Will you be able to RETIRE successfully?
Your Treasure
Treasure
THIS IS A STORY ABOUT PEOPLE like you, with the same hopes, dreams, and fears about the future. Most chapters consist of two parts: The Story and The Nitty-Gritty. The Story exposes critical planning issues that you need to be aware of and, when necessary, fix. The Nitty-Gritty sections help you wrap your brain around the complexities that come up in The Story sections.
Your New Friends
You will meet your new friends Lisa and Mark Dolan. They feel inadequate because they do not have just a plan for retirement.
Lisa and Mark’s best friends Charlie & Doris are also worried that they are not prepared. They know they must take action.
Then a mystical Certified Financial Planner™ (CFP®), Ace Sorts, appears in Mark’s dreams to guide him in his quest to create a formal written strategy.
And then, as luck would have it, a real-life CFP®, Chico Jetton, comes on the scene, and presents his L.I.F.E. Formula. A Comprehensive 7-Step Retirement Planning System.
L.I.F.E. is an acronym that represents four thoughts: Live, Imagine, Focus, and Enjoy. It is the essence of a simple action formula. Think about this; most of us Live and Imagine what we want in our life, but unfortunately many stop there, we only live and imagine. Others take the all-important crucial next step and FOCUS on the actions we need to implement so we can fully ENJOY what we have Imagined. Your time is now. This story has your answer.
Two Formulas
Nitty Gritty Section in Chapter 1
There are two common approaches to creating a plan for retirement and financial freedom: cash flow–based and goals–based. Either can be used to build a roadmap to travel through time. The cash flow format is replete with assumptions leading up to your retirement date. You will need to track your income, taxes, living expenses, and discretionary spending for all years. It is necessary to recalculate your assumptions every year in order to maintain accuracy. In other words, tons of numbers.
The goals-based technique focuses less on data. This approach does not require constant tracking of all your expenses. You only need to know how much you are saving for retirement, the total value of your retirement assets, and if any pre-retirement expenses will be paid from those funds. When such expenses are paid from income, then no additional accounting is necessary. With the goals-based technique, you do not need to list expenses or make a variety of assumptions that must be revised each year.
There is one exception . . .
You are still reading. You must be in Group 1.
Nitty Gritty Section in Chapter 2
When preparing for future possibilities, people have one of two attitudes about controlling their life. Group 1 sees the positives that will support achievement of success. Group 2 sees the negatives that might cause failure. A massive gap separates these two mindsets. Group 1 personalities have clear, action-based expectations. They have confidence that their abilities and smart choices will make things go their way. Group 2 personalities let the chips fall where they may, hoping things turn out well, seldom trying to control their outcome. They may even blame outside forces for their life’s predicaments. Fortunately, they are not stuck there. They can cross the abyss on wings of optimism to reach the other side. You must control life, or life will control you.
What is time? Time is invisible. You cannot see it, you cannot touch, smell, taste, or hear it. Time is mysterious. Is it real? Is it your friend or enemy? Does time control you or do you control time? Do you have a choice? Time is more than days, weeks, months, and years. It is your companion and treasure.
Time is life! And life is finite. A day lost to the clock cannot be recovered. Start your journey toward fulfillment today, and I will hold your hand and walk with you.
Fiduciary vs. Non-Fiduciary (Code for Salesman)
Nitty Gritty Section in Chapter 3
The Investment Advisers Act of 1940 (the Act) regulates how investors must be treated. The U.S. Securities and Exchange Commission (SEC) and state security regulators are the watchdogs. The Act requires that an investment adviser act as a fiduciary while receiving a fee when advising you.
The Act does not regulate investment brokers (salesman). An investment broker is required only to sell a “suitable investment.” An investment could qualify as suitable as it relates to your risk tolerance, asset category, allocation percentage to your other investments, and so on and still not be a good asset to own. It could be a bad investment with commissions and high fees.
Password Migraine Solution.
Nitty Gritty Section in Chapter 5
The regulators refer to your name, address, Social Security number, and financial records as Personally Identifiable Information, or PII. Websites with PII must have strong passwords, and they should be changed every 90 days. The problem? The passwords that are tough to hack are often difficult to remember. To make matters worse, we are told that each website should have a different password. It is a nightmare. And can cause severe password migraines. You know the feeling.
The method in Chapter 5 will solve this everyday problem. Hooray!
Vanilla Ice Cream is Vanilla Ice Cream
Nitty Gritty Section in Chapter 7
When you go out to get an ice cream sundae, you pick the closest store. If there are two nearby, you pick the one that you know is cheaper. After all, vanilla ice cream is vanilla ice cream.
