In this episode, I’ll share the top 3 financial regrets of Americans and how to counteract them. No one manages their finances perfectly so we all have regrets, but it’s important to be aware of what the most common ones are so we can take actions to avoid them.In this episode...Emergency Funds [03:15]Investing for Growth [08:02]Buying a Home [9:57]Unconventional emergency fund options [14:25]Now no one is perfect when it comes to financial decisions. Like everyone else, I’ve certainly made my fair share of financial mistakes which I chronicled in a few different episodes of this podcast. In episode 18 I shared about a time when I sold a stock for a 50% loss because I succumbed to fear during the Great Recession only to see that stock since that time, rocket over 11,000% higher. You heard that right, I missed out on an 11,000% return. In episode 43, I shared the financial mistakes I made as a young adult and what I wished I had known about money sooner. Having financial regrets is a normal part of learning and growing, but it’s important to be aware of the biggest regrets so we can take actions preemptively to avoid them.So just what are the most common regrets of Americans so we can avoid them. These insights are courtesy of the personal finance software company Quicken, which surveyed about 1,000 Americans and found that a whopping 80% said they have financial regrets. The top three regrets were not having a big enough emergency fund (mentioned by 28% of respondents), not investing aggressively enough (25%) and not buying a house when they were younger (22%). A few of the other regrets mentioned were lending money to a friend and family member and not investing in stocks. Emergency FundAs a Certified Financial Planner™, financially speaking I know that few things can provide the peace and security that an emergency fund can provide. An emergency fund is way more than for just emergencies, instead it’s financial insurance allowing you to have way more freedom in how you choose to live your life. For example, having an emergency fund allows you to quit a toxic workplace. I recommend having three months’ worth of expenses in savings if both spouses work and if you are single or only one spouse works, then you will need 4-6 months worth of expenses saved. Sadly, far too many Americans don’t have emergency savings as nearly 6 in 10 Americans could not come up with $1000 in the event of an emergency. Far too many think their credit card is their emergency fund.How do we prevent this regret and ensure we have an emergency fund. The first step is to have a budget and ensure that you have extra money left over each month. The next step is to set aside these extra funds into an account that you don’t regularly access.Not Investing For GrowthThis had to be tied to the fact to some painful emotional memories. Maybe they succumbed to fear in the moment and sold stocks only to see the stock market soar higher. Here is why it’s so important to invest with a higher allocation to stocks. For nearly a century, stocks have provided returns of nearly three times that of inflation. As an asset class, they have been the greatest generator of effortless wealth in history. Since 1926 stocks returned between 8% – 10%  where as the bonds returned between 4% – 6%. The best way to counteract this fear of not investing aggressively enough, is to ignore the noise and stay invested. Buying A Home The third biggest regret for American’s was not buying a home when they were younger. This one seems a bit unfair as there can be a lot outside of ones control when it comes to purchasing a home. Prices...

WARNING - Why Taxes Are Going Higher for EveryoneThis episode is airing on April 15th, our tax filing deadline and a key aspect of my financial planning practice is to identify and implement tax-saving strategies for my clients. In this episode, I’ll share why it’s almost certain that everyone’s taxes will be going higher in the future because of our annual federal deficit and our cumulative national debt.In this episode...The Government Spends Worse than a Drunken Sailor [3:10]Tax Burdens by Income Level [07:12]Possible revenue streams for the US Government [11:02]Tax Saving Strategies [15:24]The National Debt The federal government of the United States has an annual budget. It’s the set amount that the Federal government spends throughout the year. The amount they are currently spending is much more than the “income” they receive from individual and corporate taxes. In the Calendar Year of 2023, the federal government spent $6.3 trillion but only collected $4.5 trillion in taxes. Just what happens when you add up all of this overspending year after year? That’s called our national debt. Right now that total is over $34Trillion dollars. I shared more in episode 33 of this podcast entitled Time to Pay the Piper. Our debt is steadily climbing at over $34T as of this recording and is expected to be over $5oT by 2032. you can see more at the website usdebtclock.org. We must get our deficits lowered because the interest costs are set to become enormous. In 2028, Federal tax revenue is expected to be $6.1T, actual spending is expected to be $11.7T and just the interest payments on the debt will be nearly $2.7T a year. In order to reduce our debt and the interest we pay on it,  we will need to stop adding to it each and every year with the government's extra spending.   As John Mauldin says: “Yet people continue to say we could balance the budget and pay down the debt by“making the rich pay their fair share.” I wish it were that easy. I really do. But sadly, as I’ll show you, it’s not.”Tax LoadHere’s how it looked in 2020 (the latest available data from the IRS courtesy of the Heritage Foundation).The top 1% earners in America, those that earn over $548k/year earn 22% of the income and pay 42% of the income taxes received by the Federal government.The top 5% earn more than $220K 38% and pay 62% of the taxes paid to the government. The top 10% earn more than $152K earn 49% of the income and pay 73% of the taxes paid to the government.The bottom 90% (those that make less than $152K) earned 50% of the income and paid 26% of the taxes.The US deficit will rise by an average of about $2 trillion/ year for the next decade.As John points out, to account for the extra $2 trillion of spending we will need $2T more of tax revenue. If we raised taxes by about 50% on everybody, from the bottom 1% to the top 1%, it would only get us $850 billion which is a little less than half the way there. Clearly, we don’t have enough money just to match the current projected spending of the government. Instead, they have to reduce spending and raise taxes on individuals and corporations and likely also look for additional sources of tax revenue because income tax by itself won’t cut it. The most likely option in my opinion is a national sales tax or value-added tax.Suffice it to say, we and really our children are in a heap of trouble given our debt obligations. We’ll eventually have to pay the piper for our overspending. What exactly happens is uncertain but I believe what is almost certain, is that our taxes will be going

