Mike the CFP
What is Sequence Risk? (Explained) | 4 Ways to Manage Sequence of Returns Risk in Retirement
What is Sequence Risk? (Explained) | 4 Ways to Manage Sequence of Returns Risk in Retirement Sequence risk is often overlooked, which is unfortunate given its potential severity. We are trained to look for the "average" rate of return, yet, the "timing" of returns is rarely discussed. This affects investors in both accumulation and retirement. In this video, I go through what sequence risk is and four strategies to help navigate it. ⏩ Timestamps, click to skip ahead: 4 Ways to Manage Sequence of Returns Risk in Retirement: 00:00 Starting 01:13 What is Sequence Risk? Sequence Risk Explained 04:52 4 Ways to Manage Sequence of Returns Risk in Retirement - Increase Your Bond Allocation As You Age 05:43 4 Ways to Manage Sequence of Returns Risk in Retirement - Give Your Withdrawal Rate Flexibility 07:45 4 Ways to Manage Sequence of Returns Risk in Retirement - Spend/Withdraw Less Money During Down Markets/Recessions 08:23 4 Ways to Manage Sequence of Returns Risk in Retirement - Give Yourself Options: Diversify (other than just bonds) 09:13 Conclusion "Sequence risk is the danger that the timing of withdrawals from a retirement account will have a negative impact on the overall rate of return available to the investor. This can significantly impact a retiree who depends on the income from a lifetime of investing and is no longer contributing new capital to offset losses. Sequence risk is also called sequence-of-returns risk." (Investopedia) This definition fails to mention the sequence risk during accumulation, but we will discuss that example further in a later video. Download Our FREE Retirement Guide (Built with JP Morgan) https://www.vivid-wealth.com/knowledge-center Have questions about Sequence Risk? Schedule a free assessment with Mike, the CFP. https://www.vivid-wealth.com/scheduleacall Michael MacKelvie CFP® Certified Financial Planner Website: https://www.vivid-wealth.com/ FB Page: https://www.facebook.com/vividwealthadvisory IG Account: https://www.instagram.com/mikemack3/ #SequenceRisk #cfp #CertifiedFinancialPlanner Source's https://www.kitces.com/blog/url-upside-potential-sequence-of-return-risk-in-retirement-median-final-wealth/ . . . Keywords what is sequence risk sequence risk explained 4 ways to manage sequence of returns risk in retirement sequence risk what is the sequence of returns sequence of return risk sequence of returns how to reduce sequence of returns risk sequence of return risk explained sequencing risk sequence of returns risk sequence of returns risk in retirement sequence Risk in retirement sequencing risk explained retirement risks certified financial planner cfp financial planner
Mike the CFP
Reasons for Investing in Bonds Explained - From a Certified Financial Planner™
Reasons for Investing in Bonds Explained - From a Certified Financial Planner™ Bonds often are seen as boring...and they are especially under siege given the current low-interest-rate environment. Do they still serve their purpose? Why would one consider bonds? In this video, I go over the five reasons for Investing in Bonds. Reasons for Investing in Bonds Explained 00:00 All About Bonds 04:45 Reason 1: Short-Term Goals 06:07 Reason 2: Special Tax Treatment 06:33 Reason 3: Bonds Have Less Volatility Than Stocks 07:33 Reason 4: Asset Preservation 09:04 Reason 5: Opportunity Through Rebalancing 11:02 A few final considerations But first, What is a bond? “A bond is a fixed income instrument representing a loan made by an investor to a borrower (typically corporate or governmental). A bond could be thought of as an I.O.U. Between the lender and borrower, that includes the details of the loan and its payments. Bonds are used by companies, municipalities, states, and sovereign governments to finance projects and operations. Owners of bonds are debtholders, or creditors, of the issuer. Bond details include the end date when the principal of the loan is due to be paid to the bond owner and usually includes the terms for variable or fixed interest payments made by the borrower.” In my experience, individuals primarily hold bonds through “Bond Funds” or “Bond ETF’s,” but one can still easily purchase individual bonds (and there may be reasons to do so). Why in the world would anyone consider owning bonds? Let's cover 5 different reasons why somebody might consider investing in bonds even though they're pretty boring. We'll start with a key question here when doing people typically need to access their monies? Good or bad times; Now the follow-up to this is how do most growth assets most growth-minded investments perform during bad times? They typically don't do too well. This is the whole foundation for why someone might have bonded as a part of their portfolio. A bond is essentially an IOU. You give somebody money in exchange for that they're going to pay you interest over a set period of time. These interest payments