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Living a Happy Healthy and Inspired Retirement Your Definitive Financial Guide Stephanie Fullerton With Steve Fullerton

Book Publishers Network P O Box 2256 Bothell WA 98041 Ph 425 483 3040 www bookpublishersnetwork com Copyright 2016 Stephanie Fullerton All rights reserved No part of this book may be reproduced stored or transmitted by any means whether auditory graphic mechanical or electronic without written permission of both publisher and author except in the case of brief excerpts used in critical articles and reviews Unauthorized reproduction of any part of this work is illegal and is punishable by law All stories are based on true events Except for Steve Fullerton and Stevie Fullerton the names of people and some details have been changed Neither the publisher nor the authors have been engaged by the reader to render legal accounting tax or other professional services or advice Readers should engage competent professionals before making decisions related to the subject matter discussed in this publication Neither the publisher nor the authors shall have any liability or responsibility to any person or entity with respect to any loss or damage caused or alleged to be caused directly or indirectly by the information contained in this book 10 9 8 7 6 5 4 3 2 1 Printed in the United States of America LCCN 2016949241 ISBN 978 1 945271 16 8 Editor Julie Scandora Cover designer Laura Zugzda Layout Melissa Vail Coffman

To my grandparents Clarence and Lola Abbott

Contents Part I Begin Preparing 1 1 The One Question 3 2 Forget about Forecasting the Market 9 3 Know What You Can Control 15 Part II Your Partner in Retirement Planning 4 What to Look for in an Advisor 5 Trust 6 Hidden Fees 7 Fiduciary or Broker By Steve Fullerton 8 Team Power 19 21 31 35 41 47 Part III The Customized Plan 9 Long Life Healthcare and Your Legacy 10 Diversification 11 Creating a Rock Solid Plan 12 Retirement Plan Step 1 Accumulate Savings 13 Retirement Plan Step 2 Preserve Your Funds 14 Managing Taxes 15 Working with Women 16 Living the Plan 51 53 59 65 73 77 81 87 91

vi Stephanie Fullerton Part IV Fullerton Financial Planning 95 17 At the Heart Stephanie Fullerton 97 18 The Fullerton Difference The Power of Your Team 101 19 The Fullerton Difference Customized Plans 105 Acknowledgments 111 Contact Us 113

Part I Begin Preparing

Chapter 1 The One Question M y husband Steve and I love to dream Especially when we re on vacation we will talk of what we want to do once we retire And boy do we have big dreams Especially near and dear to my heart are traveling around the world and doing mission work We ve already done this working in orphanages so we know what is involved Several years ago we visited Kenya and worked in an orphanage of about four hundred children Throughout the day we would play and Steve and I would intentionally look out for those little babies that seemed to need special attention Some might be sitting in a corner not playing with anyone others maybe just looked as if they weren t feeling well One afternoon I noticed a little girl three years old at the most who seemed to need some someone s special care I went over to her and she scooted away Maybe she was scared of me or perhaps she was just shy It didn t matter I just sat there and gradually scooted closer to her Soon I found myself sitting right next to her At first she didn t want to acknowledge me or even look at me Slowly gently I began rubbing her back and before I knew it she had climbed onto my lap Then I began to rock her and hold her tight as she curled in my arms She stayed in my

4 Stephanie Fullerton arms for over three hours At the end of the day when it was time for me to leave I finally had to put her down One of the workers came over to me and said That s probably the first time she has ever been held and nurtured by a female She was abandoned as an infant Shortly after she was born she was left alone to die Her parents couldn t afford to keep her and take care of her Steve and I left that orphanage after a week with tears in our eyes and a piece of our hearts with those children And we left knowing we wanted to do more of that work in our retirement when we d have more time That was our goal and we knew it wouldn t happen by itself We d need to plan for it just as I plan for our clients needs and desires Over the years of retirement planning and helping others I have seen many good retirement plans people worked hard put away enough money and invested wisely and many bad plans Unfortunately people have come to us with far more bad ones than good ones Everybody s different with different goals for retirement different incomes and wealth different levels of debt and so on all of which play into their retirement plan However regardless of those differences I have found everybody has one overall need in retirement never to run out of money All need an income to be able to retire and to maintain their current lifestyle Invariably they answer one simple question we ask them the same way and that becomes the core of our advice to them We ask Do you want to risk getting rich or do you want to make sure you will never be poor n n n Everyone would love to be rich And many think they have the magic formula for beating the stock market for winning big for getting rich But the question is not about being rich it s about

Chapter 1 5 risking getting rich And that risk means you also have a good chance of not getting rich or even worse of becoming poor Unfortunately too many people s investments are based on only the getting rich part without thinking of the other equally likely possibility losing a good part of their investment Ask yourself that question Do you want to risk getting rich or do you want to make sure you will never be poor Then expand upon it What is important to you in this life your health your family your friends traveling peace of mind Don t wait for your advisor to ask you Before you even meet with an advisor to help you manage your money for retirement decide what you want to do in those years Many people never bother thinking about this what they really want Instead while working they have been focused on accumulating money for retirement Each paycheck contributes to Social Security which they hope will give them a fair stream of income when they reach the magic age of sixty two sixty seven or even as late as seventy Some fortunate employees have a pension they will receive in retirement Many have a 401 k IRA mutual funds stocks bonds life insurance annuities savings and the list goes on In one form or another we all are working years and years to get to that special time of life called retirement And too often we lose sight of what we really want in retirement remaining in the accumulation mindset of just save save save I make sure my clients do consider more than where their money is invested and how much it is growing When I sit down with my clients I ask them what is important to them when they think about retirement Each one has a slightly different answer and will say things like family traveling security hobbies love health faith the list goes on What always amazes me with my clients answers is they never say Oh my mutual funds are

6 Stephanie Fullerton so important or My stocks I love them can t see retirement without them or Definitely my annuity No They tell me other things that are near and dear to their heart Even though people answer this question in different ways typically their answers have common threads Most people want to do the following n Maintain their current lifestyle n Stay healthy n Have peace of mind about their future I have yet to have a client tell me he or she will risk those or any desires to try to get rich My clients want to make sure they never become poor and that is enough to make sure they do get what they really want variations of those three desires listed above This has been so eye opening to me It has helped me realize that there comes a time for those looking at retirement when accumulation isn t as important as preservation Folks just want to make sure they have enough to sustain their lifestyle and maybe leave some to those they love most So ask yourself now what you want How do you want to live in your retirement What is tops on your list Prioritize Don t confine your thoughts to what money buys Think about how you see your days in retirement What do you want to be doing or maybe not doing Here are some ideas to get you started n n n n n n n Spending more time with family Traveling to see parts of the United States or the world Traveling to visit friends and family Writing the great American novel Living frugally so the grandchildren will have money for college Taking a cruise at least once a year Working with a trainer to get in shape

Chapter 1 7 n n n n n n n n n n n n n n Volunteering overseas Working for a local cause Hitting par on at least five holes in one round Finally fixing up the gardens Learning to play the piano Taking courses at the university Running for a political office Earning a second or first degree Just relaxing at home with no worries Being a Big Brother or a grandfather to children who don t have one Building a boat Playing bocce with the guys twice a week Mastering bread baking Exploring the local parks My clients specific answers about what they want guide my team in creating an investment plan that is just right for them Your advisor will need your answers to do the same for you In the following pages I will give you more detail about what our team at Fullerton Financial Planning considers in creating a retirement plan so it works for each client s specific needs and desires You will need to consider the same with your advisor to get a plan that works best for you I explain all in terms easy to understand with simple numbers and through real stories to help you remember key points In this first part I focus on the early stage of preparing a financial plan what you need to do to prepare and knowing what you can control so you have a better idea of how much risk you will accept In part 2 I cover considerations in choosing your financial planner This person is a key element in your financial plan so you need to choose wisely I describe characteristics to look for in the person as well as in the person s firm Just as my team does for each client here I make sure you understand the fees you pay

8 Stephanie Fullerton whether with us or with another advisor especially the fees some would rather remain hidden Part 3 looks at customized financial plans with more specific information about what goes into a plan that will meet each client s needs Finally in part 4 I give more details including my background about Fullerton Financial Planning the difference our team makes in securing the financial future you desire Happy Endings Steve and I answered that question as most of our clients do we want to make sure we will never be poor We set up a retirement plan that ensures we will have the income necessary for our plans especially for traveling the world and helping others like those little orphans in Kenya For us this is more of a happy beginning Follow me now as I share what you need to know to create your own happy endings or a happy beginning

Chapter 2 F Forget about Forecasting the Market red Dolman one of my clients and I were discussing some fundamental changes to his portfolio He had agreed to remove X dollars from one account keep the gains and send me a check for the remainder to be placed into a different account But it wouldn t be quite that simple Stephanie he said to me with a holiday weekend it s better to pull money from the stock market after the long weekend than before I m going to wait until the weekend s over before I sell On Tuesday I ll make the call and sell and then get the check to you Well Fred I told him no one can really time the market But if you feel that strongly about this it s your money so go ahead I don t recommend it but it s your choice The holiday weekend came and went On Tuesday Fred Dolman called me I can t believe I just lost twenty thousand dollars n n n Indeed you can t time the market Yet people try it all the time They think they ll be smarter than everyone else They ll sell at

10 Stephanie Fullerton the peak buy at the low point or fine tune their transactions as Fred thought he was doing But it just doesn t work Look at what happened in 2000 2010 the lost decade How many predicted that awful time for the stock market During this time most investors saw barely any returns by the end of 2009 Between the dot com bust and the mortgage crisis investments took a beating Retirees were especially hard hit No longer working they were only withdrawing from their IRAs because of the RMD rules Let s look at this chart of two brothers to illustrate what happened Oliver Retired in 1990 Year Return WD Balance 1990 4 34 30 000 449 602 1991 20 32 30 000 504 865 1992 4 17 30 000 494 667 1993 13 72 30 000 528 419 1994 2 14 30 000 509 085 1995 33 45 30 000 639 340 1996 26 01 30 000 767 829 1997 22 64 30 000 904 873 1998 16 10 30 000 1 015 728 1999 25 22 30 000 1 234 328 Larry Retired in 2000 Year Return WD 2000 6 18 30 000 2001 7 10 30 000 2002 16 76 30 000 2003 25 32 30 000 2004 3 15 30 000 2005 0 61 30 000 2006 16 29 30 000 2007 6 43 30 000 2008 33 84 30 000 2009 18 82 30 000 Balance 440 954 381 776 292 819 329 364 308 794 277 094 287 345 273 892 161 359 156 081 Older brother Oliver retired in 1990 with five hundred thousand dollars in his 401 k and began withdrawing thirty thousand dollars a year to supplement his lifestyle After ten years he had received three hundred thousand dollars from his 401 k Meanwhile Oliver s 401 k was invested in an account that simply followed the S P 500 index His 401 k still grew even with the withdrawals to over 1 2 million dollars Wow Life was good and so was retirement without any concern of running out of money However younger brother Larry retired in 2000 Using the same withdrawal and investment strategy for the next ten years 2000 through 2009 Larry had a very different story Yes he still had withdrawn three hundred thousand dollars in those ten

Chapter 2 11 years But by following the S P 500 index starting in 2000 Larry now had just a little over 156 000 only about an eighth of what Oliver who retired in 1990 did after ten years Who would be more concerned with the investments and the RMD Oliver who retired in 1990 or Larry in 2000 Of course Larry the later retiree from 2000 with hardly more than 150 000 left in the 401 k would be very concerned But who would have known Who could have predicted what the market would do in 1990 or 2000 Anyone who did was just plain lucky You cannot accurately predict what the market will do in any period All investments in the stock market are risky for those in retirement it doesn t matter if the market segment is high risk or low risk all rest on shaky ground And that scares most retirees Studies have shown that retirees have a bigger fear of running out of money than of dying This is not a concern for young investors they have a different outlook about investments because they have so many years before them For instance someone in her thirties can invest her savings all in the stock market and it will be fine The stock market will go up and the stock market will go down but at that relatively young age the woman has time on her side She has decades in which any downturns can recover and she has many years before she has to make sure her investments are secure for her retirement Also younger investors can more easily adapt to changes in employment income living conditions Especially if single they can get by living paycheck to paycheck rooming with friends when money is tight moving around the country to get a better job However when you are in your sixties or older you do not want to be forced to downsize your life just because you have entered the retirement zone You have worked for decades to enjoy this time in comfort and ease and not to live more frugally I have never yet met anyone who can t wait to retire because he or she wants to run out of my money