Tax Advantaged Investment Accounts, Ep #59It’s April and taxes are on the forefront of everyone’s mind. An essential part of building wealth is to not pay more taxes than you have to. In this episode, I will be getting back to the basics and provide and overview of tax-advantaged investment accounts.  In this episode...Pre-tax account strategies  [4:03]After-tax account strategies  [6:11]How young adults can benefit from HSA accounts   [12:26]Taxes can be incredibly confusing regarding how they work and the terminology does not help. Terms such as Gross Income, Adjusted Gross Income, Modified Adjusted Gross Income, above-the-line deductions, below-the-line deductions, tax credits, tax deductions, and Marginal tax rate vs effective tax rate are all important to understand how taxes work and how to implement tax saving strategies. If you want to learn more about these terms consider listening to Episode 8 and Episode 9 of this podcast. In this episode, I’ll provide a more basic understanding of tax-advantaged investment accounts and how these accounts can help you save on taxes. More specifically, how different investment accounts are taxed because knowing the differences can help a person decide when it is to their advantage to pay taxes.  This is an important topic because I often see individuals and families paying way more taxes than they need to because they don’t understand the differences between tax-advantaged investment accounts and how they allow tax optimization.There are 3 different types of tax-advantaged accounts we will discuss each one below.Pre-tax Accounts - Also known as traditional retirement accounts. Most know these as their 401(k) or IRA. In these accounts, you contribute a portion of your salary before you pay taxes. You will still have to pay taxes on this money but you will pay it later, when you take the money out of the account. These types of accounts make the most sense when you are in your highest earning income years. Deciding to pay taxes on the money put into these accounts during retirement when your income is lower can save you a significant amount of money in taxes. After-tax Accounts -After-tax accounts are when you pay taxes on the money before you make contributions to the account. These are commonly recognized as Roth 401k or Roth IRA retirement accounts. 529 accounts are also after-tax accounts. The advantage to these accounts is you never have to pay taxes again on the money contributed if you follow the distribution rules. This type of tax-advantaged account makes a lot of sense in your lowest and lower earning income years. By deciding to pay taxes when your income is lower you can save a significant amount in taxes. HSA Accounts -HSA accounts are the only accounts that are considered triple tax-free. With these types of accounts, you don’t pay taxes on the contributions or distributions or anytime in between. The contributions are tax-deductible, and both the growth, and distributions (if used for a qualifying medical expense) are tax-free.  As long as you follow the rules with HSAs you will pay ZERO taxes on them. Only people with a qualifying high-deductible medical plan are eligible to invest in HSAs. Contributions to HSAs are limited to an annual amount. For 2024 the limits are as follows: Individual $4,150, and Family $8,300. For those 55 and older you can contribute an additional $1,000. You may use funds in an HSA at any time for medical expenses. If you do not use all of...

Retiring Out of the States - What to Consider, Ep #58Last episode we discussed the implications of where you choose to retire in the United States. In this episode, we will dive into what to consider when retiring internationally. Retiring outside of the United States is not a simple decision but one we hope to offer guidance on today.In this episode...Top countries for Americans to retire to [03:12]Factors to Consider when retiring out of the states  [8:47]How to “test drive” international retirement   [10:45]For those that want to retire internationally, you are not alone.  Global Citizens Solutions is a firm that helps Americans retire abroad. They have listed the top 10 countries to retire by considering criteria such as housing, benefits and low-cost perks, Visas and residency ease, cost of living, cultural assimilation, quality and accessibility of healthcare, development, climate, government stability, and the opportunity to semi-retire.The number one country to retire to as ranked by the Global Citizens Solutions is Portugal followed by Mexico and Panama. You may be considering retiring out of the States to pursue a happier life and an adventure, you will also be able to take advantage of stretching your funds through a lower cost of living and meeting financial goals that wouldn’t be possible to achieve by staying in the United States.My practice helps take clients to and through early retirement and retiring in a country with a lower cost of living makes early retirement much more feasible. Take Portugal for example, the number one country for Americans to retire to offering beautiful beaches, a warm climate, and a rich culture. Portugal offers programs to help Americans retire to Portugal.Most obvious factors to consider when moving to another country in retirement:Cost of Living - This is a significant factor to consider when choosing to retire abroad. Retiring to a country with a significantly lower cost of living can change lifestyle during retirement.Climate —It is important to consider what climate you want to retire to. Why make such a massive move to only have to endure winter? Healthcare Access and Expenses— This is one of the top considerations with international retirees. The average married couple in America spends over $250k during retirement on healthcare alone. There are countries where your health care dollars can go further and you will be surprised how good the healthcare you receive will be.Housing— will be a significant factor to consider, for example, some of the houses in Costa Rica are gorgeous but they come at a steep price. You may want to consider the cost of buying a home outside of the States.Culture— There may be significant cultural differences as well as language barriers to consider.In short, if you are looking to retire outside of the States some of the factors you will want to consider are Cost of living, Climate, Healthcare Access, Housing, and Culture. There are a host of other factors as well such as tax and legal factors and proximity to family. My practice helps take clients to and through early retirement, one strategy to consider is to spend the first few years of retirement in an international location with a lower cost of living.The idea of living internationally might sound exciting but, you might still have some hesitation. A great way to temporarily test drive a retirement out of the country is doing a home swap. There are websites that provide a platform where you can exchange homes with other international travelers. Securities and Advisory services offered through LPL Financial. A registered investment advisor. Member FINRA & SIPC.Resources & People...

Retiring Out of State - What to Consider, Ep #57When it comes to retirement for citizens in the U-S-of-A, you have 50 different states to choose where you would like to spend your retirement. It’s not a decision to take lightly as there are advantages and disadvantages that every state offers. There are a host of factors to consider when retiring to another state and I’ll go over a few of them here.In this episode...United States Retirement Migration trends [03:35]Factors to Consider when retiring out of State  [05:47]How to save on taxes for those with residences in two states   [12:57]More than a few Americans decide to relocate to another state. Smart Asset examined U.S. Census Bureau migration data to uncover where retirees are moving. They noted, unsurprisingly, that a lot of seniors are moving out of expensive northeastern cities and into other parts of the country. Here are some of the key findings of their analysis of the census data:The most popular city for retirees to move to was Mesa, Arizona which topped the list for the nation’s highest net gain of seniors for the third consecutive year. In fact, the influx of retirees more than doubled that of the second place city.The most popular state is Florida which sees a massive influx of seniors. Florida netted more than 78,000 senior residents from other states in 2021 – three times as many as the second-ranked state. Miami, Jacksonville, St. Petersburg, and Tampa all placed among the top 20 cities gaining the most seniors.Smart Asset noted that Taxes and climate appear to influence retirees.The most obvious factors to consider when moving to another state in retirement. Proximity to Family - As you get older, you want to cherish your time with family. Obviously, you’ll get more of that when you live closer to one another. Additionally, you may need some assistance as you get older so you will want to have family close to help you. Clearly, being geographically close to family is a compelling reason to retire to another state but maybe not too close to your family, as the comedian George Burns put it “Happiness is having a large, loving, caring, close-knit family in another city”. But it should be noted that he didn’t say in another state.Cost of Living —The next most important factor when considering retiring in another state is the cost of living. This has more to do with just taxes as things can be significantly more or less expensive. Climate — There’s a reason why more retirees are moving to sunnier climes such as Florida, Arizona, Texas and the like. Taxes — Are a huge consideration when deciding to retire in another state. Some states tax income at higher rates, some don’t tax income at all. Some tax social security benefits and some don’t at all. Others have no to low income rates but have higher property tax rates to make up for it. Some have high sales tax and a few have none.In short, if you are looking to retire to another state some of the factors you will want to consider is proximity to family, the climate, the cost of living and of course taxes. Because if you live close to family near the border of two different states, it might make a big difference in which of the fifty nifty United states you decide to retire to. There is a tax saving strategy for those who have residences in two different states. We’ll call it the 183 rule. Why that number, because there are 365 days in a year and 183 days is just over half. If a person has residences in two different states, say California and Nevada, they would want to become a resident in Nevada and spend 183 days or more in their Nevada residence. This would ensure that their income would be taxed at Nevada rates and not Californias, because...

