Life Expectancy and Costs

Life Expectancy and Costs

Do you know your life expectancy?  What does life expectancy really mean, and why should we care?

 These are the questions I answer in my video this newsletter.

Therefore, you should watch my video.

Hi there, Mike Brady with Generosity Wealth Management, a comprehensive, full service, wealth management firm headquartered here in Boulder, Colorado. Today I want to talk about life expectancy and withdrawals and Medicare and Social Security, etc. To be honest with you I only have three or four minutes so I’m only going to give you a little teaser and then I’m going to follow up in the next video.

The first one is life expectancy. If you are 65; I’m going to put up on the chart there, on the video, a chart. What you’ll see if you are 65 years old and you are a woman you have an 85% probability of living up to age 75. That’s a high probability of course. If a couple that are 65 years old the probability of one of you living past 75 is almost assured at 97%. We go out to 80, 85, 90. Let’s just look at 90 years old; if you’re 60 years old, from 75, 85, that’s 25 years to age 90. If you are a woman you have a 1 in 3 chance of living to 90. Periodically I’ll meet with someone who will say; well you know my mother and father they died in their early 80s and there’s no way I’m going to live to 90. Well, you know what, there’s a 1 in 3 chance that you will. Do you want to be that one and spend all your money in the next 25 years? Probably not; plus, many times our parents, that’s just kind of the way it worked. That generation they were smoking and drinking and all kinds of stuff and now we’re always eating kale and gluten free stuff so chances are we’re probably going to live a little bit longer. That’s what statistics have shown us.

One of the values that a financial advisor brings and I always bring to the relationship with clients is life expectancy, that’s usually; if my life expectancy is 85 or so I’ve got to make sure that I plan for much longer than that because that’s using the average. I think that chart there starts to show it. The reason why I bring that up is in retirement; I’m now going to throw one more chart up there for today and what you’re going to see is extending my age and category. From left to right it adds up to about 100%, some rounding and stuff like that, but the gray is the 10 years leading up to retirement at age 65. Then you hit 65 and then above. What you’re going to see is some housing and other increases as a percentage. Transportation goes down. Medical care of course goes up, etc. What we’re going to see on the bottom there is the average inflation from 1982 to 2013 of those particular categories. You’re going to see the medical care which is a higher percentage has a tendency to increase. You know this; you’ve been paying attention the last five years and I’m stating the obvious. Other things; housing is still almost 3%. The percentage of; the items that seem to go up as a percentage of your income also has some high inflation to it as well. That’s something that we have to keep in consideration. We live longer than what we think we’re going to do and many times things are more expensive than what we think as well.

Gosh, do I have time for one more really cool thing here? Here is the variation in healthcare cost. See that little graph there, the little United States there? What you’re going to see is the annual Medicare cost and in Colorado we’re right in the middle. We’re not on the cheap side like many of the world in blue, we’re between $3750 and $4500 and then $4500 after that entry has to do with those with traditional Medicare and comprehensive Medicare depending on where you live in retirement. We’re going to talk a little bit more at another video of some long-term planning, withdrawal strategies. One of the things that a financial advisor brings to the relationship are all the strategies about the de-accumulation of the portfolio; you’ve got the accumulation stage where you’re trying to save money and 401(k) all this type of stuff and then you hit a point and then it’s the de-accumulation. What’s your strategy? What’s your mix? How can you set things up to limit, to make the probability that you’ll outlive your money as low as possible because that’s of course a bad thing. These are some of the things I’m going to talk about in upcoming videos. Nice to talk to you today, sorry it’s so short but I did want to be short and pippy.

Mike Brady, 303-747-6455.

You have a great day.


First Quarter and into the Rest of the Year

The first quarter is now behind us, but all the excitement happened in the first week of April!

After reaching new highs, the unmanaged stock market indexes pulled back a little bit, so the question we have to ask ourselves is “what does this mean for the rest of the year?”.