are called coupon payments. These coupons you would take into the bank every six months, and you would get basically cash for it. Now, if you were to hold this bond to mature, you would get back what you initially invested. Reasons for Investing in Bonds: 1. Short-Term Goals you maybe don't want to take in a bunch of risks for those goals. There's a key difference between stocks and bonds in regards to risk. Stockholders do not have precedence over bondholders when bankruptcy occurs. So, bondholders take precedence over stockholders; they're going to get paid back first when bankruptcy occurs. There's also an obligation for bondholders to get some form of an interest payment over the course of that bond length term. There is no such obligation to pay you anything with the stock; it's just whether or not that company appreciates or whether it has enough money to pay out a dividend. So, when you buy a bond, it's typically seen as less risk primarily. Now there's still an inflationary risk, but if you look at short-term bond funds, these are very safe bonds in addition to maybe our treasuries. 2. Special Tax Treatment Municipal bonds, as well as treasuries, are going to be exempt from federal income taxes. If you buy a municipal bond from your own state, you can be exempt from state income taxes as well. This could be a huge benefit for somebody, especially if they're jumping up into higher brackets. 3. Bonds Have Less Volatility Than Stocks I can tell you this is especially comforting, especially in a year, such as last year, where markets are down roughly 30 percent. Bonds will swing less than stocks, and we know that we're emotional creatures, and we don't always behave rationally. So having less volatility can be a good thing. 4. Asset Preservation As we age, we typically add more bonds to our portfolio. There's a reason for this, we actually have a portfolio to preserve; this is our ability to replace our income later in life. After 60 or 70 years old, we eventually do need to replace our income. Why would you take unnecessary risks at that age? And also, sequence risk is another big part of maybe you want more asset preservation in just having more bonds. 5. Opportunity Through Rebalancing Having the opportunity through rebalancing is a huge benefit of having at least some percentage in bonds. Have questions about Investing in Bonds? Schedule a free assessment with Mike the CFP. https://www.vivid-wealth.com/scheduleacall FREE Knowledge Center https://www.vivid-wealth.com/knowledge-center Michael MacKelvie CFP® Certified Financial Planner Website: https://www.vivid-wealth.com/ FB Page: https://www.facebook.com/vividwealthadvisory IG Account: https://www.instagram.com/mikemack3/ #bonds
Mike the CFP
Why Should I Use A Health Savings Account (HSA)? | 6 Benefits of Choosing an HSA Plan
Why Should I Use A Health Savings Account (HSA)? | 6 Benefits of Choosing an HSA Plan Very few people fully understand all the reasons why an HSA can be so powerful. In this video, I discuss 6 reasons why someone should consider maxing out their HSA. The only “triple-tax savings” account available, the HSA offers distinct tax savings advantages. In this video, I go over six massive reasons why you should consider opening an HSA. As always, this may or may not make sense given your current situation, so this is not specific advice. Overview of an HSA “A Health Savings Account (HSA) is a tax-advantaged account created for or by individuals covered under high-deductible health plans (HDHPs) to save for qualified medical expenses. Contributions are made into the account by the individual or their employer and are limited to a maximum amount each year. The contributions are invested over time and can be used to pay for qualified medical expenses, such as medical, dental, and vision care, as well as prescription drugs.” (Source: Investopedia) HSA’s are often paired with HDHP’s, which are typically available for sign-up during the annual enrollment period. ⏩ Timestamps, click to skip ahead: 6 Benefits of Choosing an HSA Plan: 00:00 Starting 01:04 Benefit Number 01: Triple Tax Savings. 01:30 Benefit Number 02: HSA is portable. 02:03 Benefit Number 03: Use HSA to pay for Medicare Premiums. 02:31 Benefit Number 04: Use HSA monies for any reason after the age of 65 03:30 Benefit Number 05: Investment Control 03:46 Benefit Number 06: Use HSA monies for prior year expenses 05:23 Government Incentive “Triple Tax Savings” - 6 massive benefits why anyone highly consider looking into an HSA. An HSA is typically a part of a high deductible plan. You want to make sure that your employer offers this. Most of them do but check first and if you're self-employed, just check the open marketplace. There's plenty of plans out there that offer these, but you essentially get a certain amount to contribute each year as an individual or if you have family on your plan. There's a family max that's allowed as well, which leads into. Big benefit number 01, The taxation