The 3 Keys to Surviving Major Life Transitions

Originally in ForbesYou might think that the most important work a financial advisor can do is related to allocating a client’s investment portfolio, or perhaps helping secure a timely insurance policy or drafting the optimal estate plan. In fact, their most important work is done when clients are in the midst of navigating life’s major transitions.

Help

I have very recently undergone two of these major life events — a job change and a move — in the span of five months. Crazy, right? Who would willingly subject themself to two of life’s most stressful changes within such a small window of time? Fortunately, I had at my disposal three keys to surviving major life transitions, and I’d like to share them with you:

Key #1: Flexibility

“Blessed are the hearts that can bend; they shall never be broken.” — Albert Camus 

In February, I left the company I loved after seven years of life-changing work to lock arms with a national alliance of financial advisory pioneers dedicated to the practice of “building relationships by doing the right thing.” But in order to build a new and rewarding relationship with them, I had no choice but to sever some relationships with others. 

Mint.comSince shortly after its inception, I’ve been a fan of Mint.com and have recommended their powerful budgeting tool to anyone willing to listen.  The tool has changed so many lives that Mint.com has become a reputable personal finance source of news and information as well.  So when they asked if they could do an “Expert Interview” with me on the topic of human behavior and personal finance, it was an easy “yes” response.

Enjoy the interview here: “Expert Interview with Tim Maurer on Human Behavior and Personal Finance for Mint”

Date: July 23, 2014
Appearance: Interview with Magnetic Personal Finance Site, Mint.com
Outlet: Mint.com
Format: Other

Here’s Why People Ignore 80% of What Their Advisor Tells Them

Originally in MoneyI’ve heard it estimated that out of all the financial and estate planning recommendations that advisers make, their clients ignore more than 80% of them. If there’s even a shred of truth in this stat, it represents a monumental failure of the financial advice industry.

To explain why, let me tell you a story about a financial planning client I worked with a few years back. In one of our first meetings, she and I were reviewing her three most recent tax returns. As I discussed them with her, it became clear that the accountant who had prepared those returns — an accountant who had been recommended to her by her father — had filled them out fraudulently. A bag of old clothes that she had donated to charity became, on her Schedule A, a $10,500 cash gift. She also deducted work expenses for which she had already been reimbursed.

Pogo Stick Retirement Planning for Younger Generations

Originally in ForbesHistorically, retirement planning has been likened to a three-legged stool — consisting of a corporate pension, Social Security and personal savings. Baby boomers saw the pension fade from existence, leaving them to balance on retirement planning stilts. For younger generations, however, the retirement situation can seem even worse. Sometimes, it feels like it’s all on us. We’re left with only a retirement planning pogo stick.

three legged stool

Further complicating matters, doctors suggest that the length of life Generations X, Y and Millennials can expect may exceed that of our parents and grandparents. We’re likely to live a long time, but our quality of life — to the degree that it is improved by cash flow — is in question because of the heightened savings burden.

Last week, I shared two “silver bullets” — MOVE and WORK— for hopeful boomer retirees who may fear that a 14-year stretch of economic uncertainty has put their goal for a comfortable retirement out of reach. Here’s how these two concepts can be applied to younger generations:

Is A Million Bucks Enough To Retire?

Originally in Forbes“Wow, those guys must be millionaires!” I can recall uttering those words as a child, driving by the nicest house in our neighborhood—you know, the one with four garage bays filled with cars from Europe.

The innocent presumption, of course, was that our neighbors’ visible affluence was an expression of apparent financial independence, and that $1 million would certainly be enough to qualify as Enough.

Now, as an adult—and especially as a financial planner—I’m more aware of a few million-dollar realities:

Retirement Stress Test Graphic - v3-01

1)   Visible affluence doesn’t necessarily equate to actual wealth.  Thomas Stanley and William Danko, in their fascinating behavioral finance book, The Millionaire Next Door, surprised many of us with their research suggesting that visible affluence may actually be a sign of lesser net worth, with the average American millionaire exhibiting surprisingly few outward displays of wealth. Big hat, no cattle.

2)   A million dollars ain’t what it used to be. In 1984, a million bucks would have felt like about $2.4 million in today’s dollars. But while it’s quite possible that our neighbors were genuinely wealthy—financially independent, even—I doubt they had just barely crossed the seven-digit threshold, comfortably maintaining their apparent standard of living. To do so comfortably would likely take more than a million, even in the ’80s.

3)   Wealth is one of the most relative, misused terms in the world.  Relatively speaking, if you’re reading this article, you’re already among the world’s most wealthy, simply because you have a device capable of reading it. Most of the world’s inhabitants don’t have a car, much less two. But even among those blessed to have enough money to require help managing it, I have clients who are comfortably retired on half a million and millionaires who need to quadruple their nest egg in order to retire with their current standard of living.

The teacher couple, trained by reality to live frugally most of their lives, don’t even dip into their $400,000 retirement nest egg or their $250,000 home equity because they have two pensions and Social Security that more than covers their income needs.  Their retirement savings is just a bonus.

But the lawyer couple, trained by reality to live a more visibly wealthy existence, aren’t even close to retiring with their million-dollar retirement savings. In order to be comfortable, they’ll need to have at least $4 million.

A million bucks, then, may be more than enough for some and woefully insufficient for others.

Real Estate Quagmire Sinks Gen X, Y Fiscal Hopes

Originally published CNBC

Throughout the course of my career, I’ve heard a lot of financial horror stories. The majority of these stories are told by baby boomers whose aggressive stock market strategies went bust, often at the behest of a transaction-oriented “advisor.”

foreclosure-1

The most pain—yes, even marginally greater than that of former Enron employees and Bernie Madoff scam victims—has been felt by a younger generation, however, in America’s suburbs, far from Wall Street.

My bad! I was wrong about rising rates and bonds

Originally published CNBC

“I was wrong.”

There are few words strung together that possess such power to free us. In less than a second, we’re able to reconcile the inconsistency between our previous conviction and the apparent truth. Humbling, yes, but also strangely euphoric.

Well, I’ve earned the opportunity to claim said euphoria, as I must confess that I had bought into the most prevalent myth du jour surrounding bond investing. You’ll forgive me, I hope, because this misconception—like all of the most powerful ones—is especially deceptive because it’s grounded in half-truth.

bondpit

Let’s be quite clear: Rising rates simply do not guarantee negative bond returns.

There’s no magic to a million in retirement, but as the Baby Boomer generation begins making the transition, it’s a question oft posed. In this Nightly Business Report clip, Sharon Epperson (CNBC) and I answer the big question: Is a million enough?

Date: June 5, 2014
Appearance: Is a million dollars enough to retire?
Outlet: Nightly Business Report on PBS
Format: Television

The financial industry has a reputation for being an “old boys club,” known for paternalism and the marginalization of women.  Unfortunately, there’s a lot of truth to it.  I enjoyed talking to Kim Palmer at U.S. News and World Report in preparation for her article, Where Are The Female Financial Planners?

Women financial advisors

Date: June 4, 2014
Appearance: Where Are The Female Financial Planners?
Outlet: U.S. News & World Report
Format: Other