How to Become a Member of the Two Comma Club, Ep #56This episode focuses on the behaviors needed to become a member of the two-comma club. What exactly is the two-comma club? Well, it’s just a different way of saying how to become a millionaire, since one million dollars is represented by 7 numbers, the number 1 followed by 6 zeros, consequently there are two commas required to break those numbers up.In this episode...Who Wants to be a Millionaire [01:26]USA has a lot of millionaires [03:23]The Abundance Mentality [05:49]Prerequisites to becoming a Millionaire: The Success Sequence [07:28]What you should do [09:20]What happens to those that didn’t model the behaviors [14:13]Years ago there was a hugely popular game show entitled Who Wants to Be a Millionaire. It captivated the American public. The television network ABC first launched the American version of the game show in 1999 and it became the highest-rated television show later that year, and has since had 21 seasons with several different celebrities serving as the game show host.In 2023 here in the US of A, we have never had more millionaires than we do right now. Based on the latest estimates from the Federal Reserve there are around 16 million American households with a net worth of $1 million or more. That’s up from fewer than 10 million millionaire families in 2019.While saving and investing are important behaviors to cultivate on the path to becoming financially independent (or a millionaire) there are prerequisites behaviors that must be mentioned. In an opinion piece in the WSJ by the wonderful Jason Riley, he emphasized the success sequence. That sequence is often credited to research done by Brookings Institution scholars Isabel Sawhill and Ron Haskins, though others have made similar observations. The success sequence is simply this:If you finish high school, get a job, and get married before having children, you have a 98% chance of not being in poverty.Recently Dr. Melissa Kearny, MIT-trained economist wrote a book entitled The Two-Parent Privilege.  In it she shared the story of how declining marriage rates are driving many of the country’s biggest economic problems and how the greatest impacts of marriage are, in fact, economic: when two adults marry, their economic and household lives improve, offering a host of benefits not only for the married adults but for their children. A summary of the book notes that For many, the two-parent home may be an old-fashioned symbol of the idyllic American dream. But The Two-Parent Privilege makes it clear that marriage, for all its challenges and faults, maybe our best path to a more equitable future.Here are a few additional behaviors I would add:Not borrowing money when you don’t have to. Just because you are approved for a loan doesn’t mean you can afford the thing you are trying to purchase. Don’t confuse approval with proof that you can afford the car or whatever it is you are trying to buy with borrowed money. If a person has a new luxury car they are wasting money and most who have them don’t have the money to waste. You should only borrow money to buy an house and pay for some college. And even with college there are many reasons not to borrow money to pay for college. See episodes 15 and 16 of this podcast for more information.Another thing to note, just because a person has a high FICO score it doesn’t necessarily mean they have made smart money choices but simply the fact that they have shown the ability to borrow money and pay it back consistently. One’s personally accrued net worth and the savings rate is a far better determiners of smart money choices.In the end, it all comes down to discipline. Everything changes...

All That Glitters Isn’t Gold, Ep #55On my drive to work, I mostly like to listen to podcasts but on occasion, I will listen to the radio. And frequently, I hear advertisements that claim that the economic sky may be falling and that one needs to invest in gold to protect themselves from the oncoming economic apocalypse. Well, the truth regarding investing in gold is a very different story and those that invest in gold may not have fools gold but I’ll share why it could be very foolish to do so.In this episode...Using Fear to Sell [2:54]The lies salesmen tell you about Gold [4:10]Gold has grossly underperformed for over 40 years [6:26]Three Additional Reasons to NOT invest in Gold [10:25]Beware When Salesmen Use Fear to Sell [13:13]This communication regarding a precious metal is limited to a general and educational discussion as an asset class such as an economic or market commentary. This is not a promotion or solicitation for the direct purchase of a hard asset. Gold has enamored the mind of mankind for millennia. There are tales of Eldorado, the lost city of gold, or King Midas who had the golden touch, or even a leprechaun that hides a pot of gold at the end of a rainbow. In fact, the very state I reside in, California, owes much of its initial rise to the tens of thousands of people that came out west in hopes of also striking it rich in the gold deposits after gold was first discovered in 1848 at Sutter’s mill. Gold holds a certain allure to people and the commercials advertising investing in gold use this perception to peddle an investment theory regarding how gold supposedly has these incredible wealth-preserving capabilities. Now the advertisements I have heard always focus on fear and emotions with references to a teetering economy or references to the stability of the dollar owing to our massive national debt. That they use fear is no surprise as few things motivate people like fear. Greed is a close second, but fear is certainly the most powerful.Since 1980, Which Investment Has Generated the Best Returns? Stocks bonds or gold?From January 1980 through January 2023, the S&P 500, with dividends reinvested, returned an annualized 11.4% before inflation. Adjusted for inflation, it was 8.0%. As for bonds, the benchmark 10-year Treasury note delivered an annualized total return of 5.6% over the same period. Adjusted for inflation, it was 2.4%.What were Gold's returns since 1980? Gold had an annualized return of just 3.1% before inflation. After adjusting for inflation, the average annualized return was negative. 0.01%. Meaning you had less money than you started with 44 years later.Let me repeat that, since 1980, over 44 years, gold has had a negative return when adjusted for inflation. Again, how these people can get away with these lies on the radio and TV is beyond me. Now if that’s not enough reason to convince you why you shouldn’t invest in gold let me share 3 additional reasons why all that glitters isn’t gold.First - Gold pays ZERO incomeGold doesn’t produce income. It’s only worth what someone will buy it from you in the future, whereas stocks pay income via dividends and bonds pay income via interest payments. I like Apple products. I own a Macbook Air, a watch, an iPhone, iPad and Airpods, and Apple TV. These are all products Apple makes. They sell these products to consumers for a profit. Some of those profits are shared with stockholders/part owners in the form of...