of these things. So monies that go in are tax-deductible, they also grow tax-deferred, they can also be taken out tax-free for qualified medical expenses, so big benefit number one is that triple tax savings. Big Benefit Number 02, HSA is portable. Whatever reason you don't use the money in that year for qualified medical expenses or you just don't access it for whatever reason, you can roll it to the next year. If you leave your job, this money stays with you even if you leave your career. It is rare in the insurance world. Even though this is more of an investment product, obviously, it's attached to an insurance plan. Benefit Number 03, you can use HSA to pay for Medicare premiums. Long-term care that's a pretty big expense now. Roughly half the population is going into a home at some point, so the ability to contribute to an account. Tax-deductible use that money then tax-free to pay for a benefit. That would be tax-free in the form of long-term care. That's another big benefit. Big Benefit Number 04, you can use HSA monies for any reason after the age of 65. If you use the money before 65, there's a penalty of 20% plus taxes. You can avoid that if you can hold on to these monies till the age of 65. Very few people actually invest theirs has. I'm not really sure why. Because of the triple tax benefits, you should really look to this account as a potential supplement to your retirement. Big Benefit Number 05, you have control over this account. It's not some random insurance policy that will change next year, and you lost out on some benefits. These are your investments; you get to invest them however you want. You are in control. Lastly, Big Benefit Number 06, you can use HSA monies for prior year expenses. Sometimes people also ask, what if I die? If you die, your state has one year to claim that HSA money tax-free. This is a big benefit to consider reimbursing prior expenses and letting that HSA grow. The government is going to incentivize you to use vehicles like this. They'll give you this tax break in hopes that you do it. Because it's going to be more expensive for them to bail you out later in life. They really don't want to do that through programs like medic aid. So we might as well take advantage of options such as an HSA or at least consider them. ***All content is for educational purposes and should not be taken as specific advice. Have questions about Health Savings Account (HSA)? Schedule a free assessment with Mike, the CFP. https://www.vivid-wealth.com/scheduleacall FREE Knowledge Center https://www.vivid-wealth.com/knowledge-center Michael MacKelvie CFP® Certified Financial Planner Website: https://www.vivid-wealth.com/ FB Page: https://www.facebook.com/vividwealthadvisory IG Account: https://www.instagram.com/mikemack3/ #hsa
Mike the CFP
4 Massive Reasons to Build Your ROTH or Tax Free Savings Account USA
4 Massive Reasons to Build Your ROTH or Tax Free Savings Account USA Tax-Free savings, such as those by way of ROTH IRA, or ROTH 401(k), have in many ways distinct advantages over Pre-Tax savings. It will highly depend on where you are at in life, but in this video, we cover four reasons why you should absolutely consider building your ROTH. You may understand the basics of a ROTH IRA or ROTH 401(k), but do you really understand all the unique advantages? Tax-Free savings, such as those by way of ROTH IRA, or ROTH 401(k), have in many ways distinct advantages over Pre-Tax savings. It will highly depend on where you are at in life, but in this video, we cover four reasons why you should absolutely consider building your ROTH. In this video, I explained 4 Massive Reasons to Build Your ROTH or Tax Free Savings Account. ⏩ Timestamps, click to skip ahead: 4 Massive Reasons to Build Your ROTH or Tax Free Savings Account: 00:00 Starting 02:26 Consider Tax-Diversification 02:32 Social Security Taxation 03:32 Decent Accessibility 04:20 No Required Minimum Distributions (RMD'S) 04:57 Conclusion Overview of a ROTH IRA… A Roth IRA is an individual retirement account (IRA) that allows qualified withdrawals on a tax-free basis provided certain conditions are satisfied. Established in 1997, it was named after William Roth, a former Delaware Senator.1 “Roth IRAs are like traditional IRAs, with the biggest distinction between the two is how they’re taxed. Roth IRAs are funded with after-tax dollars; the contributions are not tax-deductible. But once you start withdrawing funds, the money is tax-free. Conversely, traditional IRA deposits are generally made with pretax dollars; you usually get a tax deduction on your contribution and pay income tax when you withdraw the money from the account during retirement.” (Investopedia) FREE Knowledge Center https://www.vivid-wealth.com/knowledge-center Have questions about ROTH or Tax Free Savings Account? Schedule a free assessment with Mike, the CFP. https://www.vivid-wealth.com/scheduleacall Michael MacKelvie CFP® Certified Financial Planner Website: https://www.vivid-wealth.com/ FB Page: https://www.facebook.com/vividwealthadvisory IG Account: https://www.instagram.com/mikemack3/ Sources (images) https://www.kitces.com/blog/long-term-capital-gains-bump-zone-higher-marginal-tax-rate-phase-in-0-rate/ #roth #ira . . . Keywords: reasons to build your roth build Your roth roth roth ira explained roth ira investing retirement accounts importance of roth roth ira retirement account tax free savings account USA tax free savings account tax free savings accounts explained what is a roth ira tax-free wealth retirement planning financial advice what is a tfsa tfsa explained retirement accounts explained retirement planning at 50 what is the benefit of a roth ira cfp financial planner
