longer term. Long-term is riskier than short-term because you don’t expect the borrower’s situation to change in a month, but in 10 years? Anything can happen. That’s term risk. That is why a one-month CD pays far less interest than a five-year CD. So, term risk is another way investors get paid more to take on more risk.
     
  • Equity risk.Every time you hold stock in a company, you accept the risks of ownership. As an owner, you are paid a share of earnings, and the value of each share increases with company growth. Because of the risk of ownership, investors are paid an equity risk premium to bear uncertainty, price fluctuations, bear markets, business failures, and other perils. Earning the equity risk premium is how investors get paid more for owning stocks.

As an investor, by definition, you must be willing to take some level of risk to reap the rewards. Whether you take on credit risk, term risk, equity risk, or a combination of all three, risk creates value. While risk and reward may not be a perfect relationship, if you add time and discipline to the equation, it’s nearly perfect. It’s what capitalism is all about, and it’s what gives every investor (including you!) the opportunity to leverage assets for continued growth.

Of course, just like Anne and her slot machines, the smartest way to play is to know how much risk you can accept. If you’re a younger investor with years of saving ahead of you, you have time on your side. You can breeze through a bear market, happily buying up equities at sale prices, and waiting for the inevitable bull market to come your way decades from now. If you’re already retired, you may still have years ahead to enjoy growth, but you’ll need a strategy to meet your changing income needs. Whatever your life stage, remember that risk is your friend. Unless you’re skydiving, in which case I can only recommend that you check that parachute just one more time before you jump!

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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 >