For Investors, Elections Do Not Matter - Ep #54Recently, I read that one of investors' chief concerns is the upcoming presidential election that occurs in November of this year. It seems every year we are told that this is the most important election of our lifetimes only for the next election to be even more important than that. In this episode, I will share why elections do, and do not matter for investors.In this episode...America is the Best Country in the world [02:05]Americans have more freedoms [04:04]It’s All About the Constitution [6:48]Election Outcomes Don’t Matter for Investors [10:14]We need to vote [16:51]How to have more influence via voting [19:22]The Inspired ConstitutionOur founding fathers understood that power corrupts and absolute power corrupts absolutely and for these reasons, they put tremendous checks on the powers of government to limit their influence on the freedoms of American citizens. In doing so they provided many more freedoms for the citizens of the United States than any other nation where they could go on and pursue their happiness. Allowing us, individually to determine our ultimate destiny.The freedoms enshrined in the Constitution has enabled America to drive the progress of humanity further than any other nation in history. Stock Market Ignores Election OutcomesU.S. stocks have trended up regardless of whether a Republican or Democrat won the White House.  A $1,000 investment in the S&P 500 Index when FDR became president in 1933 would have been worth over $19 million in 2023. During that time there have been seven Republican and eight Democratic presidents. But We Must VoteMany could complain about the government, media, and academia but if one fails to take action to make the changes by voting not just in the general elections but the primary elections as well. How to Have More Influence via Voting If you take the initiative to understand the elections and especially the ballot propositions, you can guide multiple other voters on how to vote, magnifying the result. That can have a huge effect. Your endorsement holds WAY more weight than some politician, businessman, or celebrity.Securities and Advisory services offered through LPL Financial. A registered investment advisor. Member FINRA & SIPC.Resources & People MentionedThe US ConstitutionGuidetoelections.comConnect with Jonny Westhttps://BetterPlanningBetterLife.com Connect with Jonny on LinkedInSubscribe to ONE FOR THE MONEY on Apple Podcasts, Spotify, Google PodcastsAudio Production and Show

Another year has passed, which means that many are a year closer to retirement. The most successful retirements are planned many decades in advance. This episode of the One for the Money podcast focuses on what one should do in the last decade of work before retiring. A mistake in these years can ruin the prior decades of work and jeopardize retirement dreams. In this episode...Better planning [01:22]Assessing financial readiness [03:09]Health and financial planning [07:36]Tax diversification [10:25]Estate considerations [13:31]Planning before retirementFew things are looked to with more anticipation than retirement, and sufficient savings to provide the income to fund retirement is at the top of the list of retirement readiness. Fidelity, an investment company, suggests that by age 55, individuals should have approximately seven times their current income saved. However, this is just a general rule and doesn't account for factors such as pensions, life expectancy, and other sources of income. Seeking advice from a Certified Financial Planner is crucial to ensure a more thorough assessment of your preparedness for retirement. Certified Financial Planners can also determine if enough or too much is being saved. Considering an individual's unique circumstances, they will also determine whether money should be saved in pre-tax or after-tax accounts. A healthy retirementPeople can be set financially for a wonderful and early retirement, but that won't matter if they have poor health. Now is the time to start or increase healthy habits, enabling you to thrive both now and during retirement. Those 50 and older should "invest" an hour a day into their health. Longevity is most impacted by major, modifiable behaviors such as exercise, sleep, nutrition, and emotional health. Exercise itself is in a league of its own because of its ability to extend one's life and reduce all-cause mortality. It is the most challenging aspect of people's behavior because of the significant time commitment, but having healthy habits entering retirement will make retirement significantly better. Estate plansAn estate plan is a critical part of financial planning and cannot be missed. This estate plan must be communicated to the beneficiaries. The primary reason for an estate plan isn't to avoid probate. Rather, estate planning preserves family unity. When the last parent or grandparent dies, money goes into motion, and some people's love for money can destroy lifelong family relationships. This tragic circumstance happened to my father's family. That's why, every fall, I focus on my clients' estate planning preparedness. I also continue to spend time and money on my own understanding of estate planning.The last decade before retirement has critical planning considerations to help ensure a better retirement through better planning. It's imperative to take advantage of the next ten years and utilize these points. Tremendous progress towards the best retirement possible because the best retirements don't happen by accident but are planned for years in advance.Securities and Advisory services offered through LPL Financial. A registered investment advisor. Member FINRA & SIPC.Resources & People MentionedHow much do I need to retire? | FidelityCongratulations, You Already Have an Estate Plan - BUT YOU DON'T WANT IT!, Ep #21

Many feel that the country and the world are on the brink of challenging times, and many investors wonder if they should get out of the market and wait to invest because a better time may come along in the future. In this episode of the One for the Money podcast, I share why this is always the wrong strategy.In this episode...Fear of investing in uncertain times [01:19]The relationship between difficult times and stocks [04:30]Investment mistakes and the importance of discipline [10:37]Don’t let emotions get the best of you [13:18]Planning and spending for more experiences [17:16]Investments in uncertain timesWhen someone is about to make a significant investment, they often wonder if there might be a better time to invest later. This same fear is gripping the hearts of people invested in the stock market, with many wondering if they should be more conservative.With ongoing conflicts in Europe and the Middle East, there is a growing concern that we are heading towards a period of instability. Despite predictions of an economic downturn, it has yet to materialize. The upcoming presidential election is causing anxiety as both major party candidates have historically low approval ratings. As a result, many individuals are hesitant to invest or stay invested.Losses are twice as impactful for investors than equivalent gains. Studies have shown that a 10% loss hurts twice as much as a 10% gain. However, being afraid of the future market is a dangerous mindset that will not lead to successful investing. For this reason, one should always invest according to one’s goals and in alignment with time-tested investment principles. Data perspectiveSince 1926, bonds were negative just 15 times, with an average loss of just 2.4%. Over that same period, stocks were negative just 25 times, with a significantly higher average loss at 13.2%. That’s why bonds are beneficial for short-term goals: fewer years with negative returns, and those negative returns were considerably less than what they were for stocks.For longer-term goals, we invest in stocks. Since 1926, stocks returned between 8-10%, whereas bonds only returned between 4-6%. Over the past century, the U.S. stock market has been up nearly 75% of the time, and for 60% of the time, those increases were more than 10%. More than 33% of the time, those increases are more than 20%. Historically, you are more likely to have a gain of 20% in your investments than to experience a down year.Investment behaviorSome don’t succumb to the fear of a down market but rather the belief that they can correctly time the markets and know when to sell or buy. But the two most successful investors in history, Jack Bogle and Warren Buffett, said they had never met anyone who could correctly time the markets. The famous investor Peter Lynch explained the fool’s errand of market timing best when he said, “More people lost money waiting for corrections and anticipating corrections than the actual corrections themselves.”JP Morgan’s Guide to Retirement highlights the perils of trying to time the market and why it doesn’t work. Using data from the S&P 500, the guide shows the performance of $10,000 invested between January 1, 2002 and December 31, 2021. The initial investment would have grown to over $61,000 during that period. But if the best ten days were missed, then the initial investment would have grown to only just over $28,000. That’s missing only ten days out of 5,000 or just 2% of the time invested. If you have long-term investment goals, investing and staying invested is essential. Every investor should have an investment plan that aligns with their goals and can help them navigate challenging market conditions.Securities and Advisory services offered through LPL Financial. A registered investment advisor. Member FINRA &...