Mike the CFP
Social Security - 5 Ways We Can Fix it
Social Security - 5 Ways We Can Fix it. 2021 marks a crucial year for social security...here are five ways we can work towards fixing the problem. In this video, I go over five ways we can fix the problem. In this video, I talked about the 5 Ways We Can Fix Social Security. ⏩ Timestamps, click to skip ahead: 5 Ways We Can Fix Social Security: 00:00 Starting 00:24 Raise Tax Revenue 00:42 Increase The Wage Base 01:00 Reducing Benefits 01:30 Push Back Retirement Age 01:47 Universal Benefits 02:22 Ending Points What is Social Security? “Social Security is the term used for the Old-Age, Survivors, and Disability Insurance (OASDI) program in the United States, run by the Social Security Administration (SSA), which is a federal agency. While best known for retirement benefits, it also provides survivor benefits and disability income. Social Security is an insurance program. Workers pay into the program, typically through payroll withholding where they work. They can earn up to four credits each year. For 2021, for every $1,470 earned, one credit is granted until a sum of $5,880, or four credits, has been achieved. That money goes into two Social Security trust funds—the OASI Trust Fund for retirees and the Disability Insurance Trust Fund for disability beneficiaries—to pay benefits to people currently eligible for them. The money that is not spent remains in the trust funds.” (Investopedia) FREE Knowledge Center https://www.vivid-wealth.com/knowledge-center Have questions about Social Security? Schedule a free assessment with Mike, the CFP. https://www.vivid-wealth.com/scheduleacall Michael MacKelvie CFP® Certified Financial Planner Website: https://www.vivid-wealth.com/ FB Page: https://www.facebook.com/vividwealthadvisory IG Account: https://www.instagram.com/mikemack3/ Sources https://www.ssa.gov/news/press/factsheets/HowAreSocialSecurity.htm#:~:text=Social%20Security%20is%20financed%20through,self%2Demployed%20pay%2012.4%20percent.&text=The%20payroll%20tax%20rates%20are,up%20to%20a%20certain%20amount. #socialsecurity . . . Keywords: social security social security trust fund fixing social security social security bankrupt 5 ways we can fix social security fix social security social security benefits social security benefits 2021 social security explained social security changes in 2021 retirement planning social security retirement benefits social security retirement retirement income planning retirement benefits social security strategies certified financial planner cfp financial planner
Mike the CFP
Malpractice - My Biggest Fear with "Financial Advice"
Malpractice - My Biggest Fear with "Financial Advice" FREE Knowledge Center https://www.vivid-wealth.com/knowledge-center Have questions? Schedule a free assessment with Mike, the CFP. https://www.vivid-wealth.com/scheduleacall Michael MacKelvie CFP® Certified Financial Planner Website: https://www.vivid-wealth.com/ FB Page: https://www.facebook.com/vividwealthadvisory IG Account: https://www.instagram.com/mikemack3/
Mike the CFP
You Can't Avoid Risk. You Also Can't Ignore it...
Ask someone what they're actually invested in, and they might have an answer. Ask them the degree of risk they are taking, and they will almost certainly have no clue. Have questions about this? Schedule a free assessment with Mike the CFP. https://www.vivid-wealth.com/scheduleacall FREE Knowledge Center https://www.vivid-wealth.com/knowledge-center Michael MacKelvie CFP® Certified Financial Planner Website: https://www.vivid-wealth.com/ FB Page: https://www.facebook.com/vividwealthadvisory IG Account: https://www.instagram.com/mikemack3/ Citations Michael Kitces https://www.kitces.com/blog/why-its-best-to-measure-risk-tolerance-with-fintech-questionnaires-instead-of-just-risk-conversations/
Mike the CFP
Why Amateurs Think They Are Experts
Over a six month period, I took notes (their emotional reactions) on the way clients responded to areas of planning. Meeting with over 150 different clients, I found that individuals had a very similar way of qualifying truth. In fact, almost every individual did it the exact same way.... This was a larger project for me, but it was gratifying to see it all come together. Hope you enjoy.