Good question, and one I answer in the below video:


Hi, this is Mike Brady with Generosity Wealth Management, a comprehensive full-service wealth management firm headquartered right here in Boulder, Colorado, and today I want to talk about the first quarter review and the rest of the year preview, but I also want to talk a little bit about time horizons and our perspectives, recency bias, a confirmation buys, those things of things.

The first quarter review is both stocks and bonds, unmanaged stock market and bond indexes were positive for the quarter. Bonds were really bad in 2013 and if you could go back to 2013, you’d have no exposure to them. Well, you were vindicated in the first quarter. They were really what brought up a balanced portfolio for the first quarter of this year. The stock market started off well in January; we only kind of stumbled; dropped around 6% at the S&P. The unmanaged stock market index S&P 500 dropped about 6% through the middle of January to the middle of February and they kind of came back and of the dictating this video, I’m not – let’s see, this is April 8, Tuesday – that we’ve given up some of that gain that we had in the first quarter, so we’re about breakeven for the year in the unmanaged stock market indexes. I think that it’s real important to know what your time horizon is and the reason why I bring that up is if your time horizon is weeks or months or if you need the money for some kind of a purchase in a year or two, these kind of fluctuations could be really kind of scary; however, we’ve got to take a big picture on this and really look at it from the long point of view, because if you’ve ever held up like a piece of paper that had some ink on it really close to your eyes, you can see the actual droplets of the ink. It’s only when you go backwards, kind of some distance from it that you can really see how everything kind of fits together. I’m going to put up on the screen there the S&P 500 for about the last, let’s see, what is that, 14, 15, 16, 17 – 17, 18 years or so, and you can see that it goes up and it goes down, et cetera, and so the question we might have is this big upward swing there. I’ve frankly been hearing from people for two, three, four years about how, oh, we’re at the top again, and then when it hit those new highs a year or two ago, oh my, gosh it can’t go any further.

Well, you know they always joke that economists have predicted 15 of the last three recessions, okay, and so it’s always easy to be negative. It’s a little bit more difficult to be positive. I’m going to put up on the screen there again; this is annual returns in intra-year declines. You can kind of see that far right-hand side there, the year-to-date number and then that red number underneath is that we had a 6% decline throughout the year. That was the maximum decline that we had for all of last year, so it’s actually been relatively low historically from a top to a bottom within a year, so that’s something to keep into consideration.

I am still optimistic for the rest of the year. One thing that we have to watch out for as it relates to data is we have a tendency to extrapolate short-term events and say, wow, that’s what’s going to happen for a long-term and it just doesn’t work that way. Just because things have gone up doesn’t mean they’re going to continue to go up. Just because things have gone down doesn’t mean they’ll continue to go down and so we place more emphasis on recent information than maybe data that is six months, 12 months, or even three years old. When we look up at this one screen that I just threw up there on your video is interest rates and equities. From the left to the right is the yield that you have on your 10-Year Treasury, which as of this chart creation was 2.72; as of today, it’s actually about 2.67. Not important to know that except to the degree that the correlation between a rising, where the yield is going from 2.7 to 3 to 4 that the market is actually continuing to go up, and so they have moved in lock stock in the past.

I’m going to put up another screen there. You’re going to see that circle there. Lots of corporate cash that has continued to be a very strong thing as I see. Quantitative easing has thrown so much money into the system that that is continuing to prime the pump. If you look over on the right hand side, there, that second circle that I just did, cash return to shareholders, lots of profitability and cash being returned. Now, today’s video I’m going to make relatively short, because I’m going to try to do more videos, but make them shorter. I’ve been kind of bad this past two months or so and I just unbelievably busy. Even I want to make this short and pithy.

Diversification, while in a generally trending down market does not guarantee that you won’t lose money; it is a very wise thing to do. On the pie chart on the top left is your stocks, your bonds, your internationals; and then on the right hand side you’re going to see an even more diversified portfolio adding in some real estate investment trusts and other things like that. One of the things that I’ll be doing for the appropriate clients going forward is diversifying out. I do believe in diversification, because if this past quarter is any indication, sometimes it’s the bonds that hold up your portfolio, sometimes it’s the stocks that are the driver behind your portfolio. I think that the standard deviation, the variance, the ups and downs, the volatility is very important, because we want to set ourselves up for success and unfortunately your average investor buys at the top and sells at the bottom and really hurts themselves.