Giving to others can be an incredibly rewarding experience. Have you ever wondered how you can give better? In this One for the Money podcast episode, I discuss ways to improve our giving and make it more impactful for both others and ourselves. In this episode...The season of charitable donations [01:12]Donor-advised funds [03:39]Donating appreciated assets [05:26]Giving retirement money [06:33]Planning charitable giving [09:32]The month of givingFor many people, December is the season of giving. While many may think of presents around a Christmas tree, December is also when the most money is given to charitable organizations. According to the Blackbaud Institute, in 2021, over 20% of all donations for the year were received in December. Americans gave an astounding $471 billion to charity in 2020, nearly 70% of that coming from individuals. What’s fascinating is that philanthropic giving is highly correlated to the stock market’s strength. The better the stock market performs, the more charitable contributions are made. Investing to giveA donor-advised fund is an investment account you set up to hold your donations, allowing you to receive a tax deduction. The great thing is that you don’t have to decide where to donate these funds until later. The money can grow until you find the charity best aligned with your values. Donor-advised funds can accept non-cash assets, as well as stock, mutual funds, bonds, and even S and C corp stock.While a donor-advised fund can be a potent vehicle for charitable contributions, the fact that they can receive stock provides an introduction to another powerful way to give to either a donor-advised fund directly or to a charity itself. Some may think it’s best to sell appreciated assets and give the money to charity. A better way is not to sell the asset at all and give it directly to the charity. Donating appreciated stock to a charity can be more beneficial than selling it. The charity can receive more without paying taxes, and you can qualify for a larger tax deduction.Qualified charitable distributionsWhat if you want to give some of your retirement money to charity? A qualified charitable distribution(QCD) is a tax-free donation from an IRA to a qualified charity. While a QCD can’t be deducted from your taxes, the savings on your income may make this type of donation beneficial to your taxes. A QCD counts toward satisfying the required minimum distributions. QCDs must go directly from the IRA to the charity. Clients can be provided with a checkbook just for their QCDs so they can make direct contributions. While there isn’t a deduction for these contributions, they’re a great way to give unwanted retirement funds to charity.Securities and Advisory services offered through LPL Financial. A registered investment advisor. Member FINRA & SIPC.Resources & People MentionedOverall Giving Trends - Blackbaud InstituteTrends that Will Shape Philanthropy in 2022 | Giving USA2021 Donor-Advised Fund Report | National Philanthropic TrustWho Itemizes Deductions?

In February, I visited the beautiful island of Maui, Hawaii, and trained in helping clients plan for their ideal life. It’s not just the right way to plan but the only way to conduct financial planning for clients. In this episode of the One for the Money podcast, I share details of this type of planning. At the end of the episode, I share a thought-provoking strategy from a book I recently read called Die with Zero.In this episode...Focus on the essentials [01:20]The godfather of life planning [02:22]Life choices with limited time [06:14]Untapped potential [08:32]Dying with zero [11:24]Listening first, then planningWhen financial planning, focusing on what is essential for you to have the life you desire is imperative. The worst thing I could do for a client is to immediately start solving their financial problems without an understanding of what they truly want. Financial solutions without the proper context have the potential of putting a ladder on the wrong wall and having clients start climbing. The key to discovering what is essential for clients to have an ideal life requires something you may not experience in many investment firms: an investment of time and a lot of listening. After going through this planning myself and taking a number of my clients through the same process, I’ve concluded that it’s not only the best way to plan financially for clients; it’s the only way. Prioritizing people in their financial plansGeorge Kinder, the godfather of the life planning movement, has been at the forefront of the financial services industry for more than 35 years. He spearheaded the movement to put the lives that clients desire to live at the center of their financial plans. George Kinder has distilled this planning via five unique steps he has termed the EVOKE process: Exploration, Vision, Obstacles, Knowledge, and Execution. As George Kinder describes, “Life planning focuses on the human side of financial planning and puts people, not products, at the center of analysis and advice and helps clients meet unique goals and unlock the greatest meaning in their lives.”EVOKE life planningDuring the exploration phase, clients share everything that would encompass an ideal life for them without any emphasis on prioritization. It’s imperative to understand what is essential for each individual, even with couples. The vision stage prioritizes the elements of one’s ideal life through inspirational writing exercises. This process helps to shape financial plans that aim toward what matters most to the clients. The Obstacles stage involves identifying barriers hindering the realization of clients’ goals and finding solutions to overcome them. EVOKE planning’s collaborative process empowers clients to make their dreams feel attainable. The subsequent stages, Knowledge and Execution, involve conducting comprehensive financial analyses and implementing tailored strategies that align with clients’ aspirations, making every financial decision resonate with their passions and purposes.Securities and Advisory services offered through LPL Financial. A registered investment advisor. Member FINRA & SIPC.Resources & People MentionedKinder Institute of Life PlanningDie With Zero: Getting All You Can from Your Money and Your Life