12 Stephanie Fullerton In your fifties as you near retirement your financial needs and outlook begin to change and you enter the second phase of financial life The two stages of financial investments are accumulation and preservation The accumulation stage is where you put money aside contributing thousands of dollars to one or more of various programs 401 k 457 403 b IRA etc While you are collecting a paycheck you are contributing some of your earnings for your retirement You are building savings for your future The goal is to save and grow enough dollars to ensure a retirement without worries Unfortunately it s not as it used to be when a retiree could count on Social Security a company pension and a series of CDs earning over 8 percent to give a comfortable life after decades of working In 2008 2009 401 k s were being called 201 k s because people saw their retirement savings cut in half Million dollar accounts fell to half a million in the blink of an eye Everything they had worked for went away overnight These retirees thought they were still in the accumulation phase but they weren t or rather they should not have been They were following an old formula that no longer worked They thought the investment program they had when they were working would serve them just as well once they retired But the rules had changed and they didn t learn that until too late Once they realized what was happening they didn t know what to do They had no plan for managing such devastation to their hard earned savings and they didn t have any time to wait for the comeback The new rules say you can t predict the future so you need to ensure you will have adequate funds for your retirement You must move from stage one accumulation to stage two preservation as you near retirement The choices you make at this point can be the difference between a retirement vulnerable to a volatile stock market and a retirement with asset protection

Chapter 2 13 growth opportunity and a guaranteed predictable stream of income for the rest of your life Happy Endings Fred had more to tell me with that disturbing news He said I ve called my broker and told him to sell everything On the surface that is not the happiest of endings But I believe Fred did learn his lesson and that is a very good outcome You can t time the market You can t predict the future You don t know what changes will happen in ten minutes or ten years from now That s important to know when planning your retirement and making decisions about investments The only certainty is that things will change and your plan had better take that into account Thank goodness Fred learned this with only only a twenty thousand dollar loss when he did If he had made the same mistake in the middle of retirement with a significant reduction of his investment it would have been too late for him to recover

Chapter 3 Know What You Can Control W hen Steve and I married he was already contributing to his 457 He worked for the police department and a 457 is similar to a 401 k With every paycheck he was putting one hundred dollars into that fund As a new bride I had plenty of ideas about how to use that money and none of them involved putting it away in a retirement savings plan I would have loved a new couch we had only hand me down furniture or to have upgraded our old car or just to have had a little spending money for fun With every paycheck Steve brought home I complained about that disappearing one hundred dollars But Steve was firm He said that one hundred dollars was non negotiable it was going to be saved Worse as far as I was concerned whenever he got a raise at least half of the raise went into the 457 account Steve even said that one day I would thank him Still I continued to complain Then I just gave up Steve wasn t going to budge and my complaining was not worth the effort n n n

16 Stephanie Fullerton You know you cannot control the stock market or earnings on bonds or the direction real estate is going But you do have control over several factors that affect how much money you will have in retirement n The money you save When you begin collecting Social Security n Your tax rate based on your income n The main one is the amount of money you save And the earlier in your life you begin saving the more you will have in retirement It s never too early to start and it s never too late to start Having a set amount deducted from your paycheck and placed directly in a retirement account makes it easy to contribute on a regular basis If the account is the stock market you are using dollar cost averaging or DCA also called a constant dollar plan you invest a set dollar amount regardless of the share price So the share price determines how many shares you purchase with each paycheck s set deduction if prices are high at that point you get fewer shares if prices are low you get more shares You never see those dollars in your hands and you are saved from having to take the step of transferring them from your checking account into a retirement account a step you could otherwise skip just this once or maybe only around the holidays or well most of the time You have direct control over that savings Having an automatic deduction only helps you maintain the discipline you need to save for your retirement years Another aspect you control about how much money you will have for retirement is deciding when you will begin taking Social Security We can start those checks coming any time between age sixty two and seventy Some people have no choice they need the money now Others may be able to wait until full retirement age

Chapter 3 17 Why delay collecting Social Security The longer you wait the more you will collect with each paycheck However the calculation is not quite so simple That may not result in collecting more over your lifetime only on a monthly basis Whether you will ultimately benefit from delaying when you start collecting depends upon how long you will live Of course you don t know that so you have to guess For each year after your full retirement age sixty six or sixty seven depending upon the year you were born that you delay collecting Social Security your Social Security payment increases by 8 percent However if you wait until the maximum age for beginning to collect age seventy you would have to live almost into your nineties to break even That is if you live past ninety you are better off waiting for full retirement But if you expect a shorter life you are better collecting Social Security right away at sixty two Although you likely can t accurately predict how long you will live you do decide when to begin receiving your Social Security check The age you choose to begin collecting has a specified dollar amount associated with it so you can calculate how much Social Security you will have in retirement The third aspect you can control is your tax rate based on your level of income Do you expect to be earning more or less in retirement compared to your earnings now Most people expect to see a drop in their annual earnings after retirement But sometimes the combination of their Social Security pension and money they must withdraw RMD or required minimum distribution from their IRAs puts them in a new and higher marginal tax rate Ouch In such cases we can sometimes change the timing of withdrawals to provide a better tax situation overall You might pay a little more in taxes now but significantly less later in retirement This is a more complex calculation and depends upon the individual circumstances but it is one element you can control with guidance from an advisor

18 Stephanie Fullerton So the future is not completely out of your control You can decide how much to save when to start collecting Social Security and sometimes how much you will pay in taxes Happy Endings Steve and I have been married almost thirty years One hundred dollars plus the adjustments for his raises over those years from every paycheck in every year made for one very nice 457 when he retired And yes I did thank Steve

Part II Your Partner in Retirement Planning

Chapter 4 What to Look for in an Advisor E arly in my career as a retirement planner I received a call from a dear friend Amy was very concerned about her sister Barb after their last phone call Her sister had attended an educational workshop and subsequently had invited the speaker we ll call him Jimmy to her home and Barb was afraid she had made some significant mistakes In Barb s house Jimmy had spent over an hour pushing and pressuring her In fact he refused to leave until she had given him statements of her investments and had signed numerous papers Jimmy had repeatedly told her not to worry and that he would call her back in a few weeks He was simply going to evaluate what she had and then he would come back and advise her about what she should do with her investments Don t worry he had said Everything will be fine A few weeks went by with no word from Jimmy so Barb finally picked up the phone called Amy and told her what had happened By now Barb was very concerned because she had not heard a word from the fellow and didn t know what to do let alone exactly what she had done To make matters worse Barb had the beginning stages of Alzheimer s so her memory was starting to fail her

22 Stephanie Fullerton Amy knew I was in the industry so she asked if I would do her a favor and visit Barb and see what her sister had done When I arrived Barb was very upset with herself as well as very confused about what she had done She shared with me the documents she had signed and as I began to look through them it was obvious that Barb had signed over her investments to Jimmy s brokerage firm This was clearly not what she had understood she was doing She absolutely did not want to make any changes Barb had been taken advantage of and needed help putting her accounts back as they had been to regain her peace of mind So the work began I had to make many calls but could only leave a message to get a return call However once I finally spoke to Jimmy I expressed how upsetting it was to see what he had done Furthermore I added people like him who took advantage of clients gave our industry a bad name It took nearly five weeks to get everything back to where it belonged n n n One of the hardest decisions you will have to make when it comes to planning for retirement is whom to trust Who can help you with managing your hard earned savings kept for your golden years Maybe it s easiest to start with what not to do whom not to trust Once I had gotten everything back to normal for Barb I told my friend and her sister what everyone needs to know If you are able to get around never let another person in your house to look at your investments and never ever let someone walk away from your home with papers you have signed for that person Please don t misunderstand me I realize some people are confined to their home and don t have any choice but to have advisors come into their house But if you are in this situation make sure you have a trusted competent advisor and if possible have another trusted person with you if you are asked to sign or

Chapter 4 23 give important papers to that advisor certainly so if you suffer from Alzheimer s But when you have a choice always go to the advisor s office This is one step you can take to make sure the person is what he or she claims part of an established business in an organized office with proper staffing Educational workshops are great You can learn so much from them But if the presenters only want to come to your home this is a huge warning sign Not only might this indicate they do not have an office you can visit it also puts you in a vulnerable position as it did with Barb In an office you can walk out if you do not like how the interaction is going If it is taking place in your home you do not have that option And you may feel unable to get the person to leave especially if you are an elderly well brought up woman who feels it is rude to tell a visitor to get out Whether you visit in the advisor s office or must have the person come to your home do your due diligence Check out the individual as well as the business he or she works for Do not settle for the first name you get Instead interview several Ask questions You will be handing over the investment of your hardearned money to this person so you have every right to feel it is in secure hands First compile a list of potential advisors How to begin Ask friends and ask why they recommend their advisor Get to specifics Exactly what about the person gives them reason to endorse him or her Remember that your confidence in your advisor comes from both objective and subjective considerations Objective ones deal with the facts how long the person has been in business professional memberships how investments have fared in the years etc Subjective issues may be harder to identify but you will feel them in your gut So one friend s advisor may be right for her but you may want a different personality to inspire confidence and an ability to communicate freely Even if friends recommend an advisor you still need to do your due diligence

24 Stephanie Fullerton If you have advisors in professional fields such as accounting or the law ask them for recommendations for a financial planner And search online if you still need a few more It is perfectly fine to use non financial considerations in compiling your list For instance you may prefer an advisor who has an office close to your home or your workplace one with free parking one with Saturday hours etc Keep your list relatively short five to ten names Then do an online check before scheduling any appointments for an interview Here is a list of what to look for in your online evaluation Advisor s Website n Does the person have a website If not discard this name The lack of a website indicates someone who is not established in the field doesn t have time or money for creating the basics in an online presence and possibly doesn t want clients investigating him or her n Does the website look professional or done by an amateur The latter indicates someone who does not care about his or her image Image is not substance but it is part of the overall picture of the person s capability How you do anything is how you do everything If the website something viewable by anyone in the world is poorly done can you really have confidence in this person professionally managing your money n Is the website easy to navigate This indicates how easy it will be to communicate with the advisor and you do want clear open communication n Does it provide the basic information you seek Does it explain investments and options in terms you understand This too shows whether the advisor can speak to you at your level and possibly educate you if you desire about your financial investments

Chapter 4 25 n What certification does the advisor hold Here are the main ones to look for c Registered Investment Advisor RIA c Certified Financial Planner CFP c Chartered Financial Analyst CFA c Chartered Investment Counselor CIC c Chartered Financial Consultant ChFC c Personal Financial Specialist PFS Other Online Searches n How is the advisor rated by the Better Business Bureau How is the advisor rated by the National Ethics Association www ethics net n What organizations does the person belong to Verify those claims Go to the website for each of the following professional organizations and any others mentioned by the advisor and do a search for the advisor s name Some sites will also indicate if the person has received any disciplinary action c Financial Planning Association FPA c Certified Financial Planner CFP c National Association of Personal Financial Advisors NAPFA n Is the person an officer or on the board of any of the organizations While not necessary this indicates an advisor who is open works well with others and wants to remain current with changes in the law n How do clients rate the person Be careful with this one Most reviews are made by people who have had a negative experience so you may find only bad reviews One or two negative reviews may indicate only a few mismatched client advisor relationships But numerous ones likely mean keep away Also consider the substance of the reviews Are the issues ones that matter And finally n

26 Stephanie Fullerton remember anyone can write a review you likely can t tell if it whether positive or negative is legitimate This is why the first entry professional rating organizations should have a stronger influence on your decision Next use your online search to narrow down your list of people to interview If you have discarded all but one or two you should go back and get a few more names You do need to compare You will find the face to face interview enlightening An advisor who looks good online or on paper may well turn you off in person Then set up appointments with the advisors still on your list Here are considerations for setting up the appointment Setting the Appointment n When calling do you reach the advisor or a staff person Although it may be nice to talk directly to the advisor doing so on your initial call indicates inadequate staffing n How friendly is the person with whom you set up the appointment Management in this case your potential advisor sets the tone for the office While anyone can have an off day an unfriendly voice may indicate a generally unhappy work environment and an unpleasant boss Keep this in mind for the in person interview For the interview you will ask questions of yourself about reactions to what happens in the interview process from your entering the office to time with the advisor to your leaving as well as ask questions of the advisor Take notes You may be overwhelmed with information in your meeting Words written in a notebook will help you remember the important details of your impressions and feelings First here are questions to ask yourself when you interview potential advisors