Mike the CFP
Biden's Tax Changes in 60 Seconds
Some of the key highlights from Biden's new tax proposals. Website: https://www.vivid-wealth.com/ Instagram: https://www.instagram.com/vivid_wealth_/ Sources: https://taxfoundation.org/joe-biden-tax-plan-2020/ https://www.investopedia.com/explaining-biden-s-tax-plan-5080766
Mike the CFP
Our Central Bank is Creating a Lot of Money: Here's How it Affects You
This has been a record setting year for the Federal Reserve; but, the question remains....where does that money go, and why are the printing it? How does it affect things like inflation? Is this in the best interests of the public? Let me know your thoughts on the Fed's moves this year!
Mike the CFP
Building a Financial Plan: Part One, Defining Wealth
Often times, many start the journey of financial planning by looking into the different products, and services available. In this video, we discuss why this is the incorrect first step, and why a more philosophical outlook is key when beginning.
Mike the CFP
Paying for College? 5 Best Tips From An Expert To Get You Financially Ready
Jennifer Satalino, a former Financial Aid Counselor, and financial aid expert sat down with us to go over some helpful hints for the upcoming school year. Jenn regularly visits dozens of high schools every year to help students, and parents lower the financial burden of higher educations. Questions? Find our email, and contact info on the website below: Here is our website: https://www.vivid-wealth.com/
Money is Funny
Mike the CFP
Santa's Journey : A Toy Drive Drive (Boys and Girls Club)
Link to Donate a Toy or Meal: https://nam11.safelinks.protection.outlook.com/?url=https%3A%2F%2Flinkprotect.cudasvc.com%2Furl%3Fa%3Dhttps%253a%252f%252fsignup.com%252fgo%252ffeiqbnQ%26c%3DE%2C1%2CgiBs7pSe-JzDNhBHBnJfpHrfGd5EjQce_pQ0ChVYi92v1R82vtppiWYBXNt6PgA0wFuBKg09uJFJZrz3eWBvqqLbFM7ss-11h9HsSm98%26typo%3D1&data=04%7C01%7Cmichaelm%40cascadiawm.com%7C5d661bb739c14f4d921408d88e5ae281%7C5c6b893f515c4ceb8a6911dd84203a5e%7C0%7C0%7C637415868301014002%7CUnknown%7CTWFpbGZsb3d8eyJWIjoiMC4wLjAwMDAiLCJQIjoiV2luMzIiLCJBTiI6Ik1haWwiLCJXVCI6Mn0%3D%7C1000&sdata=qfzVS%2FXBvBgONlfN6s9YPoO0j1pN4QA5orFQXpT6sL0%3D&reserved=0 Donate Dollars https://impact.bgcportland.org/give/86143/#!/donation/checkout This year, Vivid Wealth partnered with the Boys and Girls Club to help bring early Christmas presents, and meals to kids. Feel free to pick out any toy, or restaurant gift card from the "Giving Tree" for a local child.
Mike the CFP
Republicans vs. Democrats: Who's Better for the Stock Market?
Since 1900, which political party has faired better for the stock market? Using the Dow Jones (longer history than the S&P 500 ), we exam two seasonal politically minded investors…Republican Russ, and Democrat Dean. Past performance is not a guarantee of future returns. https://www.schwab.com/resource-center/insights/content/election-blues-looking-election-history-market-guidance Investment advisory services offered through Cascadia Advisory Services, LLC, a Registered Investment Advisor.
Mike the CFP
Selecting Your Investment Time Horizon: A Golf Analogy
Former PGA Tour Player Brian Henninger demonstrates an understandable analogy for an investments time horizon. Like many investors, Michael struggles with his overconfidence, often choosing the wrong tool at the wrong time. WEBSITE: https://www.vivid-wealth.com/
Mike the CFP
To Scale: How Much Has the Cost of College Increased?
As FASFA opens up, I wanted to create a visual for those who were curious: how much more expensive has college become? There are multiple reasons for this...perhaps we will dive in for a later video. All numbers adjusted for 2019 dollars. Website: https://www.vivid-wealth.com/ Instagram: https://www.instagram.com/vivid_wealth_/
Mike the CFP
To Scale: How We Spend Our Time
This is how the fully employed spend their time...we annualized data from the American Time Use Survey. The 8,760 hours does not include social media usage, which was not listed as a stand alone activity, despite studies showing it ranged from 2-3 hours per day. https://www.bls.gov/tus/ https://www.digitalmarketing.org/blog...