April 2017 Newsletter to Clients

Enjoy this month’s edition that features…

 

From the desk of Steve Byars: We Put the “Advisors” in Moneywatch Advisors. As a client at Moneywatch Advisors I always thought the name said it all – Moneywatch managed my investments and helped them grow. Absolutely, yes, that’s true! But Moneywatch does SO much more to help clients reach their goals. Here is a story from a recent client meeting that illustrates our role as advisors to our clients. 

 

Our clients, Fred and Ethel (as you might’ve guessed, not their real names) recently asked if they might consider retiring earlier than the goal of age 65 that’s in their financial plan. Their initial plan required them to have investment assets of $1.13 million at age 65 in order to generate income sufficient to continue their desired lifestyle throughout retirement. If they retire at age 60, however, they will need $1.96 million. Can Fred and Ethel, in their late 40’s now, retire at age 60? 

 

Fred and Ethel live beneath their means and are very good savers. So, we ran a new scenario that determined, yes, they can retire at age 60 assuming they will continue to save and continue to contribute to their retirement plans at their current levels and that rates of return continue to match or exceed the 7% rate assumed in their financial plan. Fred and Ethel are now even more motivated to save and grow their hard-earned dollars for their new goal. 

 

While they were here, Fred and Ethel mentioned they would like to save some additional dollars for some home improvements. Rather than contribute from their paycheck directly into their savings account, we recommended they increase their monthly, before-tax contributions into their retirement accounts and move an equal amount directly from their taxable, joint account at TD Ameritrade into their savings account. Because one dollar contributed pre-tax to a retirement account defers income taxes, this process will save them an estimated 30%, their effective tax rate, on their renovated kitchen. Now, who wouldn’t want to save 30% on a new kitchen? 

 

Do you hate the process of buying a car? Ramsey recently helped a client negotiate the price of a new purchase; savings for the client. 

 

Similarly, clients who owned a diesel Volkswagen received a settlement from the company because of the company’s admitted guilt in tampering with their cars’ emissions software. Now, they need a replacement vehicle. The vehicle of their choice offers 0% financing – free money! So, we counseled our clients to invest the settlement of $20,000 and finance the purchase of the new car. While it’s tempting to avoid debt and use the settlement to purchase the new car, the more prudent move for our clients is to invest the $20,000 and, over time, the clients will earn considerably more than the 0% interest rate at which they financed their new car. 

 

In order to live up to our name as Moneywatch Advisors, we want to help with all the decisions that impact our clients and their financial goals. In fact, feel free to think of us as your personal Chief Financial Officer.

 

From the desk of Bob Bova: Consumer confidence rang in at the highest level since the year 2000. Economic growth is exceeding the experts’ opinions and forecasts. Stock prices never move in one direction indefinitely so none of us are surprised the recent dip below 21,000 on the Dow Jones. I remind myself frequently of Warren Buffet’s comments to Becky Quick on CNBC that expects 30,000 on the Dow. He further stated that he was confident she (Becky) would see the Dow Jones Industrial average at 100,000 in her lifetime. There is little question in my mind that Buffet is one of the most successful investors of all time because he focuses on the long term.