We want to set ourselves up for success by creating a portfolio that hopefully will have reduced volatility so that when the market does go down, which inevitably it does at various points, whether that’s a small decline or a larger decline, whether or not that’s a quick recovery or a longer recovery, we want to be well prepared for it with a time horizon that is long, but also not be the dump money and sell at the bottom. That bar graph at the bottom, where you’re going to see is on the far right-hand corner, the average investor, when we take into consideration inflows and outflows of the stock market, mutual funds, things of that nature, unfortunately does the wrong thing at the wrong time and we simply don’t want to do that. I continue to be optimistic for 2014; I have not changed from that. I encourage you to go back to my January video and I lay out in 17 minutes or so an argument for that – that has not changed. I’m not freaked out. I am completely, if you can see my hand there, I’m completely rock steady, so that’s where I am.

I am going to continue to add a couple of extra asset classes to sell clients, and many of you, I’ll be talking with you about that. Some of the upcoming videos I’m going to do is I’m going to read Michael Lewis’s Flash Boys on the high-frequency trading. Everybody get, but I’m going to dissect that and give my opinion. I also want to really talk about social security; I want to do a whole series frankly on social security and Medicare, retirement and all of those things, because I think that’s very relevant. One of the values that I can add is what’s the right stuff to own, what’s your withdrawal strategy, et cetera, and I just find it all fascinating and I think it would be a great value to you.

If I can help you out in any way, please give me a call. Mike Brady, 303-747-6455. Stay tuned for another newsletter after this one. Have a great week. Bye-bye.




Confidence in Retirement

Confidence in Retirement

One third (1/3) of workers and retirees have less than $1,000 in savings and investments in their retirement nest egg.

Only 44% have done a calculation to find out how much they should be saving. Confidence in Retirement Picture

 With longer life expectancies, your retirement years can be the best years of your life, but outliving your money is a real risk!

 One of the biggest and best values I bring to clients is the ability to put the pieces of retirement planning together, and chart the progress along the way.

 Please contact me if you feel I can help you with your retirement planning.

 Retirement Confidence Rises, but the Data are grim

What is Generosity Wealth Management’s Dynamic Value?

It’s been my experience that when people don’t reach their financial goals it’s not because they failed to buy stock A over stock B, or bought this mutual fund over another.

Most of the time, it’s the bigger questions they’ve failed to answer, like “am I spending more than I earn?” or “what happens if I lose my spouse?”.

What is the dynamic value Generosity Wealth Management brings to the table? A = helping clients answer and address these issues, and keep the big picture in mind.

For a full discussion of this, listen to my short video where I expand on these ideas.

Good morning. Mike Brady with Generosity Wealth Management, a comprehensive, full service, wealth management firm, headquartered in Boulder, Colorado.

Today I want to talk about the dynamic value that I bring as a professional to the relationship with my clients; or at least my philosophy of where I probably add the most value. Here it is:

Point A is today. Prospective clients come in and they usually have a point B; what their goals are in the future and most of the time that’s retirement. Of course there’s usually a point C as well which is not outliving your money. So there’s a point B, something that we’re striving for in the future and of course a point C which is a secondary goal which is not outlive their money. Where I add value is all the planning from point A to point B and of course to point C. All the decisions that are there.

Understanding and explaining with the client and working with them the interdependence of all the various variables of; the saving, the investing and when to retire. All the decisions around retirement, how much the particular portfolio supports with various assumptions, upon retirement or withdrawal. All those various decisions- because what my experience has led me to really understand is when someone has not reached their particular goal it’s usually not because they bought stock A instead stock B or they had mutual fund A instead of mutual fund B; it’s because they frankly, didn’t save enough money; they spent more. Here’s your income and here’s your expenses and the expenses were greater than the income. They just didn’t save enough. Or it’s because they had some kind of a catastrophic event along the way like the loss of a spouse, the loss of a job, the loss due to some kind of a disability; and so part of that planning process is to proactively identify and talk about what are the contingency plans that we should have that could derail the great plan that we’ve come up with together. Many times that’s trying to identify them and have a plan for them. So that’s where I think I add some of the best value in the relationship.