Chapter 4 27 Ask Yourself during the Interview n n n n n n n n n n n How friendly is the staff Does your reaction match what you felt when setting up the appointment What is the overall atmosphere in the waiting room Are you acknowledged and attended to promptly Are you offered water coffee tea or anything to make your wait and visit more pleasant How does the advisor greet you firm handshake or Does the advisor look you in the eye How about other body language Does the advisor lean slightly toward you indicating interest in you when talking lean far into you indicating an overbearing nature with invasion of your personal space or lean back indicating distance from you and your ideas Do you sit at a round table indicating welcome and encouraging joint participation or are you separated from the advisor by a desk or other piece of furniture indicating separation and a hierarchy Are your questions addressed directly or are they sometimes dismissed as unimportant Overall do you feel listened to and understood Before you leave are you given contact options information When you leave are you escorted out Ask the Advisor during the Interview n How long has the advisor been in business n Is the advisor a fiduciary A fiduciary must act in the client s best interest and as of April 2017 all financial professionals must act as fiduciaries n What is the advisor s philosophy in investment decisions for clients n How often at the minimum does the advisor meet with a client Are fees charged for each meeting

28 Stephanie Fullerton n n n n n What are the advisor s fees for managing your money How many are on the advisor s staff and what are their positions and or specialties Does the advisor sell only insurance or annuities What will happen to your account if the advisor leaves the firm What will happen if you outlive the advisor Why should you choose this advisor over any other What unique qualities or benefits does he or she contribute When choosing your advisor you must be certain he or she has your best interest in hand Trust plays a very important part in this so much that I devote a whole chapter to it see the next chapter Trust You spend half your life preparing for retirement and according to the mortality tables you could spend ten twenty or even more than thirty years in retirement You must know your advisor and know and understand his or her intentions for your money Happy Endings Most people looking at retirement are like my friend s sister Barb wasn t interested in making more money she was mostly interested in keeping her money So when Jimmy didn t call her back as he had said he would she became frightened about what was happening with her money And then when she learned he had not been honest she was horrified and really scared All she wanted was her money to be put back into a very safe place so she could continue living as she had been doing stress free Returns on her money were not nearly as important as the return of her money She had hopes and dreams in her retirement and this wasn t the time to risk her money to try to make her rich It was time to guarantee that she would never become poor I did exactly that

Chapter 4 29 After I had helped Barb and gotten her money returned to its original place I met with her in my office She looked at me and said Thank you so much I don t know what I would have done if you hadn t helped me out I had started with simply helping a friend s sister get out of a situation that had gone bad And now as she sat at my office she looked at me and said I trust you I believe you truly care about me Will you help me There was only one possible answer Of course I will And one of the first questions I asked her was Would you rather risk being rich or would you rather be guaranteed that you will never be poor Like 90 plus percent of the folks I work with Barb said I would rather guarantee that I will never be poor And so Barb s and my journey really began

Chapter 5 Trust I was interviewing William for a position as advisor in our company As a certified financial planner or CFP for one of the big brokerage houses he had multi million dollar opportunities there if he was willing to work hard So I asked him Why would you want to work for an independent firm like ours when you work for a big brokerage house Here s the problem he said As a CFP my fiduciary responsibility is supposed to be to my client I work with phones A call comes in and the system directs it to me The client says I need a name change or I need an address change or I m concerned about my account Can you tell me if everything s okay I m paid minimum minimum but I m paid a very high bonus to reach certain goals Those goals tell us what to sell So that s what we give our clients The more we sell the bigger bonus we make I asked him a question I knew the answer but just had to hear it from him Let me understand When somebody calls in how do you handle it William said Well Mr Smith calls in and first I take care of whatever he s calling about Then I say Mr Smith do you have a few minutes I want to look at your account and see how

32 Stephanie Fullerton things are going and hear if you have any concerns Would it be okay it I take a few minutes to evaluate your account Mr Smith says okay So I put him on hold and look at his account I find out what s suitable based on those goals Then I pick up the phone again and say You know what I ve noticed no one s looked at this for six months sir Things are kind of changing Here s what we re recommending you do Is that okay Mr Smith Well of course Mr Smith feels good about it because he thinks somebody s looking after him But all that really happened is William just gave Mr Smith something suitable to get rid of inventory in the brokerage house Suitable does not mean in your best interest It means it s okay it can fit in your overall plan but it doesn t have to be the best option available to you n n n In the previous chapter What to Look for in an Advisor I said you need to feel your advisor has your best interest in the forefront when making investment recommendations The foundation for that feeling is trust How can you tell if you can trust an advisor Chapter 4 included several items to look for when checking out an advisor and these can help in determining trustworthiness One is to see if the advisor is a registered investment advisor RIAs are registered with the Securities and Exchange Commission of their state They are required to disclose their fees and any other compensation they receive Although they may have other licenses for insurance for example they must disclose their fees for transactions in those fields as well Those advisors at Fullerton Financial Planning who are RIAs provide a higher level of trust to their clients than those without this designation Trust is connected to transparency and that can show in people s behavior When you are sitting in a meeting with the advisor are the arms crossed over the chest or open Privacy in dealings with a client is important so closed doors in a meeting

Chapter 5 33 are natural But does the meeting room have a window to the rest of the office indicating openness and transparency Does the advisor share with you stories or details that include clients names You do not want this type of openness That is a violation of trust You certainly don t want your financial or private information shared with others If an advisor shares personal details with one client this indicates what he or she might do with you and your information You want to be able to trust your advisor and cannot be constantly questioning the person Yes you can ask questions to learn why your advisor makes one suggestion over another Yes you can ask to become more knowledgeable about different investments Yes you can ask your advisor what the next step is You can ask many questions to educate yourself about investing But if you ask questions that are based on a lack of trust in your advisor s decisions for you then you need to find another financial planner Trust in this person is central to your relationship It also helps to know what questions to ask Don t be afraid to bring up the difficult ones This is your hard earned money that you want to grow or just be secure for your retirement You deserve honest answers to every question especially the probing ones So ask if the advisor collects a fee on transactions Ask if the fee is the same percent on all recommendations Those funds that the firm is pushing usually give a higher fee to the advisor or salesperson Ask if the person gets a bonus for selling certain stocks Ask questions to which you know the answers to see if you get the correct ones or the ones the advisor thinks you want to hear Listen carefully to the answers Do they sound honest People lie It s true especially when money is concerned Also pay attention to your gut feeling In an independent firm like Fullerton Financial Planning our fiduciary responsibility is to do what s right for our clients We have no obligation to a brokerage house We don t have goals for selling X shares of a certain stock this week Our goal is to provide you with the best possible plan for your retirement

34 Stephanie Fullerton based on your specific circumstances and desires Our concerns are your concerns We meet with our clients as needed and at least once a year We want to know what is happening in their lives Things change and some will affect investment decisions Adjustments might be needed We keep a close and caring relationship with our clients always based on mutual trust Happy Endings This was a happy ending for Fullerton Financial Planning but maybe not for William Although he was qualified for the position I did not hire him because he was not the right fit for our company

Chapter 6 Hidden Fees T he Robertsons just wanted us to check their investments handled by a brokerage firm As far as they were concerned all seemed perfectly fine but another s opinion would give them peace of mind Unfortunately we couldn t give them that at least not right away We did a fee analysis and presented it to them They quickly saw they were spending over twenty six thousand dollars a year in fees Boy were they shocked Their broker had told them they were paying only 1 percent in fees which to their calculations would have been only ten thousand dollars n n n This short story illustrates a simple fact your broker is likely costing you far more than you imagine One of my favorite reports that we use at Fullerton Financial Planning is a mutual fund fee analysis from Morningstar That report and information from Personal Fund provide us with a good picture of some of the fees for each mutual fund You will be shocked when you read how much it is costing you just to own even one mutual fund But those reports do not tell all

36 Stephanie Fullerton We agree that everyone needs to earn a decent living But if the fees associated with your financial investments are hidden how confident will you feel about the reasonableness of those fees After all if they are reasonable why are you not told about them Some clients are even led to believe that the management of their funds is free Nothing is free We all know that Yet people seem to forget this when offered a program that is really too good to be true This happens all the time I meet with people and they tell me about an investment program they have been told has no fees Yet when they describe the investment a variable annuity or a blend of many types of mutual funds and I don t see any fees I cringe Right then I think Oh boy are they going to be surprised to find out how much they are paying in hidden fees It is a world of hidden fees and those out to make a quick sale and to continue doing that with you over the years never want to tell you about your true costs Plus to the layperson it can be difficult to discover the fees due to complexities Look at mutual funds as an example An article by Ty Bernicke in Forbes com The Real Cost of Owning a Mutual Fund listed six different types of costs that should be evaluated when considering the purchase of a mutual fund n n n n n n Expense ratio Transaction fees Tax cost Cash drag Soft dollar cost Advisory fees Expense Ratio The expense ratio includes the fees associated with marketing managing distributing and other administrative or related fees of the fund According to a 2011 Morningstar article the average

Chapter 6 37 cost that is the expense ratio of a US stock fund is now approximately 90 percent per year To discover the fee for your stock fund all you need to do is read the mutual fund s prospectus However tell me the last time you sat down and went through those countless pages of fine print to identify what you were paying to own that mutual fund You know what I am talking about the booklet form you get in the mail that you like most of us just toss into the recycle bin This fee is typically the only one the average investor thinks he or she is paying if the person even realizes there is a fee and manages to discover what it is Transaction Fee A transaction fee is the commission a broker receives because the mutual fund managers are buying and selling inside the mutual fund company s brokerage account Transaction fees are much more difficult to uncover A study by Roger Edelen Richard Evans and Gregory Kadlec Scale Effects in Mutual Fund Performance The Role of Trading Costs found US mutual funds averaged 1 44 percent in transaction costs per year These fees are not included in the expense ratios and can be very hard to find in a prospectus They can be found in the Statement of Additional Information which you can request of the company Seriously how many of us are going to do that Bogleheads a group of investors who discuss financial matters in an open online forum breaks transaction costs down into three categories brokerage commissions market impact and spread cost We ve already mentioned brokerage fees above Market impact is difficult to estimate and is more complex than we need to deal with here I ll keep it simple by saying this transaction cost is connected with a mutual fund trading a large number of shares which can affect the price before the transaction is completed Spread cost is also too complex to explain in detail here It generally applies when dealing in international or smaller less liquid stocks This occurs in a

38 Stephanie Fullerton sell when there is a difference between the best quoted ask price and the best quoted bid price Tax Cost Beware the phantom taxes These taxes are more transparent when you own a mutual fund outside an IRA 401 k Roth IRA or some other type of qualified account Often you don t even realize you will incur this tax But surprise At the end of the year you get to share from the stocks gains and share proportionally in taxes due from the sale of appreciated stocks that other investors profited on The average tax cost according to Morningstar is 1 percent to 1 2 percent per year Cash Drag This cost comes from cash that is being held by a mutual fund manager to maintain liquidity for possible transactions and potential redemptions by other mutual fund owners When was the last time you had to pay the bank to hold your cash According to a study by William O Reilly and Michael Preisano the average cost from a cash drag on a large cap mutual fund over ten years was 83 percent per year Soft Dollar Cost Mutual fund managers may have a brokerage house manage some funds in order to receive in return special services such as research The brokerage house charges premium fees but these soft dollar costs are not identified for the individual investor Advisory Fees Advisory fees are paid to your investment advisor or firm for the recommendations to you about your funds These fees may or may not be hidden but most clients do not pay attention to them

Chapter 6 39 Summary Four of the above hidden costs expense ratio transaction cost cash drag and tax cost total as much as 4 17 percent for taxable accounts and 3 17 percent for non taxable accounts Soft dollar costs which we cannot identify and advisory fees which vary widely increase each of those percentages substantially Typically when our investment advisory team runs Morningstar reports for potential clients they don t believe the results They are in shock when our team begins to lay out for them just how much their relationship with their current brokerage firm is costing them If that isn t bad enough often they will also have a variable annuity in their portfolio which is even more costly Not only do they have the cost of the mutual fund also known as a sub account they also have to pay the insurance company fees such as mortality and expense at 1 25 percent on average rider fees for an additional 5 percent to 75 percent and administration fees It is a crazy world of hide and seek But just as important can you really say your brokerage firm s concerns are your concerns Is your advisor truly doing what is right for you or is he or she simply doing what the brokerage house says Who really is winning you or the broker Everyone needs to earn a living and to charge a reasonable fee for services rendered You can determine if you are receiving value from your broker However you and I know that the more money you can keep in your pocket the more money you have to spend Happy Endings The Robertsons agreed We helped move money from hidden fees into their hands or better investments Our team looked at four different solutions based on their needs and desires They wanted emergency funds to cover at least six months of living

40 Stephanie Fullerton expenses Because they had an income deficit their monthly paycheck usually did not cover monthly expenses we created a bucket that would fill in the gap They had a huge taxable IRA and we created a solution to lessen some of the tax burden Our investment team also developed a customized portfolio to fit their risk assessment Most important our team was 100 percent transparent We identified all the fees so the Robertsons knew exactly what they would be paying

Chapter 7 Fiduciary or Broker By Steve Fullerton I n 2008 I had an appointment in our office with a retired couple Joseph and Anna Gooding They had a small pension they were getting Social Security but they were also depending on income from their investment portfolio that was being managed by a large brokerage firm The only thing the Goodings wanted from their portfolio was to make sure they didn t run out of money As I looked at their brokerage statement I noticed they had lost a significant amount of money in just one month Despite their being in their mid seventies their broker and adviser had them in aggressive positions Even worse they were in the very few mutual funds very commonly used by this particular large firm n n n When people enlist the services of an advisor they usually assume the person is giving them good advice The person is an expert knows the market understands the fine points of investing that s why they seek the advisor s advice Unfortunately that is not always true

42 Stephanie Fullerton A few years before my meeting with the Goodings the Los Angeles Times had written about the firm handling their investments Although it could sell any of 240 families of mutual funds more than 95 percent of those sold by this firm came from just seven preferred fund groups In eleven months this large firm had received more than eighty two million dollars in incentives but the proper title used for this payment is called revenue sharing In any other industry this would be called a kickback In politics it is called a bribe There s no doubt that big money influences what should be impartial decisions Whose best interests are being attended to How would you know An important question to ask is if your advisor is a fiduciary By law fiduciaries must put your interest the client s interest ahead of theirs Even if another investment would bring them a higher fee or revenue sharing fiduciaries must recommend others that will serve you better Many people don t know to ask if their advisor is a fiduciary and the results are as I mentioned with the Goodings they have their money invested in funds that could devastate their plans for retirement and they wouldn t know until it s too late To address this problem the Obama administration significantly tightened the rules as they apply to investors money The intent is to protect the investor from so called advisors that don t have the care and interest of their clients at heart This is a massive undertaking Although this ruling has been passed this enormous change to the financial industry will take approximately two years to implement The large well known brokerage firms have a significant interest in how this ruling will play out over the years because their first responsibility is to the company and not to the client Many of the products they sell are proprietary to the company which allows them to make significant profits And all the while clients have no idea of the high fees they are paying

Chapter 7 43 Two aspect of the Department of Labor s ruling are that financial advisors 1 act in a fiduciary capacity for the clients 2 provide full transparency on fees and commissions Fullerton Financial Planning has always had both requirements in place Adopting these as the standard practice of the financial industry as a whole will be an improvement Previously advisors could act in one of two capacities for their clients as fiduciaries or stockbrokers Fiduciaries as explained earlier must always provide advice that is in the best interests of their clients even if it means a loss of income from lower fees for the fiduciary Plus they must disclose the fees they earn on the investments they suggest Stockbrokers come by many names so clients cannot tell whose interest their advisor has at heart by the person s title Their advisor could be called a financial advisor wealth manager financial consultant registered representative or other All are fancy names that hide the truth the advisor must provide to clients advice that is only suitable They just need to give fair advice it need not be the best advice for the client That leaves open a wide array of products the broker can sell And which do you think the advisor will most often recommend The ones that bring the advisor the highest fees Often that fee is enhanced by incentives from the firm push a particular fund this week and get a bonus And the firm is pushing that product because it is getting a kickback revenue sharing But you as the client would never know about those fees Unlike a fiduciary a broker has no obligation to tell you what the fees are Just to complicate matters as a dual registrant under the Securities and Exchange Commission SEC or a state securities regulator a person may operate as both a fiduciary and broker In fact most financial advisors serve as both

44 Stephanie Fullerton So it is not enough to ask if your advisor is a fiduciary You must ask if the advisor is acting as a fiduciary for you Here is an example to help explain the differences Advisors in one of the large well known brokerage firms are beholden to themselves and to that company When they meet with a client they just need to make sure their recommendations and products are suitable for the client If there were two similar investments one that would cost the client less and one that would cost the client more brokers can recommend either Each would be suitable for the client Although one would be better for the client because it would cost less the brokers have no obligation to tell the client that They legally can and likely would recommend the one with higher fees and would not have to tell the client that s why they re recommending it Sometimes a recommendation by a broker could even consist of portfolio strategies that were created by the company itself So the company would get money for managing the portfolio as well as get paid for creating the portfolio They would get paid twice They call those proprietary products In that same situation an independent advisor with a fiduciary responsibility to the client that is one who is acting in the best interest of the client would be required to recommend and sell the client the less expensive suitable investment The bottom line is if it will cost a client less it s going to be more money inside a client s pocket in theory The legal responsibility of a fiduciary is the highest standard in the financial industry The perspective is solely from the client s point of view what is in the client s best interest without regard to the advisor s commissions or interest I am glad for the transition going on in the financial industry The fiduciary rule will have a major impact by requiring all financial advisors even ones in the large firms to put their clients interests above company profits Legally they will have to do the right thing even if it isn t the highest paying opportunity for the firm

Chapter 7 45 Happy Endings We put together a plan to significantly reduce the Goodings risk exposure and to provide the lifetime income by contractual guarantee That was our number one concern not to significantly risk the money they had in the market If they hit a homerun with the money that they had in the market it would have made no difference to how they would live their life their lifestyle would remain the same But if they lost their money in the market it would have had a catastrophic effect throughout the rest of their retirement Big gains were not their desire the Goodings just wanted peace of mind from knowing they would have income to last their lifetime Each time I meet with the Goodings they say how thankful they are our paths crossed Nearly ten years later just weeks before writing this chapter Joseph expressed how grateful they are for the repositioning of their assets to accomplish what is in their best interest and to achieve their own goals Fullerton Financial Planning has always acted in the best interest of its clients just as we did with the Goodings By acting as their fiduciary and putting their interest at the forefront we took them from a position of high risk and at best only hope to a place of confidence and peace of mind for a secure future They have a plan for success to last a lifetime

Chapter 8 Team Power S everal years ago a friend called with a special request for her son a soldier Andy has been severely injured We don t have any other details Could you please have your family pray for him Absolutely I said And we did Years passed and I had the chance to visit with my friend Andy was there and this wonderful young man told me parts of his story only parts because the intensity still overwhelms him Andy s platoon was preparing to head out As always they folded their bandanas and tied them around their heads On this particular morning Andy wrote on his bandana Psalm 91 the Soldier s Prayer You who live in the shelter of the Most High who abide in the shadow of the Almighty will say to the Lord My refuge and my fortress my God in whom I trust Then they geared up loaded into their Humvee and headed out to their assignment Once there they began to unload As the marksman Andy was the leader and went out to survey the area to make sure it was safe for the others to proceed Unfortunately it wasn t safe Andy stepped on a landmine No more words are needed Nobody can even imagine what happened nor do we need to know for this story

48 Stephanie Fullerton Several weeks later our American soldier my hero found himself in a hospital bed trying to put back the pieces of his life He learned the explosion had ripped off one of his ears But the amazing part of this story is that one of his team found it picked it up and taped it on his chest The doctors were able to surgically put it back on and today Andy has 100 percent hearing It would be wrong of me to make this into a simple story because this young man was willing to lay down his life for our country I forever will hold Andy in my heart as my hero He might not call himself a hero but no other word is more fitting As I was heading home from my visit with Andy and his family I reflected on what his fellow soldiers had done I couldn t help thinking about the power of his team They knew what to do in a crisis Not only had they saved his life but they had also attended to the detail of recovering his ear and saving his hearing There is no comparison to what Andy and all our soldiers risk every day with what we do in the relative safety of our world But what his team did inspired me and gave me an aha moment Right then I realized I wanted to create a team at Fullerton Financial Planning that treats clients as Andy s fellow soldiers treated him n n n Who has your back Who is looking out for you Do you have a financial team working for you When you choose a financial advisor you want a solid team supporting that person You will interact with most members of the team in your long term relationship and you want to feel as comfortable secure and confident in each member as you are with your advisor So ask similar questions of the team that you asked about the advisor How comfortable are you with them When you walk into the office are you greeted and made welcome Is the staff pleasant How does the office look disheveled and chaotic or neat and organized

Chapter 8 49 When you interact with team members do they truly listen to you Do you sense they understand your unique situation or do they seem to dismiss you as fitting into a standard slot Are your concerns their concerns Do you feel rushed or at ease In conversations are you interrupted and made to feel you are taking too long Or are you given adequate time to explain your situation to ask questions and to answer theirs Do you feel respected Have they created an environment in which there is no stupid question and you can ask them anything and receive a considerate response Do they explain concepts in terms that are easy to understand without talking down to you Do they follow through If they say they will call you or send a form to you do they do so in the time indicated or at least in a reasonable time Remember that everyone on the team reflects the leader in some way If you feel discomfort for any reason with one team member perhaps you overlooked some aspect of the leader the financial advisor Consider that a warning sign and reexamine your choice of financial advisor in addition to the whole team Do you feel better after your interactions with team members than you did before you arrived What is your overall feeling about all team members At the end of the day go with your heart Happy Endings After my aha moment I followed through and built a team at Fullerton Financial Planning that is there for our clients We go beyond expertise in managing our clients funds and assuring them peace of mind in retirement In our clients times of crisis or momentous changes in life we are there for them because we truly care

50 Stephanie Fullerton One of my dearest clients had become like a grandfather to me I had received the call that it wouldn t be long and was sitting by his bedside I asked Mr Murphy what he needed me to do With a very quiet whisper he said Promise me that she will be okay I gently rubbed his hand and told him not to worry I will make sure your wife will be okay Not long after that Mr Murphy passed away and I met with his wife As we began to make the changes that were necessary in my mind I could see Mr Murphy s face I could hear his voice and I could remember my promise that I would make sure his wife would be okay

Part III The Customized Plan

Chapter 9 Long Life Healthcare and Your Legacy W hen Scott and Doris McLaren came to me they had been paying a long term care policy for twenty five years and they wondered if they should continue paying Normally I would seriously consider an alternative for clients to manage long term care LTC costs but since they had paid so many years of this policy I said I d hate for you to stop and then need it and never get any benefit from it You re approaching the time when you might need to use it So we agreed they would continue the policy Five years later they did need long term care Doris could no longer take care of Scott and as much as neither one liked the idea they both felt they had no choice but to place him in the long term care section of a nursing home Then they went to get their LTC policy to start covering the costs Shock of all shocks after paying for thirty years the McLarens discovered their LTC policy would not cover Scott s fees To qualify for coverage the person had to be unable to perform two of the six activities of daily living ADL bathing dressing transferring to and or from a bed or chair toileting continence and eating If the person could perform more than four of those tasks the policy assumed the person did not need LTC

54 Stephanie Fullerton and it would not cover the costs Unfortunately Scott did not qualify for coverage he could still perform all six of the ADL n n n Planning for retirement focuses on money but several non monetary considerations influence decisions about financing your retirement These include how long you expect to live your health and healthcare decisions and the legacy you want to leave Long Life People are living longer A man who turns sixty five today can expect to live almost twenty more years a woman a few years more than twenty But that is just the average today Some will never see retirement but many will live longer than the average And those who reach sixty five in ten years can expect to have even more years ahead of them We cannot accurately predict how long you will live But in creating a plan for your retirement we need to make assumptions to ensure you have sufficient money for all the years you will be here Some parts of a plan allow for a lifetime stream of income it doesn t matter how long you live you are covered regardless I ll discuss that type of investment in the next chapter on diversification But a person rarely has all retirement funds in only one type of investment So still we have to make a best guess about your expected life span for the other accounts A good start is the government s or insurance industry s life expectancy tables Then we can adjust your expected life based only on your gender and birthdate by taking into consideration other factors Some habits tend to shorten life excess drinking smoking sedentary lifestyle dangerous working conditions even where a person lives etc Others tend to prolong life physical activity involvement in the community circle of friends and family and so on Genetics plays a part also How long lived were your parents and grandparents How about siblings

Chapter 9 55 The final number guides us in selecting the right investments for you Healthcare During those extended golden years most people will require some healthcare It may be surgery and the recovery period care for Alzheimer s or other dementia long term care because of inability to perform some of the six ADL hospice and so on Recent research shows that 70 percent of retirees need long term care at some point Two thirds of those people receive their care from family But the other third need LTC in a nursing home or some type of assisted living facility Most men need about two years of LTC whereas women on average need three and a half years As the story about the McLarens indicates getting LTC insurance is not always the solution to LTC you might not qualify according to the policy s fine print Also many people cannot even get LTC About 15 percent of people in their fifties are declined and that number doubles for those in their sixties For those who are accepted for an LTC policy the premiums can be substantial if you begin it in your later years As with any insurance policy you need to look at the different options Inflation riders can be important if you begin the policy twenty or thirty years before you expect to use it What is the deductible Many policies have a ninety day deductible period and shorter periods will have a higher premium What daily benefits are provided Usually they are around 150 a day for LTC Check for the maximum benefit Some will pay for only a certain number of years but those with a lifetime payment will cost more Premiums for LTC insurance continue to rise 15 percent in the last two years Although the typical two thousand dollar annual premium for a fifty five year old man may seem like a lot it is not when compared to the costs for assisted living A

56 Stephanie Fullerton room in an assisted living facility averages about three thousand dollars a month or thirty six thousand dollars a year If care needs to be more extensive a full scale nursing home would be up to eighty five thousand dollars a year Any financial plan must make sure you will have adequate coverage for possible healthcare Many people expect to use Medicaid to pay medical expenses in retirement But to qualify for Medicaid you can t have more than a certain level of income each month Money you are receiving from your retirement plan may disqualify you If you don t have alternate medical insurance you will be in the same situation many find themselves in when major medical bills hit them in retirement To qualify for Medicaid that they need they have to use up their money the money they hoped to take them through their golden years This is called a spend down you spend your assets until you have so little that Medicaid will cover your medical expenses Not all assets figure in Medicaid s calculation of your income so a well designed retirement plan will make sure your assets are protected A Legacy Many people want to leave something for remaining family members or a favorite charity For a married couple the spouse who passes away first usually wants to make sure the surviving spouse is adequately taken care of Before working on a financial plan think about what types of gifts you want to leave to others Besides money it can be items you own your house a favorite work of art special dishes used at every family gathering a family heirloom and so on It can even be non material experiences now such as a trip with a different grandchild every year Do you want the legacy used now or later What kind will you want

Chapter 9 57 If you want some of your savings to benefit others your financial plan must make sure it is protected not only from a Medicaid spend down but also from estate taxes A well thought out retirement plan will do this Even if you don t have any desire to set aside a certain amount for people or charitable organizations you do indicate beneficiaries of your assets Certain legal documents will ensure more of those assets go to the beneficiaries and less to the IRS Unfortunately too many people avoid creating the necessary documents Our plans for retirement focus mainly on what we want do in that time and not about its end Rather than take the time to work with a professional to draw up an appropriate document they delay and delay until delay is no longer an option because it s too late The results of forever delaying are the IRS hitting your estate with a hefty tax and your heirs or beneficiaries receiving far less than they otherwise could have and likely far less than you had desired What a waste of all your planning all your work all your good intentions You have several options for passing assets on to your heirs a will and various types of trusts All are legal documents that spell out what is to happen with your assets upon your death A living trust is set up as either revocable or irrevocable Living in the name means you set it up while you are alive And yes you can have a trust set up after your death but we won t get into that here As the name suggests a revocable living trust can be changed or canceled altogether An irrevocable trust cannot be changed by you except with the permission of the beneficiary basically in an irrevocable trust you give away your right of ownership A living trust has several advantages Compared to a will a living trust n n avoids or minimizes the cost of probate is more efficient in time and expense

58 Stephanie Fullerton n has the potential to reduce estate taxes n keeps the details private n more securely accommodates special circumstances such as disinheriting an individual or providing for one with special needs with less risk of having the provisions contested The primary disadvantage of a living trust is it is more expensive to prepare than a will So a living trust may not make sense if you have a relatively small estate with no special circumstances Seek the advice of a professional to help you decide which option will best meet your needs This may involve both an attorney and your financial advisor If you do choose a living trust you need to make sure it is properly funded Also be aware that the government changes rules all the time One option that today is beneficial to you may turn out to be disadvantageous to you next year For making sure the trust is adequately funded and an established living trust continues to meet your needs consult with your professional advisors Don t fall into the trap of avoiding the unpleasant Your financial advisor can refer professionals to you who can guide you in creating a will or trust that gives more to the people and organizations you desire and leaves less to Uncle Sam As you can see planning for retirement is not just about saving a certain amount of money You also have to consider how long you will live make sure you have adequate coverage for medical expenses in insurance or in your savings and decide what kind of legacy to leave And you must create the plan so the money is safe from a Medicaid spend down Happy Endings Sadly Scott died soon after entering the care facility Fortunately for his wife because he was there for only a short time he didn t spend down his and Doris s life savings

Chapter 10 Diversification I n 2008 I met with the Wrights in our office They were in their mid seventies and concerned with what was happening in their retirement accounts They didn t understand why their current advisor had them in the positions and portfolios they were in An analysis showed that their accounts were all aggressive and put them at significant risk If they kept their accounts in place they could lose about 40 percent Additionally they told me they just wanted to get income from their accounts they did not have the desire to make huge gains Now that they were both retired they did not have the drive or ability to replenish loses in their accounts as they had been able to do while they were working and accumulating wealth from their wages Clearly their aggressive portfolio was not in line with their current conservative goals It was mismatched put too much emphasis on and hope for positive market performance and exposed them to too much risk n n n

60 Stephanie Fullerton We all want three things in every investment 1 Safety 2 Liquidity 3 Market potential You want that I want that everyone wants that But the truth is that not one strategy or investment vehicle can provide all three desires So you need to diversify your funds you need to have your money in several different types of accounts so that no one account will wipe out your savings If one turns down then you still have others that will carry you through The Wrights did not have good diversification in their portfolio and the downturn in the market was killing them To have a good diversification you need those three elements safety liquidity and market potential overall in your portfolio Although you want a balance in general each individual investment will give you a different mix of those three elements more of one or two and less of the other s Let s look at several different investments to see how this is so Consider money in the bank Is it safe Yes Is it liquid that is can you get it whenever you want Yes Does it have market potential that is can it grow as the stock market goes up No Despite not having the potential to grow with a rising market we keep money in the bank Why But there is a value greater than returns or market potential in having money in the bank We need to be able to get money quickly when the what if happens we need the liquidity the bank provides Many people invest in real estate or see their home as an investment When I was growing up I was told buying a home would be my best investment Is it How does it rate with those three important elements Is it safe It has been most of the time but 2008 certainly showed investing in real estate is not always safe During the Great Recession many people who needed to sell their homes because they could not keep up with the payments

Chapter 10 61 could not get a price anywhere near what they had paid I would have to say there is risk in real estate Is real estate liquid No Depending upon the time of year and the market for homes you can wait for a buyer for a week to more than a year And even if you can find a buyer within a few days the transaction takes weeks to complete So real estate is not a liquid investment Does it have the third element market potential Yes Like the stock market investments in real estate can grow significantly So real estate scores low on liquidity and safety but high on market potential Despite the risk and its illiquidity people invest in real estate because of the growth potential they are willing to take the risk because of the possibility of large gains over time Although pensions at retirement are almost a thing of the past let s look at them in regards to these three elements We ll keep this simple by discussing only vested pensions Are vested pensions safe Mostly yes Federal law protects them although some associated benefits could be eliminated by the employer Are they liquid You cannot covert them into cash before retirement so they are not considered liquid investments Do they have market potential Yes they can grow as the market grows Although vested pensions don t have all three elements they are a free benefit to covered employees so their lack of liquidity is of little concern Pensions are a form of an annuity an investment that pays out a set amount every month or every year So is Social Security But most people associate annuities with insurance There are many types immediate and deferred variable and fixed Each has a different mix of the three elements and serves a different purpose Immediate annuities begin paying out right away Deferred ones hold off giving you your monthly check until some specified time in the future Fixed annuities have a guaranteed stream of income Variable annuities are tied to the stock market or other investments so can go up or down You can even create a mix of fixed and variable And either can be immediate or

62 Stephanie Fullerton deferred The possibilities can be mind boggling so it s good to have guidance from a trusted outside source in choosing one Let s look at annuities in terms of the three elements Are they safe It depends upon the stability of the insurance company that holds your annuity Will it be around to make all your payments in the decades ahead Your best guess will be based upon the firm s credit rating A high rating indicates the firm is in solid financial health and should be around for many years Another aspect of safety relates to Medicaid spend down You read about this in the healthcare section of chapter 9 Unlike most other investments funds in annuities are protected from your having to spend them before qualifying for Medicaid Are annuities liquid For the most part they are not liquid You can withdraw your money but only with hefty fees some paid to Uncle Sam and some to the insurance company It is best to consider them not liquid Do annuities have market potential This also depends yes if you get a variable annuity no if you get a fixed one Choosing the best annuity involves knowing the fine details of what to look for such as hidden fees surrender charges payment to both spouses as well as understanding all the implications of each type Certain annuities can be an effective part of a well balanced retirement portfolio Think of annuities as life insurance in reverse While life insurance pays out in the event of death an annuity pays out until death and sometimes even longer A well chosen annuity will protect you from running out of money How about the stock market Is it safe No Are stocks liquid Yes they can be converted into cash relatively quickly Do they have market potential You bet Like real estate the stock market is a popular investment because of the possibility of making huge gains despite the risk As you can see no one type of investment has all three elements You will never find one that is both safe and has market

Chapter 10 63 potential Or if you do run from it In all likelihood it s a scam and not at all as safe as its promoter would have you believe Even though any one investment does not have all three components of safety liquidity and market potential a portfolio can have all three by including a mix of different investments That is what we do for our clients We provide a balance of investments each with different levels of safety liquidity and market potential And each portfolio is different for each client because everyone has different needs Depending upon the person s age savings needs for cash lifestyle desires willingness to take on risk and many more considerations we create a portfolio that has a specific mix of investments that meets those unique needs and goals Happy Endings The Wrights became clients and we completely redesigned their portfolio with an appropriate balance of the three elements safety liquidity and market potential We adjusted their investments to significantly reduce their risk provide contractually guaranteed income for life provide appropriate market potential and provide sufficient liquidity to meet their needs

Chapter 11 Creating a Rock Solid Plan R oger and Rhonda Stone had done an amazing job of accumulating wealth for their retirement They had a simple plan reduce debt maximize 401 k contributions then Roger would work until sixty two at which time he would begin to collect his Social Security and company pension Then it all fell apart Seven years before that magic age of sixty two Carl walked into work and received notice that he was among the five thousand employees being given the goodbye slip Worse he had to make some quick decisions In only two weeks he had to select which early retirement plan to take Needless to say Carl was at a loss His simple plan to reduce debt and maximize his 401 k was useless And he was at a loss about how to proceed He was in the hole of too young to stop working and too old to get a job commensurate with his qualifications and salary Carl had no idea how he could retire at this age and still have enough money to maintain his and his wife s lifestyle for the rest of their lives Carl and Rhonda sat down with our team and we began to talk about what his concerns were His top three were running out of money surviving market corrections and managing healthcare Especially for the latter they feared what would

66 Stephanie Fullerton happen to their savings if he or his wife would need to enter a nursing home His simple plan didn t cover that n n n The simple fact is once you are no longer working the paycheck stops So how are you going to supplement your lifestyle Never once have I met anyone that says to us We are so excited about retirement we get to decrease our lifestyle and stop doing the things we enjoy Instead they will have a huge bucket list of what they want to do Carl did too but when he made his bucket list he wasn t thinking he would be retired in his fifties Carl needed a plan and so do you to make sure you can enjoy your retirement That plan must include more than simply collecting Social Security and maybe an RMD from an IRA You need a rock solid plan that will satisfy your needs regardless of what the future brings To create that plan you need to do the following n n n n n n Assess your current situation Identify your income in retirement Prioritize what you want Consider likely changes Identify your need for liquidity Honestly state the risk you are willing to take Assess Your Current Situation Before drawing up any plan we need to know what the situation is now That means examining how much you are bringing in from what sources and how much you are spending and on what Many people I advise have tens or even hundreds of thousands of dollars that they owe on their home car loans credit cards and more But whether our clients owe thousands or very little we always examine their spending