There is a popular misconception that financial advisers are like vanilla ice cream. Pick the closest and the cheapest. Think again. Investigate further. Do not fall into that trap. People who offer investment and related services are very different—as different as Neapolitan and chocolate fudge. It is the same in every profession. Some are good, some are bad, and some are in between.
If you planned to climb Mount Everest, would you go to your local sporting goods store, purchase a tent, a lantern, some warm socks, and a few other supplies and then buy a ticket to Nepal? No, you would not—because you do not know what you need to know to climb that mountain.
Do you know what you need to know to climb Mount Retirement and get all your DOLLAR DUCKS in a row? This story has your answer.
Social Security - Will you get yours?
Nitty Gritty Section in Chapter 13
The most well-known form of guaranteed income is Social Security.
According to the Social Security Administration (SSA), nearly nine out of ten individuals 65 and over receive benefits. The highest percentage of people start taking income at age 62, the lowest percentage of people wait till age 70. Which do you think is the smartest? It is a trick question because it is not the right question. The right question is, which is the smartest for you? It depends on your answers to a series of important questions. Planning your Social Security payment strategy must be done carefully. No quick decisions should be made here.
The truth is that the stream of cash flow from Social Security could be massive, a treasure. Should you, like the majority, take Social Security income at age 62, along with a big haircut? Or should you delay until age 70 to get a 24 percent increase over your age 67 benefit? During your lifetime and, if you are married, the lifetime of your spouse, the difference could amount to thousands of dollars.
A charge you do not see on your statements or in the firm’s fee schedule is an “expense ratio.” This is the mutual fund manager’s fee. As an example, it might have an annual management fee of 24 bps (0.24%), another fee of 15 bps (0.15%), and a service 12(b)1 fee of 24 bps (0.24%), for a total fee of 66 bps (0.66%), or two-thirds of 1 percent.
What You Need to Know About Fees
Nitty Gritty Section in Chapter 18
You do not pay commissions when your advisor acts as a fiduciary, you pay fees. You need to know the fee language before you can understand what you are paying. A common annual management fee is 1 to 2 percent of invested assets. However, there are other fees, and when they are less than 1 percent, they are called basis point(s) or bp(s) (pronounced as “bip” or “bips”). One bp equals .01 percent. Think of one bp as a penny—just as 100 pennies equal one dollar, 100 bps equal one percentage point.
A charge you do not see on your statements or in the firm’s fee schedule is an “expense ratio.” This is the mutual fund manager’s fee. As an example, it might have an annual management fee of 24 bps (0.24%), another fee of 15 bps (0.15%), and a service 12(b)1 fee of 24 bps (0.24%), for a total fee of 66 bps (0.66%), or two-thirds of 1 percent. Small numbers, but they add up to a lot on money. You must know what you are paying.
Who is your beneficary?
Nitty Gritty Section in Chapter 21
The beneficiary form you signed tops the list as your most important legal document. Why? Because it is one of the most underrated, undervalued, unappreciated, misunderstood legal forms you have signed. Sadly, the person who helped establish your account may suffer from this common deficiency and does not understand its vast importance or how it should be perfected. Do you have a qualified retirement plan, annuity or life insurance contract? Do you remember who you designated as beneficiary(s)? Are you certain? Do you have your wishes spelled out correctly? Can you find the beneficiary form you signed to check its ability to fulfill your wishes?
Read actual court cases in Chapter 21 of people who thought everything was spelled out perfectly.
Author - John F. Cicotte (see-cot)
It was way back in the year of our Lord, one thousand nine hundred eighty-seven that John received his certification as a CERTIFIED FINANCIAL PLANNER™ (CFP®) professional. He wanted to learn a comprehensive and skilled procedure of advising clients who needed to plan for retirement. He knew that tax implications were inherent in financial recommendations so two years later he obtained his designation from the U.S. Department of the Treasury as an Enrolled Agent.
It has been more than 30 years since he helped his first clients plan their future. Subsequently, he has accumulated more wisdom than when he prepared that first plan. Thirty years of knowledge is a legacy he wants to pass on to others. How? Write a book. Easier said than done, but with the help of family, clients, friends, and colleagues, this immense challenge evolved into an enthusiastic must-do mission, which took more than three years.
The end product, Financial Principles Simplified – A Comprehensive 7 – Step Retirement Planning System, is a step-by-step instruction book.
John retired in January of 2019 and will soon complete the manuscript for his second book, which has a working title of: Protect Your Investments – Get Ready for the Next Stock Market Crash.
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Financial Principles Simplified
One dictionary definition of “retire” is to withdraw from active life, from circulation; to go away to a place of privacy, shelter, or seclusion.” Retirement is none of those things. Think of retire-ment as a time of “rebirth-ment.” A new beginning. A new adventure. An exciting journey into the best life can offer. A time to reward yourself after years of hard work and self-sacrifice. It is life’s dessert.
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