Our guest in this episode is Deborah W. Ellis CFP®. (Certified Financial Planner) She is the author of the upcoming book, “Achieving Financial Security,” and talked to us about how to invest money wisely for a better retirement. It was a perfect topic for us (the 2 Boomer Broads) because we’ve been starving artists all our lives and don’t know diddly squat about how to save for the future.
Coming to you this time from the hidden vaults of Ventura.
Just a note: This interview was enhanced by 3 tap dancing dogs in the background who were trying to audition for our next interview.
Deborah helps her clients over 50 take the assets they have right now and puts together a plan, taking into account where they want to go and how they want to get there. Once they know what they want to do with the rest of their lives, they have to consider the financial impact of what it’s going to cost and how they’ll get the money. To devise a plan, they have to determine how much money they have now, how much is coming in, and how much they need.
After listening to Deborah, we’ve concluded we need to find Sugar Daddies, but we digress. . .
Deborah’s goal is to help them achieve financial security by formulating a plan and investing their assets.
She says, “it’s never too late to create a financial plan.” Most of her clients are Baby Boomer women in transition. They’ve either retired, lost a spouse or lost a parent and have some sort of inheritance. Or they’re tired of working full time and want to retire or start their own business.
Baby Boomers have changed the entire landscape of what it is to be over 65. Compared to their parents, they’re more physically active and many are still working, volunteering, or traveling. A perfect example is Mick Jagger, who is over 70 and still rocks like he did 40 years ago. That’s why it’s important to come up with a financial plan.
The Social Security Dilemma
Sharone asked Deborah about taking Social Security early since we don’t know if a tree is going to fall on us. She told us, it might be a good idea, but it might not be. If you have other assets, Social Security grows at 8% a year. Every year you put it off until full retirement age, it grows 8%. 78-years-old is the break-even age. If you live past 78, then you could have waited longer. If you expect to live into your 80’s and 90’s then you’ll be better off with the higher rate.
However, she says this with a caveat, because we don’t know if there will be Social Security in the future or if it will be cut back. It’s supposed to increase with inflation, but last year, the government decided there was no inflation. They apparently don’t go to the grocery store very often. When Social Security payments go up, so does the cost of Medicare, so it’s usually a wash.
Full retirement begins at 66-years-old but within the first year, if you change your mind, you can pay Social Security back. (We thought, “Fat chance department.”)
Deborah’s new book, “Achieving Financial Security,” will be coming out soon and we’ll post it in our author’s corner when it does. Its purpose is to help create certainty in an uncertain world.
How to know what to invest
When you create a plan, you plan for the long term, the ups and downs of the market, and for all the different scenarios that can happen. Deborah is open to setting up investments in real estate, commodities, alternatives, stocks, bonds, collectibles, and other means of creating income. An investment is an investment.
In her book, she spells out the basics of what you need to know to become an informed consumer. What is risk and risk tolerance? How much volatility can you handle?
If you plan for 20 years, it doesn’t matter if the market goes up and down. If you invest in a diverse portfolio you don’t want to do it for the short term. In order to invest, you’ll need your emergency fund, month-to-month daily expenses, short-term expenses, (like buying a car in a year, vacation or a house) and then long-term income, which is retirement. (at least 8 years out)
Unless you’re really into doing extensive research on investing, you need a professional financial planner to help you achieve the financial security you want.
How to avoid being scammed by those offering opportunities
“If it sounds too good to be true, it probably is.”
Make sure to have the opportunity vetted. Deborah suggests you hire a fee-only financial planner who doesn’t make a commission on the products they sell. For instance, you may have come across someone promoting “house flipping”and they’re trying to convince you to sign up for their seminar. (read Rebecca’s story here) They make a commission to draw you into the fold. When they do this, they appear to be charming, credible, and only care about you. Before you put down any money, make sure to get a fresh pair of eyes to look at what they’re offering. It’s hard when you’re caught up in the excitement and they’ve given you a deadline for a “deal.”
“If an opportunity can’t wait for a week, it probably isn’t worth it.”
Baby Boomers are often looking for new opportunities in retirement and are easy bait for scammers.
Beware of donating to charities
Not all charitable organizations are on the up and up. Find out how much actually goes to the cause and how much goes to management.
Tips to Start Planning for your Financial Security
Think carefully about what your goals are and what you want to do.
Start contributing to your IRA’s. If you put your money into a Roth IRA, it’s after taxes have been taken, but it will grow tax-deferred. You can take money out of it after age 59 ½ and if the IRA has been in place for over 5 years without paying taxes.
Once you’re over 50, the ante is upped to $6500 a year. If you own your own business, you can set up your own retirement fund. Then you can contribute out of your salary and the company will match it.
Hire the Right Financial Advisor
There are two legal standards for Financial Advisors.
- The Fiduciary standard– A fiduciary is not selling specific products and has the client’s best interest at heart.
- The Suitability standard – In this standard, as long as the product is suitable, a financial advisor can sell his or her client the product that will generate the highest commission or fees. In brokerage houses, the “sales” people (called advisors) are under pressure to sell certain products, so it becomes a conflict of interest.
Some advisors switch from fiduciary to suitability, so you want to find one who is fee-based only. You’ll have to pay a fee to this type of advisor and sometimes customers find that off-putting. However, if you choose an advisor who is commission based, the cost will catch up with you and you’ll pay for products that aren’t necessarily in your best interest. Commissions also lower your profit from the investment over time.
For more information about achieving financial security for retirement, contact Deborah W. Ellis CFP®, MBA, CRPC® at: