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FINANCIAL PLANNING 101
Courtesy of Milan J. Torres, CFP ® , CRPC ® Financial Planner
Lincoln Financial Advisors Corp. 18400 Von Karman Avenue, Suite 550 Irvine, CA 92612 949-623-1764
Milan Torres@LFG.com www.MilanTorres.com
September 2017
THE RULE OF 4 PERCENT What You Need to Know About Divestment
T
he most basic fact of financial planning is that you need to save for retirement. Everyone knows that you need to combine earning,
saving, and investing to build a nest egg for your life after work. If you turn on the TV, it won’t be long before you see a commercial with balloons or giant dominoes illustrating the impact retirement planning can have on your bank account. While this education is unquestionably beneficial, it overlooks the most strategic piece of the retirement puzzle: withdrawing money once you’re no longer working. Divestment tactics will play a huge role in determining how long your retirement savings last. A study by the Transamerica Center for Retirement Studies (TCRS) found that the greatest fear for retirees is outliving their savings. Given how widespread this concern is, I’m always surprised how little withdrawal education most people receive. I would venture to say it is the number one piece of education I do with most clients. Let’s go through an example to help illustrate the impact of withdrawals on your portfolio’s ability to last in retirement. Assume that you have a $1 million nest egg and that you are going to need $50,000, or 5 percent, to cover your living expenses. If the value of that nest egg is down 10 percent when you need to take your distribution, then you would effectively be down 15 percent. This
is because you are going to have to sell your investments at a 10 percent loss to raise the cash needed to pay your bills. Your $1 million nest egg is now worth $850,000 going into the next year. What are your chances of running out of money if this keeps up? This is where the topic of safe withdrawal rates comes in. Have you ever heard of “The Rule of 4 Percent”? It’s based on numerous studies that have determined what the highest withdrawal rate possible has been, regardless of retiring in a down or up market. It’s a relatively simple rule. It states that you should not withdraw more than 4 percent of your nest egg per year if you want a high probability of not running out of money in retirement. This 4 percent is adjusted for inflation. For example, if inflation was 5 percent for the year, then you would be able to withdraw 4.2 percent in the next year (5 percent higher). More recent studies have argued that 3 percent or even less are the new safe withdrawal rates. Advances in technology
have caused the markets to move at a much faster pace, which means that somebody retiring today has a higher chance of taking a withdrawal in a down market than somebody who retired in 1960. Whether it’s 4 or 3 percent, the concept of safe withdrawal rates can be a scary one for a lot of people. Think about it, a $1 million nest egg translates into only $30,000 to $40,000 a year of income. If you’re approaching retirement, it’s time to develop a prudent, thorough divestment strategy. You’ve worked hard and spent a lot of time building your nest egg. You’ve certainly heard the phrase “Don’t put all of your eggs in one basket,” which actually applies to the investment principle of diversification. When it comes to withdrawing money, though, a more apt saying would be “Don’t use all of your nest egg in one omelette.”
– Milan Torres
www.MilanTorres.com | 1
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THE UNSTOPPABLE RISE OF THE BULLET JOURNAL
The New Journaling System That’s Taken Social Media by Storm n the modern age, where the internet is constantly flooded with productivity apps and trends promising to fix our schedules, examine last month’s list, eliminating completed or now-irrelevant tasks and migrating long-term or continuing tasks to the current month.
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designs. As the bullet journal’s creator, Ryder Carroll, told New Republic writer Josephine Wolff, “The most valuable part of the bullet journal [is] the inventiveness of its community.” But don’t be daunted by users who seem to spend hours on every page of their journals. Really, it’s a simple system that only takes a few minutes to learn. Check out bulletjournal.com to learn how to start your own modular notebook. But be warned: You may get obsessed.
unlock our potential, and improve our lives, it’s difficult not to wish for something simpler. We want an object we can hold in our hands that doesn’t come with a bunch of unwanted features.
Bullet journals may seem simple, and they are, but they’ve acquired an explosive following on social media. At the time of this writing, there are over 791,000 posts on Instagram tagged with the #bulletjournal hashtag; there are posts upon posts of users’ beautiful layouts, bearing intricate calligraphy and embellished with incredible
Enter the bullet journal: the humble, easy-to-use notebook system that’s taken the world by storm.
Instead of maintaining a separate to-do list, calendar, and diary, the bullet journaling system rolls everything into a single economical notebook. Partitioned into minimalistic “modules” — the Index, the Future Log, the Monthly Log, and the Daily Log — bullet journals encourage you to write down everything on your to-do list, single- line tidbits recounting important daily events, and little notes you take throughout the day. Everything is marked by a particular bullet: dots for tasks, circles for events, and dashes for notes. At the beginning of each month, bullet journalers
GREAT CAUSES, WORTHWHILE CONTRIBUTIONS Charitable Giving as Part of Your Financial Plan
As you accumulate assets and wealth, it’s natural that you want to give something back to the community. A U.S. Trust survey found that affluent individuals rank philanthropy as one of the most important uses of their wealth, behind only financial security for their family and financial independence. Donating to charity isn’t a simple process, and a financial advisor can help you figure out how to make your gifts as effective as possible. The starting point for deciding how to structure your charitable efforts is identifying the causes that matter to you. While every little bit helps when it comes to nonprofit organizations, larger donations to a few charities tend to be more effective than spreading your philanthropy to a wide variety of causes. Ask yourself what matters to you and your family, whether that be education, disease prevention, or another worthy endeavor.
nonprofits are created equal, and you should be diligent in selecting organizations if you want your contribution to have the largest possible impact. Ask friends with experience which charities they support and discuss any donations with your financial planner beforehand. Once you’ve settled on where to give, you need to consider when to do so. Philanthropic efforts, like every aspect of financial planning, are not a one-and-done exercise. If you’re interested in charitable giving, you should make that discussion part of your annual review with your financial planner. Most people think cash is the only way to donate to charity. It may be the easiest method, but there are other options, some with even greater tax benefits for the donor. Another factor is how the gift will me made. Methods include direct gifts, bequests, charitable trusts, and more.
Serious philanthropy isn’t as simple as calling your local NPR station and making a pledge. Do your homework, and you’ll make more of a difference, which is the goal of charity in the first place.
From there, you should research charities that benefit your desired causes. Not all
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Great Movies About Finance Invest in This Triple Feature
“Wall Street” The grandaddy of all modern finance films, “Wall Street” tells the story of what one man is willing to do to make it to the top of a cut-throat world. Bud Fox (Charlie Sheen) is a struggling stockbroker. While introducing Fox to the world of big-spending, Gordon Gekko (Michael Douglas) also instructs him to let go of his moral compass. Tensions escalate, until Fox must decide between his conscience and his wallet. “Trading Places” For something a little lighter, try this comedy starring two of SNL’s most famous alumni: Eddie Murphy and Dan Aykroyd. As part of an elaborate bet, commodities broker Louis Winthorpe III (Aykroyd) and street scam artist Billy Ray Valentine (Murphy) end up living each other’s
lives. Based lightly on Mark Twain’s “The Prince and the Pauper,” “Trading Places” offers a humorous look at the absurdity of high finance. “Enron: The Smartest Guys in the Room” This incredible documentary, directed by Alex Gibney, lays bare just what happens when a company puts its stock price before everything else, including ethics. Enron went from the darling of the business to an infamous story of corruption in a matter of months. The film details just how Enron lost control of its corporate culture, made countless dubious decisions, and ended up crossing the line into outright fraud. It also shows just how willing stockholders are to look the other way when the numbers look good.
To be perfectly honest, being a financial planner isn’t all that glamorous. My job involves being steadfast, being careful, and putting my clients first. When Hollywood takes on the world of finance, however, things get a lot more dramatic in a hurry. Wall Street in particular has proved fruitful ground for some great movies. If you want to spend a few hours investigating the world of big deals and high risk, check out these films.