Chapter 11 67 We also identify all sources of income How much net cash is coming in every month that is after taxes Where is it going beyond the spending listed above Is some going to an IRA or a 401 k Do you have automatic deductions which you might not even think about now How much are you setting aside Identify Your Income in Retirement We also look at the situation when you will be retired How much will you receive from Social Security a pension if you are so lucky RMDs for IRAs and any other sources of income Prioritize What You Want Next we ask what you want to do now and in retirement Many of those activities will have a price tag travel classes summer home and so on Others will work under almost any income level spending time with friends and family nearby volunteering with local organizations fixing up the garden and such You prioritize your list to make sure what you really want to do is covered by what you actually can do Consider Likely Changes Some changes you can anticipate Your home loan will eventually be paid off When Are you paying for college for children Your paying for their education will also end On the expense side you can anticipate some costs such as weddings How about maintenance of your home After all these years you know that the house will not fix itself By now you probably have a good idea of what expenses to anticipate over the next several decades repainting inside and out replacing major appliances dealing with some major accident tree falling basement flooding roof leaking There is always something You must account for those so you are prepared to cover them when they come and you know they will

68 Stephanie Fullerton Medical costs can be a huge unknown Although each of us is unique with different levels of health different genetic makeup different habits we can use statistics about the general population to help guide us in identifying what to expect and in making reasonable decisions A recent study said an average couple retiring at sixty seven would need to have set aside at least 250 000 for various types of healthcare needs that will not be covered by Medicare or insurance Other studies also show that for a married couple at least one of the two will need long term care or some type of nursing home care Remember to put in that silent killer inflation This affects all planning from home maintenance to healthcare to fun activities on your list such as travel Those medical costs mentioned above are currently increasing at 45 percent a year Are you ready for that Here too we don t know exactly what inflation will be over the next several decades but a good estimate is an average of 3 percent a year When you include this in your expected annual expense calculation you will see that in just a little over twenty years your expenses will have doubled Because we are living longer you want to make sure that you are maintaining inflation Interest rates are another unknown These will affect your income You may have more or less in your investments than you planned depending upon actual interest rates Another unknown affecting many people s portfolios is the performance of the stock market A sharp drop could destroy a retirement program We don t know when the market will shoot up or take a turn down but we do know it will continue to travel a roller coaster path So a solid plan will be able to handle this Identify Your Need for Liquidity Some of the expenses you identified as likely to happen will need cash relatively quickly even right away So your plan needs to have available a certain level of cash for those emergencies A

Chapter 11 69 good rule of thumb is to have about six months of income in a liquid savings account This will give you money to cover the emergency with time to secure more funds if needed Honestly State the Risk You Are Willing to Take Often when people think of risk they think only of the upside the great gains they will see when all goes well But a risky venture can go either up or down and you must feel comfortable with either outcome The level of risk your investments can absorb will depend not only on your personality a risk taker versus a conservative investor but also on your age Taking high risks with investments at an early age allows for plenty of time to recover any losses from a down market As you near retirement you will have less time to recoup your losses so you will likely transition to less risky investments Once in retirement the level of risk may be further reduced No one formula works for everyone We need to take into account your specific needs desires income and ability to handle risk Putting together everything your current debt other spending and savings all now and anticipated in retirement the effects of possible changes in the world your need for liquidity and your comfort with risk we can come up with a plan Yes it may involve a budget We don t shy away from the necessary After all you can t expect to have money for retirement without some discipline with spending In the end you will have a rock solid plan It will be one you can live with one that can weather the ups and downs and other unknowns and one that will still keep you comfortable in retirement

70 Stephanie Fullerton Happy Endings Fortunately the Stones had accumulated over 1 3 million dollars and their debt was extremely low Their house was paid off and they had no auto loans no credit card loans no schools loans I was pleased to see they were sitting very well when it came to the ratio of debt to expenses However Carl was invested almost 100 percent in the stock market With his unexpected early retirement he no longer wanted to risk a drop in the market Although he had recovered from the 2008 recession he had had six years to do so He no longer had that luxury he wanted to reduce his risk and protect his wealth His money needed to last for his lifetime as well as for his wife s We evaluated how much Carl would receive in Social Security and from his pension Without even including inflation we discovered he would have about a four thousand dollar deficit each month and deplete his assets in his late eighties There was a good chance Carl would live well into his eighties or even nineties So we knew that we had to address first his income needs before evaluating any other risk Now that retirement was only weeks away he became uncomfortable with his risk nervous about not having a plan and concerned about running out of money As we were putting together a plan for Carl and his wife we began to run X rays on his current portfolio what I call a stress test We would share these results with him in our next meeting When we sat down with Carl and Rhonda for their second appointment we emphasized two points First for the management of their investments they were paying tremendous fees This was another unpleasant surprise to them Second the risk they were taking was double what they realized If interest rates were to increase the bonds in their portfolio would decrease in value every 1 percent increase in interest rates results in up to an 8 percent decrease in the value of a bond And if the stock

Chapter 11 71 market were to react as it did in 2008 they would lose over 43 percent That could devastate their retirement dreams I asked Carl What is your current advisor doing or putting into place to address these major issues After an uncomfortable pause Carl said Nothing So I asked him What will affect you more to lose 20 plus percent or to gain 5 percent What do you think he said At this point Carl and Rhonda began to see the importance of having a plan and we began to work together We focused on his three top concerns not running out of money managing market risk and being prepared for healthcare setbacks For the Stones I put into place a plan where the market would not dictate their life or their income Whatever he left in the stock market to chase growth whether it went up or down would never change his lifestyle What are your concerns Create a plan that addresses them It doesn t matter if you are ten years away from retiring or only two weeks It is never too late to start and it is never too early to begin

Chapter 12 Retirement Plan Step 1 Accumulate Savings M y son Stevie was close to graduating from college when he came into our office He met with my husband and me and said I want to hire you to manage my money By twenty one he had about twenty thousand dollars a goodly sum considering his age and that he was working his way through college Okay we replied What do you want He said I want stocks I want to get good growth I want to be a millionaire We then told Stevie we would open an account for him We re going to balance it out but our primary goal is to push you very hard towards big risk with the expectation of big rewards Great Stevie said We wrote out the contract handed it to Stevie and told him to read it and then sign it As he looked at it doing what he should in reading every line he asked a bit incredulously You re charging me This is my son who was charging me for every cup of coffee I ordered from him at the coffee shop He was earning a living we re earning a living So I said Yes we re charging you But we re not mean We did give him a discount

74 Stephanie Fullerton As I got up to leave the office I patted Stevie on the shoulder and said Now do me and yourself a favor Don t look at anything until you re forty years old Don t open the phone app don t open a statement don t even ask about your account n n n This could have been a one word chapter Save That says it all If you want to have money beyond inadequate Social Security payments in retirement begin saving as soon as you can the earlier the better Get into a pattern of always putting a certain amount into a long term savings plan regular IRA Roth IRA your company s 401 k or similar program for government employees or teachers If your company matches your contributions to its 401 k program take full advantage of that Contribute so the company is matching the maximum it can When you get into a pattern of saving a certain dollar amount you no longer look at it as money to spend now You learn to make do with what is left Begin early not only to establish a habit of saving but also to take advantage of compounding interest If you simply put fifty dollars aside every month you will have saved twelve thousand dollars in twenty years and twenty four thousand dollars in forty years But with a conservative 3 percent growth you will have more than sixteen thousand dollars in twenty years and almost triple that more than forty five thousand dollars in forty years Starting when you are young also allows your funds to weather the inevitable economic roller coaster If you invest in the stock market your investment might go down but it will have decades to recover any losses You won t need to worry about how the market performs you ll have no reason to check how it ended every day And less worry makes for a happier life

Chapter 12 75 Happy Endings Stevie isn t forty yet Do you think he has done what I suggested and avoided checking his account In all truth no He has peeked a few times or more But the good news is his account is growing And because he started it at such a young age he will be able to weather many ups and downs of the market He doesn t have to worry Even if he does check how his investment is doing and sees it has taken a tumble he knows he has plenty of time for it to recover He can rest easy and know he is building a solid foundation for a happy retirement

Chapter 13 Retirement Plan Step 2 Preserve Your Funds D ave Lamont loved his financial advisor Yet he was sitting in my office People don t come to my office if they have full confidence in their advisor Although Dave s advisor had done an amazing job accumulating wealth Dave now had over 1 2 million dollars he was concerned he would not have enough money to last throughout his retirement He was sixty two years old and just weeks away from retirement What now His advisor had not given him a roadmap to retirement In fact his advisor had told Dave just to spend down his 401 k to get a paycheck But the numbers didn t balance out when Dave looked a little deeper at life in retirement Dave was looking at over 341 000 in taxes in his expected lifetime just on his required minimum distributions RMDs not to mention what his heirs would pay if they inherited his IRA His advisor had said nothing about either possibility When Dave considered the possibility of a bear market cycle certainly likely in the twenty years or so of his expected remaining life he was shocked He had over 780 000 in investment risk And then there were health concerns Although Dave was in good health what if that did not continue Healthcare and

78 Stephanie Fullerton long term care costs were projected to be about 250 000 which would put a huge dent in his 1 5 million dollars of savings The advisor had said nothing about these possible threats to Dave s savings Nor had the advisor even spoken to Dave about how much he wanted to leave to his wife should he die before her or to their children Dave did know that between his Social Security he would soon collect and his pension he would have approximately 6 600 in income His expenses were about 8 500 That left him needing 1 900 to maintain his current lifestyle When Dave learned that he could lose over half his assets with a market correction as we saw in 2008 2009 all of a sudden that 1 5 million dollars didn t seem like so much wealth n n n Dave is not alone in this type of story I have met with clients after clients who share a similar story None has a plan for ensuring savings will carry him or her through retirement and that can lead to disaster Or as my mother told me when I was growing up No plan at all is a plan to fail People spend years accumulating wealth which takes them to retirement Yet when it comes to crossing the line into retirement they don t realize they need a new plan They don t look at the fact that they can t continue to invest the same way they did when they were working and both contributing and drawing from their savings Even if they do realize this after retirement they are several steps behind To prepare adequately for retirement you need a two step plan 1 accumulate saving before retirement and 2 preserve those savings during retirement and both parts need to be set up before retirement Most people understand the need for the first step for saving money and placing it in one or more accounts that will grow over the years But the second step is just as important to ensure adequate savings will be around twenty years or more into their

Chapter 13 79 retirement The following are some of the considerations your financial advisor should address in the preservation stage of your retirement plan n n n n n n Inflation risk loss of purchasing power Longevity risk Investment risk Healthcare costs and or insurance Long term healthcare costs and or insurance Financial legacy At this point you don t need to understand those terms But you do need to make sure your financial planner addresses them and makes sure your investments in your preservation stage will still provide the lifestyle you desire while able to sustain the above risks or costs And you and your advisor need to address those items before retirement before you enter the preservation stage Happy Endings After Dave expressed his concerns to me I asked him At this stage of your life how much of your retirement savings would you be willing to lose in a single year Ouch That s a hard question to answer but one you must in order to determine what to do with your savings in the preservation stage what form the investments should take how long to keep each in that form when to withdraw from each and so on Dave didn t want to lose much He had a bucket list for retirement trips with his wife visiting his grandchildren back East having a summer home out of the extreme heat in Arizona But overall he simply wanted to maintain his lifestyle enjoy his family and most important know that his wife would be okay if he passed away first

80 Stephanie Fullerton Fortunately Dave had a good foundation he had done a great job accumulating money for retirement But his lack of a plan for step 2 preservation of his wealth could have been catastrophic for even his basic needs One major market drop one financial crisis could have wiped out his and his wife s estate After our discussion Dave became a client We put together a plan that would help protect his principal give him a little money and provide some growth and the security of knowing he and his wife would be fine Isn t that what we all want At the end of the day we all realize there is no retirement without income And there is no income without a sound plan for preservation of that money

Chapter 14 Managing Taxes I meet with many people from all around the country Over the years they have given their blood sweat and tears and now they find themselves settling in Arizona Wouldn t you The sun shines almost every day of the year This time I was sitting with the Grahams They had done an amazing job of accumulating over two million dollars in assets Job well done Unfortunately over 1 5 million dollars of their net worth was in IRAs money fully taxable They were seventy and would soon have to start taking their RMDs They would have to withdraw a certain percent of their IRAs and then pay a hefty tax on the gains made over the years Now in their retirement all that money they had so diligently saved would be fully taxed Ouch n n n You do everything right you earn a decent income live well but frugally and save in appropriate investments and then in retirement you must hand over a big chunk of your savings to Uncle Sam every year No one wants to pay more taxes than necessary How can we be tax efficient in our IRAs