I do believe that just having the appropriate investment plan that’s consistent with the risk level and the tolerance and the goals of a client are absolutely essential. I don’t want to minimize that in any way; however, I do want to say that that’s kind of the sexy part that everybody likes to talk about but I think what people really should focus on is that planning and a contingency for all those things that could derail that particular plan. That’s where I add the dynamic value to the relationship.

Mike Brady, Generosity Wealth Management 303-747-6455. Hopefully you’re my client; if you’re not my client hopefully you’ll give me a call and we can talk about what that client/ advisor relationship would look like.

Mike Brady, 303-747-6455. Have a great day. Thanks, bye, bye.



Long Term Investing

It’s my belief that the longer your time horizon, the more it starts to be your friend.

What do I mean by that? Investments of all nature tend to be cyclical, meaning as a normal course of business they go up and down. The longer you’re invested, the more of these intermediary “cycles” you’ll experience, with the end goal eventually being up. If you don’t believe that long term the value will be greater, then why are you investing?

Anyway, many times people say “but I just retired and I’m no longer a long term investor”. My answer is that I hope you’re still a long term investor, as I hope you live a long life.

For a full discussion of this, I highly recommend you watch my video. Good stuff (if I do say so myself).


Good morning, Mike Brady here with Generosity Wealth Management, a comprehensive full-service wealth management firm headquartered right here in Boulder, Colorado and today I want to talk about how long-term investing is probably going to be better on your stomach and being able to sleep well at night. I want to really talk about that.

You might say to yourself, “Mike, I’ve heard that before but I’m not a long-term investor because I’m retiring next year or I just retired.” All I would respond is, “I sure hope that you’re long-term because hopefully you’re going to live a very long and fruitful life all through retirement and you don’t want to outlive your money so even though you might think that you can’t be a long-term investor, you probably are.”

I’m going to put two or three different charts up on the screen so pay attention.

The first one is the 100% unmanaged stockmarket index over the last 15 years. You’re going to see it up, down, up, down, all over the place and by looking at this chart you’re probably saying to yourself, oh the market’s gotta go down. Well, I’m just saying that’s not necessarily the case.

I’m going to put the second chart up if you could pay attention to it and this is the 100% stockmarket index over a 113-year timeframe and what you’ll see, there are some times where it plateaus, sometimes where the trend is down, and times when it’s a generally up-trending market.

The third chart that I’m going to put up on the video is the range of returns over a one, a five, a 10, and a 20 year time horizon. What you’ll see, is as the time horizon is shorter, whether it’s unmanaged stockmarket index, unmanaged bond index, or a 50/50 between the two, the shorter you go the more volatile the standard deviation as we call it, it gets greater and the range of return is very high or very low. As we go out from left to right on that chart, what you’ll see is the band starts to get narrow and narrower. I bring this up because many times we have a tendency to look at things on an hourly or a daily, particularly with the 24-hour news channels and cycle anymore, weekly, monthly, even quarterly or annually, when really we need to keep our eye on our plan and start to look at things from a long-term vision.

Of course you should work with your financial advisor, hopefully I’m that guy, in order to find a plan that works for you that you feel works with your particular goals and your risk tolerance, etcetera. We do have to keep a long-term vision and of course review it, how it’s fitting with our plan, but let’s start thinking long-term.

Mike Brady, Generosity Wealth Management, 303-747-6455. If you’re not my client, give me a call and we’ll talk about it. If you’re my client, I love you and I think that’s it for today. You have a wonderful week, wonderful day, wonderful week, wonderful quarter, and of course wonderful long-term horizon as well. Bye-bye now.