Ensuring You Get to Spend More of Your Hard Earned Money & the Government Gets to Spend Less, Ep #49For many of my clients during the fall, I implement a powerful strategy called a Roth conversion, which can significantly lower the taxes paid during retirement. In this episode of the One for the Money podcast, I review this strategy that can help retirees spend more of their own money rather than the government. Listen to the end, where I share additional powerful tax-saving strategies you may want to consider during your employer’s open enrollment. In this episode...Retirement tax planning [01:20]Timing Roth IRA conversions [05:38]The importance of tax diversification [12:16]When Roth conversions aren’t the best idea [13:20]HSAs and healthcare expenses [15:19]Planning for retirement taxesWe’ve all made poor decisions when it comes to spending. However, our spending is still way better than the government’s bridges to nowhere, costly, incomplete high-speed trains, or countless other examples of wasteful government spending. This reason is why I love helping clients keep more of their money to spend by utilizing tax-saving strategies.These strategies are necessary because people don’t pay less in taxes accidentally. Instead, lower taxes result from executing strategies over many years and being proactive with tax planning. Most Americans have two options. They can hope taxes will be lower in the future, or they can take action to retire as diversified as possible. Benefits of Roth conversionsRoth conversions are a great way to become tax-diversified and reduce taxes when conditions are right. Roth conversions work just as they sound, converting portions of not-yet-taxed retirement accounts to never-again-taxed accounts. There are no income limitations, but since income taxes will be paid in the year of the conversion, it makes the most sense to complete Roth conversions in the years when your income is lower. When the math works, a Roth conversion is one of the best strategies to mitigate taxes. Most Americans save for retirement in traditional or pre-tax retirement accounts. This money will be taxed upon withdrawal during retirement. Consequently, retirement accounts are essentially co-owned with Uncle Sam. How much is owned by Uncle Same will depend on whatever the tax rates are in the future.Reasons not to do a Roth conversionAlthough Roth conversions can be a great option, there are some reasons why you may not want to consider them. Since the converted amount cannot be used for tax payment, you would have to make sure you have the tax money saved up. Also, if you expect to be in a lower tax bracket in retirement, then a Roth conversion may not be the best decision for you. If you have a child who is applying to college and seeking financial aid, a Roth conversion would show you as having a higher income, which may affect your child’s eligibility for financial aid. It’s crucial to weigh the benefits against these factors and consider speaking with a certified financial planner and a tax professional to help you make an informed decision.Securities and Advisory services offered through LPL Financial. A registered investment advisor. Member FINRA & SIPC. Resources & People MentionedNational Debt ClockHistory of the US Federal Budget Deficit

For some people, spending money can be a hard thing to do. As a financial planner, one of the things that has surprised me the most is the difficulty some clients have in spending their money. In this episode of the One for the Money podcast, I share ways to help make spending easier. Listen to the end, where I share a spending tip for the rest of your life.In this episode...Learning to spend in retirement [02:22]Why do some people save and some spend? [06:00]Being prepared “just in case” [10:02]The rest of your life analysis [13:11]The decumulation paradoxAccording to a 2018 Investments & Wealth Institute study, nearly six in seven retirees only spend down the earnings in their portfolios and spend none of the principle itself. This phenomenon is called the decumulation paradox.People who have always been in a saving mode find flipping the switch to spending difficult. Spending can be particularly challenging when someone has retired or is on a mini-retirement because they no longer have a salary every month because everything can depend on their nest egg. This is why people with guaranteed sources of income, such as pensions and annuities, tend to spend more money during retirement.Spending more in retirement Psychological barriers can prevent us from spending what would bring more enjoyment and happiness intellectually. Clients may understand that dying the wealthiest person in the graveyard isn’t a good goal, but they may still struggle emotionally with spending money.I realize that some may see spending more as a “first-world problem,” but I will say that having worked with hundreds of individuals, I’ve seen people with limited income build significant wealth. One of my goals is to encourage people to spend more of what they worked and sacrificed so hard to make possible. It’s important for those who have made wise decisions to save and accumulate funds to spend what they’ve earned. Money is a resource, not an end in itself. Just in caseSome individuals avoid spending money due to what I call the “just in case” factor. They don’t spend money in case their children require financial assistance, in case they incur medical expenses, or in case they experience an extended long-term care situation. We are all aware of relatives with dementia for years, which appears to factor into our planning for the worst-case scenarios.There are ways to plan for these scenarios without sacrificing our ability to make memories both now and in retirement. Some of the help I give clients is giving them the peace of mind to spend on what they want. Then, they can make the memories that last lifetimes. Securities and Advisory services offered through LPL Financial. A registered investment advisor. Member FINRA & SIPC.Resources & People MentionedThe Decumulation Paradox: Why retirees are not spending more?Regrets of the DyingWhy Most Retirees Never Spend Their Retirement AssetsHow to Get Clients to Spend More Money - Articles - Advisor Perspectives

Surveys have shown that money cannot buy happiness; however, certain types of spending can increase happiness. In this episode of the One for the Money podcast, I talk about ways to increase happiness, not through increased spending, but by improving the way money is spent.In this episode...Life, liberty, and the pursuit of happiness [01:05]Money does not guarantee happiness [02:06]Spending money on others [04:03]Opportunities to anticipate [07:47]Pursuing happinessAmerica’s purpose aligns perfectly with human purpose: life, liberty, and the pursuit of happiness. Pursuing happiness has been a recurring theme in this podcast, and I regularly encourage clients and listeners to seek the things that ultimately lead to happiness. Those things are only sometimes directly influenced by money. Happiness is derived through positive emotion, engagement, relationships, meaning, and accomplishment. Money neither buys nor guarantees happiness. I have met both wealthy and poor people who are equally unhappy. When I visited India years ago, I walked past a squatters’ camp on my way to see a temple. The makeshift shelters were built of worn blue tarps and cardboard boxes. Despite their difficult living conditions, these people had joyful countenances that still impact me today.Using money for what mattersWhile money can’t buy or guarantee one’s happiness, there are instances where money via spending CAN make you happier. Spending money on others rather than ourselves has proven to lead to more happiness for the spender. Spending money to buy ourselves more time might seem simple, but it goes a long way. Sometimes, I spend a little money to have more time with my family. That extra time is priceless. With more time, you can do other things like exercise, volunteer work, or other activities linked to increased happiness. Connecting with friends, attending an event, and learning new things are all great ways to spend your time positively. Important to note is the critical issue of how people consume this extra time. Spending all your free time binge-watching shows, playing games, or scrolling through social media is quite different from doing something meaningful, engaging, or growth-promoting. ExperiencesResearch suggests that happiness is more often derived from experiences rather than material possessions. However, it’s important to remember that material things can also bring us joy if we use them to create experiences like going on a picnic or visiting a national park or museum. Simple, low-cost activities can provide small but meaningful boosts to happiness in the short term that accumulate one step at a time to significantly impact happiness in the long term.Securities and Advisory services offered through LPL Financial. A registered investment advisor. Member FINRA & SIPC.Resources & People MentionedWhen it Comes to Early Retirement - Start with Why, Ep #1Too Much Money & Too Few Memories, Ep #24Michael Kitces6 Ways Money Really Can Buy Happiness For Your Financial Planning ClientsConnect with Jonny West

A will is a crucial component of a financial plan, but it may not be sufficient on its own. In this episode of the One for the Money podcast, I share why many people would benefit from a trust. In the tips, tricks, and strategies portion, I share a tip regarding locating unclaimed money.In this episode...More than a will [01:13]Trusts vs. wills [04:06]Inadvertent disinheritance [06:52]Finding unclaimed assets [10:40]More than moneyWithout an estate plan, transferring an estate costs much more because a lawyer is necessary. Also, the process takes much longer because of the backlog in the courts. The records are 100% public, so there’s no privacy whatsoever. If you don't want scammers to harass your children by knowing how much they received, make sure you have an estate plan.While avoiding expensive lawyers and keeping your final financial information private and away from the eyes of scammers are great reasons to have an estate plan, the primary reason is to preserve family unity. As I mentioned in the previous episode, family unity is the most important legacy you leave behind. Without an estate plan, your heirs may have some strong disagreements. Relationships could be ruined over a simple thing like money.Will vs. trustSome law firms prefer wills over trusts because the result is more lucrative. That’s why some law firms charge so little for wills; they want the probate business. Changing a will requires certain steps; the same witness must sign the updated will. Trusts are easier to change than wills, and assets will be distributed based on an attached document. That document can be periodically updated, and distributions are based on the latest version. A trust is much more flexible than a will to make those changes. Trusts are great when you have several beneficiaries on accounts. You won't need to update your accounts if you’ve named the trust as the beneficiary. With a will, you can’t control the distributions. With a trust, you can for some beneficiaries. Smoothly transferring assetsCertain situations almost require a trust, as inadvertently disinheriting children is too easy, as with blended families. For example, if a husband and wife each have kids from a previous marriage, and the husband were to pass away, the wife may inherit everything. Then, when she passes, only her children may inherit all of the money. Inadvertently, this would disinherit the husband’s children from the previous marriage. Because of gift taxes and other complications, the solution isn’t as simple as inheriting children giving a portion to the others.One important thing to note about the transferring of assets is that property transfers first by title, then by beneficiary designation, and finally by probate or will through the courts. Some assets can’t have a beneficiary named, like a house. So if your will states that your 401k will be split between your kids but names only one of your kids as the beneficiary, that beneficiary will supersede the will. In that scenario, the title beneficiaries would need to match the will. By establishing trust, you can easily address this concern. Securities and Advisory services offered through LPL Financial. A registered investment advisor. Member FINRA & SIPC.Resources & People MentionedMissingMoney.comNational Association of Unclaimed Property AdministratorsThe Only Legacy that Matters - Ensuring Family Unity via Estate Planning , Ep...

An estate plan is a crucial part of one’s financial plan, but most people don’t have one. Those who do have a plan likely need to make updates or changes. This episode of the One for the Money podcast discusses the impact of an estate plan on the family. In the tips, tricks, and strategies portion, I share a tip regarding legacy contacts for your smart devices.In this episode...The crucial estate plan [01:08]Planning for the details [04:04]Family matters [06:32]Legacy contacts for smartphones [08:33]Proactive unityWhat happens when someone dies without an estate plan? The reality is that everyone does have an estate plan. Every state in the United States has a default plan, but it takes much longer and is much more expensive than necessary. There is one primary goal with estate planning: to preserve family unity.When the last surviving parent or grandparent dies, money often creates tension among family members. Unfortunately, some prioritize their love for money over maintaining lifelong family relationships. My father and his family experienced this firsthand. We learned an important lesson from this experience - to prioritize our family’s well-being, having a comprehensive estate plan and regularly reviewing it is essential.Review your plan with the right peopleWhen it comes to estate planning, a general attorney may not be the best fit for expressing your exact wishes. While they can assist with avoiding probate, they may not take into account the preservation of your family’s relationships. Estate planning often involves filling out forms that may not fully capture your desires if the right questions aren’t asked. For instance, let’s say that Mom promised her classic Volkswagen van to one son, while Dad promised it to their daughter. If the estate plan documents don’t clearly state who inherits the van, it can create family tension. Families often have disagreements over sentimental heirlooms, such as a piano or jewelry. It’s essential to consider how crucial family unity is to you after your passing. If it’s important, then you should take the time to discuss how to pass down heirlooms with your loved ones.CommunicationCommunication can be an issue with the most basic estate plan. What if special needs children are involved or children who suffer from substance abuse? These complicated issues deserve attention. You need to communicate your wishes should you become incapacitated. What if you told your oldest child that you don’t want to be on life support, but your youngest isn’t aware of that fact and wants to believe that you might still recover? That’s why it’s not only critical to have a durable power of attorney but to communicate your wishes as well. You don’t want this to come up for the first time around your hospital bed. It’s not fair for the person left responsible to have to guess.A financial planner is an excellent option to review your documents because the lawyer who drew up the plan will unlikely look at it again. Regularly review the decision makers regarding your healthcare directive and the trustee. Things change, and you may not want the person in charge now that you named previously. Family unity has a better chance with a well-written, executed, and communicated estate plan. Securities and Advisory services offered through LPL Financial. A registered investment advisor. Member FINRA & SIPC.Resources & People MentionedClick here for the funny estate planning commercial What Makes Life Meaningful? Views From 17 Advanced Economies | Pew

Many people wonder if financial planners are worth the fees they charge. In this One for the Money podcast episode, I’ll help you learn the value a financial planner can provide. In the tips, tricks, and strategies portion, you’ll learn how to identify competent financial planners and avoid hucksters and salesmen.In this episode...Money is a sensitive topic [01:07]How financial planners add value [03:46]Providing peace of mind [09:34]Planner? Advisor? Agent? [13:47]Identifying competent financial planners [15:46]The cost of not having a financial plannerDiscussing finances can be a delicate and personal matter for many individuals. Unfortunately, some people equate their financial prosperity with their overall success in life, causing anxiety and fear over their perceived lack of progress. As a financial planner, I’ve had the opportunity to meet with countless clients to review their financial situations. I’m pleased to say that individuals are often pleasantly surprised by how well they’re on track for their financial goals.Many people avoid seeking the help of a financial planner due to the complexity and emotional nature of finances. Instead, they attempt to manage their finances on their own or rely on advice from colleagues, friends, or family. However, in my experience of reviewing numerous financial plans, I have encountered many instances where mistakes or missed opportunities. These mistakes can include problems with company 401k plans, cash management, debt repayment, or tax planning, each of which can result in significant financial losses.A financial planner often means greater resultsAccording to Vanguard’s research paper from July 2022, financial advisors have the potential to increase their clients’ net returns by up to 3% or more. However, the value added may vary depending on the client’s situation. To demonstrate the impact of a 3% increase in returns, consider this example: If $10,000 is invested at a 4% rate for 30 years, it will grow to just over $32,000. But if the same amount is invested at a 7% rate, 3% higher, it will grow to over $76,000. This example shows how a financial planner can significantly impact someone’s financial future. While these results are not guaranteed, they highlight the value that professional investment advice can bring. Most mutual fund assets are advised, which further supports the importance of seeking the help of a knowledgeable advisor who can provide tailored guidance.How to choose the right professionalIt is crucial to choose a financial planner who is certified, meaning they have completed at least seven college-level courses covering a wide range of financial topics such as investments, retirement plans, taxes, insurance, and estate planning. They also have bachelor’s degrees. I wouldn’t let my friends or family work with anyone who wasn’t a CFP. Sadly, a CFP isn’t a guarantee they will have your best interests in mind, as I’ve seen too many CFPs sell only insurance products and not provide comprehensive planning.A financial planner should thoroughly analyze your tax return every year and identify all the ways to help you avoid paying extra taxes. Without studying your tax return, how can any financial planner provide guidance regarding contributions, distributions, or other tax mitigation strategies? To create a comprehensive financial plan that aligns with your ideal life, a financial planner should consider all aspects of your financial situation, including investments, taxes, savings, pensions, income, goals, and real estate, and analyze the impact of adjustments on your ideal life. Securities and Advisory services offered through LPL Financial. A registered investment advisor. Member FINRA & SIPC.Resources & People Mentioned