82 Stephanie Fullerton A Roth IRA can make sense for some If you don t invest in a Roth IRA from the start you can roll your regular IRA into a Roth IRA But that creates what we call a taxable event That means for the year of the rollover you must pay taxes on all the income earned over the years on the regular IRA That could be a very sizable tax The advantage of a Roth IRA is that after five years in the account you can use it whenever you like for whatever you want and pay no taxes on it A Roth IRA is one type of investment that can reduce your taxes in the future as well as reduce taxes that would be passed on to your beneficiaries Remember also that beginning at 70 you must take an RMD or required minimum distribution of your regular IRAs and 401 k s The RMD ruling does not apply to Roth IRAs The IRS has a formula to figure out how much you must withdraw each year after age seventy On an average it is about 4 percent Required Minimum Distribution To calculate your RMD for the year divide your IRA balance at the end of the year by the figure in the distribution column for your age on your birthday for that year For example if you turned 76 years old last year and had 200 000 in an IRA your RMD would have been 200 000 divided by 22 0 or 9 090 91 Age Distribution Age Distribution Age Distribution Age Distribution 70 27 4 82 17 1 94 9 1 106 4 2 71 26 5 83 16 3 95 8 6 107 3 9 72 25 6 84 15 5 96 8 1 108 3 7 73 24 7 85 14 8 97 7 6 109 3 4 74 23 8 86 14 1 98 7 1 110 3 1 75 22 9 87 13 4 99 6 7 111 2 9 76 22 0 88 12 7 100 6 3 112 2 6 77 21 2 89 12 0 101 5 9 113 2 4 78 20 3 90 11 4 102 5 5 114 2 1 79 19 5 91 10 8 103 5 2 115 1 9 80 18 7 92 10 2 104 4 9 81 17 9 93 9 6 105 4 5 Source IRS Required Minimum Distribution Worksheet Table III Uniform Lifetime

Chapter 14 83 Here is another strategy that is commonly used Although life insurance is a great tool for leaving a legacy it can also be used as a living benefit You can put a portion of your regular IRA in a life insurance strategy that allows you to receive taxfree income You can also use life insurance to efficiently manage your taxes This is too complex to cover here but a meeting with your advisor can explain this in detail so you fully understand how this works When considering taxes on your income you also need to take into account the Social Security check you will receive each month Originally Social Security was set up to be tax free Unfortunately that benefit went away in 1984 Still some people are surprised to learn they may have to pay taxes on their check from the government Not every recipient is taxed on Social Security it depends upon several factors Some people will not pay any taxes on their Social Security income Others will pay taxes on 50 percent to 85 percent of their Social Security income How much of your Social Security is subject to tax depends on your total annual income and where it comes from If it comes from dividends interest or tax free income from municipal bonds your Social Security could be affected Something as simple as interest from a CD could trigger a taxable event even if you don t spend it but just put it right back in the bank You still are going to get a nice little surprise at the end of the year that you will have to declare the gains on that CD as income for the year Another taxable event occurs when you own a mutual fund Just as with the CD for the mutual fund it doesn t matter if you take the distribution as a paycheck or reinvest it in more shares It could trigger a taxable event I call this phantom taxation Many of our clients enjoy the benefits of tax free municipal bonds However understand the IRS makes you include all your dividends all your tax fee interest and any other kind of interest in determining your income level for calculating whether you owe taxes on your Social Security

84 Stephanie Fullerton This is when life insurance can be an incredible tool In these cases we don t look at life insurance as an investment instead we look at life insurance as a tax code We use life insurance because this is the only place you can receive growth that is tax free and available for multiple purposes You can use it for tax free death benefits tax free income as needed and even taxfree long term care needs When you have long term care insurance basically if you don t use it you lose it But with funds in a life insurance policy which can be used for long term care if you don t use it for that purpose it can be passed on tax free to your beneficiaries We all want to keep as much money as possible in our own pockets even if only to pass it on to family or worthy causes To keep more of your hard earned money you have to find ways to minimize the amount of taxes I am not talking about cheating on your taxes I am simply talking about the different legal tax strategies you can put into place to lower your taxes Calculating taxes especially anticipated taxes in your retirement is never a simple matter Here I have only touched the tip of the iceberg of the different possibilities for minimizing your taxes When you begin to understand there are many ways to reduce taxes you should put yourself in front of a competent and trustworthy professional in this area Be sure the person understands the different tools that can be used to help reduce taxes In addition to a financial planner also seek out a tax advisor A good financial advisor will have the names of knowledgeable tax advisors to recommend to you Simply understanding the different investment tools available to you is a first step in saving hundreds if not thousands of dollars A financial advisor can help you not only make sense of the IRS rules but also devise plans for avoiding paying as much in taxes as you can As I tell all my clients It s not what you make that counts It s what you keep

Chapter 14 85 Happy Endings Because the Grahams were 70 we divided their RMD into two parts One part they took and kept to supplement their lifestyle They would pay taxes on that portion The rest of their RMD we put into a life insurance strategy that will leave their family with over a million dollar death benefit all tax free The life insurance plan will provide funds that the Grahams heirs will use to pay the taxes on the IRA they will inherit Even though the IRA is fully taxable to his estate the life insurance plan will still leave several hundred thousand dollars tax free to his family It is like taking pennies and buying dollars

Chapter 15 Working with Women K athleen came to see me in 2011 She had lost her husband in 2000 and had inherited 1 6 million dollars but she was upset She was old enough that she had to take the required minimum deposit RMD from the investments and she was frustrated The IRS mandates that at 70 you have to take an RMD a set percentage based on your age of your IRA Her RMD was about sixty thousand dollars a year much of it from her inheritance But she had never wanted that money for herself Her main goal for the inheritance was to leave it to her children But it was going fast Over those years since her husband s death Kathleen had watched her inheritance repeatedly go up and down before seeming to settle on the downside When Kathleen sat in my office in 2011 her 1 6 million dollars was barely 5 million dollars During those tumultuous years Kathleen had often called her advisor and said I just keep losing money Does it really make sense for me to have so much at risk in the stock market Can t we put it some place safe His reply was always the same Your husband never questioned me with my decisions Why don t you trust me as he did You don t need to worry The market always comes back Just be patient and trust me as your husband did

88 Stephanie Fullerton So Kathleen trusted Eleven years later one million dollars were gone and showed no signs of coming back Kathleen was rightfully worried and upset What was supposed to be a wealth legacy for her to leave to her children would soon be reduced to nothing n n n Many women like Kathleen let their husband handle the finances This can be fine for couples divvying up the work in a household but too often it also means the woman has little understanding of finances beyond balancing a checkbook It s one thing to let one person make the financial decisions it s something else to have no idea of the reasons behind those decisions By letting the husband take care of the finances the couple puts the wife in a vulnerable position In general men die at an earlier age than women on average five years sooner in the United States This means the surviving spouse is likely to be a woman and one who has little understanding of the finances her husband has been handling for both of them over the decades This situation holds true in divorces Women who have let their husbands make the investment decisions are suddenly on their own and must quickly figure out what their exes have been learning bit by bit over an extended time Years ago girls in elementary school tended to avoid math As adults they carried their dislike for numbers into a marriage and happily let their husbands take care of this business Put all this together and we have many older women who don t understand finances and are even fearful of working with numbers Feeling inadequate with financial decisions confronted with a male advisor s domineering manner and having an overall sense of being overwhelmed with a husband s death or a divorce women can feel financially lost If they have an advisor their husband used the women stay with that person and do whatever they are told For a while

Chapter 15 89 I often see women in that position They truly feel lost They don t understand enough to make a wise decision but by the time they call me they do understand enough to know that what s happening with their money is just not right They desperately need an advisor who can listen to them understand their concerns educate them and guide them to investments that will meet their needs Kathleen s woes did not end with the continued dwindling of her inheritance A letter she received from her advisor finally prompted her to seek my advice He began on a cheery note I hope you are doing well And then he launched into the real reason for writing His firm discovered it had neglected to charge Kathleen some fees over the previous three years a total of thirty four thousand dollars and they would be taken out at the end of the month Because this error was due to the firm s oversight it would be discounted by 50 percent He ended with a nice thank you followed by a smiley face Needless to say Kathleen was not smiling Her advisor had failed her on so many counts He had her investments in a risky account even though she was in a time of her life where she should not have been risking much at all She was in the preservation stage which I explained in chapter 13 His comment that the stock market would correct itself has truth to it but it did not apply to her She didn t have time for that correction to happen If she were thirty years old she would have time But Kathleen was in her eighties He had bullied her into listening to him Her calls to him invariably left her in tears for questioning not only him but also her husband s decisions in selecting his investments and using that advisor This especially incensed me I can t imagine having a relationship with an advisor that puts the client in tears You ve read in part 2 about what to look for in an advisor and you know you never want a person like this

90 Stephanie Fullerton The advisor had never disclosed his fees to Kathleen so she was shocked by the letter that indicted only some of what she was paying The worst part of this was that Kathleen felt she had no choice She thought she had to stay with this advisor for the rest of her life and do what he told her Questioning his decisions was useless it changed nothing and only made her more upset Without a doubt this advisor took advantage of Kathleen He encouraged her feelings of inadequacy when he was the one providing inadequate service No client should ever feel so lost or be taken advantage of Women especially need to feel secure with their advisors And a caring husband will see to this He should make sure his wife fully understands the investment decisions Taking care of your wife means more than having sufficient funds if you predecease her It also means having an advisor whom she can trust one with whom she feels comfortable and a person who fully explains the plan so she understands it and agrees with it Happy Endings After a very long meeting with freely flowing tears Kathleen saw the light I explained she didn t have to remain with that advisor She knew more than she realized and I congratulated her on being right about not wanting to risk so much of her money in the stock market at her age Knowing Kathleen s intent for her inheritance we created strategies that reduced her fees greatly reduced her risk and provided a legacy to pass on to her children In the end it gave Kathleen peace of mind and a reason to smile

Chapter 16 Living the Plan O ne of the greatest rewards I receive in my work is witnessing my clients emotions when it s time for them to retire They re a wonderful mixture of joy and disbelief and wonder almost like a small child s first view of the tree on Christmas morning Like many before them Sandi and Patrick Clemmens sat with me on the afternoon of his last day on the job Sandi had stopped working several years before so this day marked the beginning of their real retirement We went over the plan and I reviewed what we would put into action what it would mean as far as income to them As I continued to explain the important details I could see Sandi and Patrick sparkling up as they remembered what we had set up so long ago Over the years they had forgotten and now reality was settling in Their dreams were about to come true Sandi looked first at Patrick and then at me I can t believe this is really happening she said with tears welling in the corners of her eyes What touches my heart the most is knowing that I was part of that plan I met with Sandi and Patrick and helped them put together the ingredients to ensure they would not run out

92 Stephanie Fullerton of income in retirement Even if the stock market crashed they were not going to lose over half their portfolio because I d shown them a way to grow their investment account in another and more secure way n n n When you follow the plan you get the reward It s that simple Most clients follow the plan so I continue to see joyful success with each client s retirement plan What a wonderful job I have bringing success into each one s golden years Although we set up retirement plans each one unique created for your needs and desires and based on certain circumstances at that time changes in life do happen You unexpectedly lose your job Your spouse needs extensive medical care You inherit a tidy sum Anything can happen and many of those anythings can call for a reexamination of your retirement plan I like to meet with my clients once a year to make sure that all is going well that their goals remain the same and that no major changes have occurred This meeting also gives me a chance to review with them the plan we set up and make sure it still meets with their approval If not or if the changes in circumstances call for it we adjust the plan as needed Possibly most important in these meetings I check that you are following through on your part of the bargain Working together we created a rock solid plan for you to follow But it doesn t happen by magic Yes my team and I have our part to do managing your investments You have your part to do as well If you are still in the accumulation state you have a savings program to follow Are you contributing to your 401 k to maximize your employer s matching contributions Are you sticking to the budget we worked on Are you maintaining the discipline needed Maybe just as important is what you are not doing Are you avoiding checking the stock market and second guessing the solid plan we laid out Remember that one question

Chapter 16 93 Do you want to risk getting rich or do you want to make sure you will never be poor When the stock market surges up it s tempting to think you should be fully invested there to take advantage of the good times Remember the story about timing the market You can t And your goal is not to make a killing in the market as wonderful as that seems Your goal is to follow the plan so you can be sure you will never be poor so you will never have to worry so you will have peace of mind in your well deserved retirement Happy Endings I just love happy endings and I see so many of them in my work My reward truly becomes my clients reward With the Clemmons their happy ending is stretching from that first day of retirement into years They continue to have peace of mind in their future Sandi and Patrick like all my clients know that the plan we put in place works regardless of what the market does or the economy does They know they re guaranteed to receive a paycheck for the rest of their life