Sudoku
Wood-Fired Fun Cha Cha’s Latin Kitchen When Cha Cha’s Latin Kitchen opened on Jamboree Road early this summer, it sent a jolt through Irvine’s culinary community. A casual, stylish Latin restaurant with terrific food and drinks, Cha Cha’s has quickly become the go-to restaurant for Latin American flavors. The menu at Cha Cha’s synthesizes ingredients and techniques from across Central and South America. The centerpiece of the open kitchen is the wood-fired oven, which is used for a variety of menu items. You’ll taste the flavor of flame the moment you’re seated, as complimentary chips are accompanied by fire-roasted salsas. Before we talk anymore about the food, though, attention should be paid to the robust beverage options. In addition to a variety of beers and wines, Cha Cha’s has a stellar selection of tequilas and mezcals. The bartenders serve up watermelon and mango-habanero versions of margaritas, and the sangria is the best in the city. If you just want a drink and some snacks, grab a seat in the lounge for a great kickoff to a night out. A full meal at Cha Cha’s proves equally satisfying. Appetizers, like the fresh Manila clams with Spanish chorizo and the empanadas,
stuffed with ground beef and ancho salsa, are perfect for sharing. Main course options include wood-oven carnitas and short rib enchiladas. Of course, Cha Cha’s also has a mouth-watering array of tacos, all served on organic corn tortillas. Cha Cha’s may be new to Irvine, but it already feels like an old favorite.
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FINANCIAL PLANNING 101
Courtesy of Milan J. Torres, CFP ® , CRPC ® Financial Planner
Milan Torres@LFG.com • www.MilanTorres.com • 949-623-1764
Lincoln Financial Advisors Corp. 18400 Von Karman Avenue, Suite 550 Irvine, CA 92612 California Insurance License #0H1958 4
Inside
This Issue
1. 2. 3. 4.
The Rule of 4 Percent The Unstoppable Rise of the Bullet Journal Great Causes, Worthwhile Contributions Great Movies About Finance Wood-Fired Fun The Museum of What?
Milan J. Torres is a registered representative of Lincoln Financial Advisors Corp. Securities and investment advisory services offered through Lincoln Financial Advisors, a broker-dealer (member SIPC) and registered investment advisor. Insurance offered through Lincoln Marketing and Insurance Agency, LLC and Lincoln Associates Insurance Agency, Inc. and other fine companies. CRN1722031-022817.
THE MUSEUM OF WHAT?
The World’s Strangest Museums Museums are a staple of vacations no matter where you travel. Everyone has heard of the Louvre and the Smithsonian, but you might be surprised to learn about some of the stranger museums around the world. For nearly every passion, there is a building somewhere dedicated to it. Take a look at some of the weirdest. THE MUSEUM OF BAD ART Dedham, Massachusetts
history and culture through an examination of the ways a society flushes (or doesn’t).
ramen has grown to beloved status from Japan to Jamaica. The museum named after its creator offers you the chance to look at some of the strangest versions from around the world. As an added bonus, you can even design your own packaging. Bring along some chopsticks, as there are plenty of samples to slurp up.
There are plenty of museums dedicated to exceptional artwork from history, but only one dedicated to less-than-successful artistic endeavors. The Museum of Bad Art, or MOBA, promotes itself as the home of “art too bad to be ignored.” A trip to MOBA will leave you smiling, laughing, and feeling a little better about the fact that you’re not Picasso. MOMOFUKU ANDO INSTANT RAMEN MUSEUM Osaka, Japan It’s not just college students and video gamers who love ramen. Since the invention of the instant noodles by Momofuku Ando in 1958,
SULABH INTERNATIONAL MUSEUM OF TOILETS Delhi, India A functioning toilet is something everyone takes for granted until they don’t have access to one. In India’s capital, you can explore the fascinating history of commodes. From primitive examples you would never use today to gold- plated bathroom thrones from palaces across the world, the variety of toilets on display is staggering. Divided into three sections — ancient, medieval, and modern — you’ll be shocked at how much you can learn about
THE KANSAS BARBED WIRE MUSEUM Rush County, Kansas
Plenty of museums are hands-off, but that’s usually to protect the precious objects held within. At the Kansas Barbed Wire Museum, not touching the exhibits is just sound advice. The development of barbed wire was instrumental in settling the American West, and this museum pays tribute to the ingenuity of those farmers who wanted to make sure their cattle stayed on their property and thieves stayed out.
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