This One for the Money podcast episode is for young adults and those younger. This information is what I wish someone had shared with me at that stage of life. Would I have heeded the advice? I can’t definitively say, but what is definite is that knowledge proceeds wisdom. With the knowledge provided in this episode, hopefully some listeners can make wiser decisions to create a better life.In this episode...Reasons understanding money is so important [03:34]When not to borrow money [10:11]Avoid credit cards at all costs [12:29]Building wealth is about discipline [15:55]Lessons from Everyday Millionaires [17:50]How to keep your spending simple [21:10]When to borrow moneyOnly borrow money when investing in appreciating assets. Borrowing money to buy real estate is a positive example. A car, however, is a depreciating asset. For example, if you purchased a car for $25,000 and were paying 6% interest on the loan, your car would be worth $22,000 the day after its purchase. If the car is paid off in five years, the total payments would have been $31,000, but the car’s worth would be around $7,500. Sadly, this was a lesson I learned the hard way. My twin brother and I borrowed money to purchase a used Jeep Wrangler. We fell in love with the vehicle at the auto dealership and even paid extra for drive-train insurance. Two days later, the clutch went out, and the dealership said it wasn’t included in part of the drive-train. That wasn’t the only issue we had with the Jeep. It was constantly in the shop, and we had expensive mechanical problem after problem that the dealership said our drive-train insurance didn’t cover. Avoid credit card debt at all costs. Literally. Credit card debt leads to long-term borrowing habits that are tough to overcome. Instead, it’s best to avoid developing these negative habits altogether and save yourself the trouble.If you had $10,000 in credit card debt with 17% interest and paid the minimum payment of around $142/month, your balance would have decreased by only a dollar by the time interest is applied. I learned this lesson the hard way by borrowing money on a credit card because I had no other options. Because of that, I missed a few credit card and student loan payments. Later, a company ran my credit, and I wasn’t approved to buy anything. In my mid to late 20s, when I learned the power of money, I mended my ways, paid off all my debts, and maxed out my savings.Make budgeting simpleBudgeting is key to succeeding with money, but many make it harder and more tedious than it has to be. Keep it simple by maxing out your retirement and other savings, then spend the rest. This strategy has made one of the biggest differences for me. Because I was maxing out my 401k and my wife’s Roth IRA, I didn’t have to worry about budget categories since we didn’t go into debt for our regular spending.Sometimes the easiest way to control your spending is to set bigger goals. It’s way easier to limit what you spend at restaurants and Amazon when saving for a trip to Tahiti, a newer car, or a down payment for a home. It has been way easier for me to skip restaurants and eat at home when I know that my family can enjoy new cuisines in another part of the world because of it.Securities and Advisory services offered through LPL Financial. A registered investment advisor. Member FINRA & SIPC.Resources & People MentionedLetter to a High School...

The timing of when you start receiving Social Security benefits can greatly affect your retirement experience. In this episode of the One for the Money podcast, I share a few things every American should know about Social Security. At the end of the episode, I share a tip on where you can find out the details regarding your Social Security benefit.In this episode...Eligibility for Social Security [02:19]Is Social Security enough? [03:16]Retirement doesn’t mean lower living expenses [06:32]Will Social Security run out? [08:46]Estimating your benefits [15:03]What is Social Security?Social Security is an essential aspect of retirement planning, providing a source of income not affected by market fluctuations. Given its significance, Americans need to have a thorough understanding of Social Security. To receive Social Security benefits, individuals must contribute by paying FICA taxes. Employees and employers each pay 6.2% up to a certain level of income. A self-employed individual is responsible for paying the employer and employee portions of Social Security.Relying on Social SecurityUnfortunately, living on Social Security alone leaves people on the brink of poverty. According to the Social Security Administration, 21% of married couples and about 44% of unmarried people rely on Social Security for 90% or more of their retirement income. Social Security was never meant to provide for a comfortable retirement. Rather, it is intended to help ensure lower-paid workers do not have to retire in relative poverty. Social Security retirement benefits will replace only about 40% of your pre-retirement income if you have average earnings. Your Social Security benefit is determined by calculating your average monthly income over your lifetime. This figure is then divided into three portions using a formula, with the lowest portion being given the most weight. The result is that the less a person earns while working, the more income Social Security replaces.Living expenses in retirementMany assume that Social Security will be enough because their living expenses will reduce in retirement. Unfortunately, expenses don’t go down as much as one might expect. More and more people are taking mortgages into retirement. Homes require regular repairs and maintenance, and some of those repairs can be very expensive. Transportation costs will remain about the same, as well as everyday household expenses. In retirement, expenses for healthcare and leisure activities increase significantly, with healthcare being particularly costly. A couple, on average, spends over $250,000 on health care in retirement. Consequently, people are expected to need 70-80% of their pre-retirement income to live comfortably in retirement. Social Security doesn’t provide enough to meet that need, which is why people need to supplement Social Security with 401k or IRA savings.Securities and Advisory services offered through LPL Financial. A registered investment advisor. Member FINRA & SIPC.Resources & People MentionedFear Over Social Security’s Future Leads Some to Claim Retirement Benefits Early - WSJSSAWhat Is Social Security Tax? Definition, Exemptions, and ExampleSocial Security Benefit Amounts