Part IV Fullerton Financial Planning

Chapter 17 At the Heart Stephanie Fullerton T he heart of any company is its leader That person sets the tone for everything about the firm from how it operates in general to how its employees interact with each other and with the public I am that leader and I make sure every employee we hire fits with my philosophy for working with others Certain values rank high on my list honesty compassion integrity openness These make a big difference in establishing that trust in a financial planner that I say is so important Because these matter so much to me and to the work I provide our clients I m going to tell you about my growing up how I learned these at an early age and how these values became an integral part of me I grew up in a small town very much like Mayberry You know what I mean everybody knew everybody It was a great place to live No fences separated neighbors houses and kids could run from yard to yard playing with the neighborhood kids with no worries Our only concern was getting to the dinner table hands and face washed of course at five o clock for a home cooked hot meal One fall day when I was eight years old I had another normal dinner with my family my parents and two older brothers After we ate and cleaned up I finished my homework By early

98 Stephanie Fullerton evening it was time for bed My mom tucked me in said prayers with me and kissed me on the forehead Everything was good Then in the middle of the night I was being awakened and asked to come out into the family room As I entered the room I immediately noticed my mother I could see she was very upset and had been crying My brothers were already sitting on the couch Something was terribly wrong My dad was there too next to me He was the pillar in my life I idolized him At this point I was standing next to him and looked up at him Then my mom said in a very very small voice to my dad David go ahead and tell them now In his own soft voice my dad said to all of us I m leaving Leaving On a trip For the weekend His words meant nothing to me My face must have shown my confusion because my mom then said to him Tell them what you mean Dad proceeded to say goodbye to all of us and explained that he wasn t coming back I was devastated At eight years old my life unraveled changed forever Yet it worked out thanks to two amazing people Had it not been for the influence of my two grandparents my life could have ended up so much different From them I learned the foundations of life My grandfather was a hard working man a barber by day and a preacher at night He would share stories of the incredible miracles he saw God do in people s lives and he would tell me that nothing is impossible But I would have to do my part to work hard And he would stress the importance of being a person of integrity when you give your word to do something you stick to it until it is done a handshake is a handshake My grandmother was a strong woman of faith I can remember lying in my bed next to my grandparents bed at night and watching them kneel by the bed and listening to them pray out loud for all thirteen of their children as well as their dozens of grandchildren

Chapter 17 99 I am blessed because my grandparents in a time when my world had been turned upside down were there to hold me tight and guide me to become the person I am today As a woman whose faith is most important when I commit to something I stick to it That handshake still means a commitment to me Most of all I am in love with an incredible man We have three children one son in law three dogs and best of all amazing grandchildren Several years ago Steve and I began to dream about the possibilities for me in returning to work After being a stay at home mom for many years I was ready to earn an income and help my husband with the growing expenses of raising children I wasn t certain what I wanted to do But I did know I wanted my work to make a difference in the lives of others In gratitude to my grandparents I particularly wanted to help the elderly to give back to a generation that had one of the greatest influences in my life While I was exploring different possibilities destiny helped me decide on the perfect career for me Around this time I was asked to help an older woman who had been taken advantage of by an unethical financial planner Through this process of setting things straight for her I came to understand what I wanted to do in helping the elderly give them peace of mind for their retirement years Next I needed to work on the details of my career search find a firm with sound ethics that truly was working in the clients best interests My best friend s husband was in the business of helping folks prepare for retirement and guiding them through safe solutions to ensure they could maintain their lifestyle even through fundamental changes with the hard earned monies that they had accumulated for retirement It didn t take me long to see that was a perfect fit for me I had found my passion in life I knew I could help make a positive difference in people s lives So my journey began I have spent hours months and years learning to be the best I can be in educating folks in retirement planning with safe secure solutions Starting my business in

100 Stephanie Fullerton the spare room in our house I grew it through the Great Recession and went from just my mom and me to now over twenty employees Happy Endings This is one happy ending that is still being formed because it comes about with every single client I help I am so grateful that I witness happy endings every day What makes Fullerton Financial Planning different What distinguishes my company from the thousands of other financial planners across the United States What attracts others to it Certainly the knowledge training and continuing education help But others have those attributes too What I truly believe makes a difference to our clients are those values instilled in me at an early age faith integrity keeping my word and compassion Those gifts learned from my grandparents come into play every single day As I have focused on helping the older generations prepare for retirement and make real their dreams I have learned so much Most important is the knowledge that there is no retirement without income I hope through reading this book you will be inspired you will find hope and you will find solutions to your own safe and secure retirement

Chapter 18 The Fullerton Difference The Power of Your Team O ne day Sharon Tyler called asking that I meet with her and her husband Paul In itself this wasn t an uncommon request I meet with my clients annually However I had just seen this couple earlier in the year My instinct said this couldn t be good I tried to imagine what could have prompted the call but came up blank at least from our company s viewpoint The last time we had visited everything had seemed fine I scheduled the appointment and hoped for the best The day for our meeting came Before sitting down with them I headed to the copier to pick up some papers As I was passing the window of the conference room I glanced in to see the Tylers seated at the table very somber looking Plus Paul had lost an incredible amount of weight so much that it caught me off guard I had just seen them a few months ago and they had seemed perfectly happy and healthy A sinking feeling settled in my stomach This wouldn t be the first time clients would convey bad news but I never would have expected it from the Tylers They were relatively young What in the world was going on As I entered in the room I asked Paul what had happened that he had lost so much weight Knowing the answer I had to hear it from him all the while hoping I was wrong

102 Stephanie Fullerton Paul said he had stage 4 cancer It was terminal and things were happening quickly In just a few months he had lost over forty pounds He had also aged twenty years My heart sank I pulled over the Kleenex box and began to cry with them You could tell he was scared His wife was numb and in shock Sharon told me Everything is happening way too fast We aren t ready for Paul to die Our daughter s wedding is in just a few months What are we going to do All I could do was simply listen move alongside them and tell them that I was going to be there for them I said our team at Fullerton was going to pray for that miracle Whatever else we could do we would give it our very best Paul looked at me and said Stephanie I need to hear from you that Sharon is going to be okay I don t want to be a burden on her and when I am gone I need to know you will be here to help pick up the pieces for her Of course I will Paul I told him No no you don t understand Stephanie he said Is she going to be okay financially How will she pay the bills How will she make ends meet I need to know you are going to be here for her Paul and Sharon had become my clients just a few years before this After thirty five years with a major company Paul had been let go That had prompted them to meet with me initially They didn t know what to do How could they take his 401 k and make it last He wasn t going to get a pension and their combined Social Security payments were not going to be enough How in the world could they make ends meet They didn t want to rely only on hope for things to work out They needed to know what he should do Did he have to go out and look for another job or could he finally retire even though his plan had not been to retire so soon At that time we began to put together a plan It would help fill in that gap and would allow Paul not to have to go back into

Chapter 18 103 the work force and try to find another position Little did we know that Paul had only a few years to live We never would have guessed how this early retirement would be a blessing in disguise in giving him the last two years of his life with his wife daughters and grandchildren Now Paul only needed to know that the plan going to work for Sharon his greatest treasure and enable her to continue life without him n n n You plan and plan and do everything you should and then life happens This is where your team at Fullerton Financial Planning comes in In addition to our having certified financial planners CFPs our advisors are fiduciaries that is they put the client s needs before their own Plus we have an employee dedicated to Medicare and keeping current on its regulations The Fullerton Financial Planning team takes care of you regardless of what life sends your way The rock solid plan we create for you will weather those changes or when an especially wild one gets hurled at you we can make the needed adjustments to ensure you and your financial plan are secure Happy Endings In this case happy is a relative term Paul s death certainly was not happy for anyone but we made sure his most important concerns were answered to his satisfaction He could leave knowing Sharon would be taken care of In this meeting we spent about an hour reviewing the plan and showing them how we were going to make the necessary adjustments to help Sharon feel financially secure Paul looked at me with tears in his eyes in fact there wasn t a dry eye around that table that day and said Thank

104 Stephanie Fullerton you Stephanie This is a huge burden that has been lifted from me today I needed to see that you were going to be here and that everything that has been put into place will be ready to go Little did we know two years before that we would be sitting at that table talking about Paul s premature death Sadly it wasn t long after that meeting that Paul left this world At that point it was time for our team to get busy and do exactly what we had said we would do take care of Sharon by putting into place those guarantees that were essential to her everyday living Chasing the market was no longer important to her What mattered was simply the peace of mind from knowing her lifestyle wasn t going to change We had put into place lifetime income that wouldn t change regardless of what the markets would do Not long after Paul had passed away Sharon came into our office As our staff was gathered to give her their heartfelt hugs she said You guys will never know just how much it has meant to our family that you were here to walk us through some of the darkest hours of our lives We wouldn t have it any other way I told her Over the years I realize that our work is more than just a job it has become our mission to serve our clients with passion from the beginning to the end

Chapter 19 H The Fullerton Difference Customized Plans ave you ever packed your bags loaded up the car grabbed your spouse and said I ve decided we re all leaving for two weeks Forget reservations hotel rooms maps research for where we re going or packing We re just going off on an adventure Let s go No As wild and carefree as that sounds very few of us would ever be comfortable on such a journey We d worry too much I am a planner of life and like most of you I have to know where we are heading on a vacation I want assurance that I ll have a clean bed to sleep in for the night without driving around for hours looking for a vacancy Plus I want to know where I am going so I can plan some fun activities for my family Our family loves to go to Southern California to the beaches and we go every summer The whole year we plan for it what we are going to do where we ll eat how we ll get there We ve been doing this for more than twenty years and we still plan the trip Sure we have a few details nailed down what to bring but we invariably add to the list a new restaurant so we plan to make sure we don t miss anything After thinking about the trip all year we want to make sure it lives up to our expectations n n n

106 Stephanie Fullerton Why is it that we spend more time planning a vacation than we do planning our retirement If I gathered one hundred people who are nearing retirement and asked them Who has a plan for retirement that details how much money you are going to take out and when how long it will last and how you can spend it hardly fifteen would raise their hands More than 85 percent would have not a clue Worse they wouldn t even want to think about having a plan because if they think about it then they have to do something about it But if they do something they might do the wrong something A wrong decision could devastate their retirement So they do nothing and hope for the best Currently over a trillion dollars sits in bank CDs Not only are they earning very low returns these investments also are actually falling behind they are losing money because they are not keeping up with inflation But people keep their money in CDs because they want safety no risk What kind of safety is losing money Then there are the few who are completely invested in the stock market But they too are hoping for the best that the market will go in only one direction and their investment will grow There s certainly no safety in that either Let s face it we can t plan retirement as our grandparents did They could work the required number of years and retire knowing they had Social Security often a pension and CD rates at 8 9 10 percent That made retirement so much easier No worries no plan needed Times have changed and the old way no longer works That is where Fullerton Financial Planning comes in Every retirement plan we create is different because every person is different Everyone has a different bucket list for retirement different health conditions different comfort levels with risk and amount of savings different desires for a legacy and the list goes on No one plan could ever satisfy every person To create your unique plan for retirement your Fullerton team does exactly what I mentioned in chapter 11 for creating a

Chapter 19 107 rock solid plan We look at what your future expenses are projected to be what your guaranteed income check will be and what s on your bucket list Then we take into account the unknowns inflation interest rates your health and so on We can t guarantee what any of those unknowns will be but we can make sure your retirement plan keeps you afloat in calm waters as you weather what life throws at you How to invest your money depends upon the mix of the factors the current situation the expected future and where your comfort level lies Several different investment options are available But behind the overall plan is the realization that you must maintain a very strong average return on your money just to keep it up with inflation Some folks invest in real estate to protect their money against inflation As explained in chapter 10 Diversification real estate has risk That market can go down as we saw in 2008 but this affects those paying a mortgage for their primary residence more than those investing in real estate Property held as house or apartment rentals can be a good hedge against inflation When people don t have the money to buy homes or keep up with their mortgage they turn to renting instead Then when the economy improves you can sell the house or continue renting it out Also you have the ability to raise your rent as inflation kicks in which increases the value of the property for selling it later if you choose Stock held in strong companies such as Coca Cola General Electric AT T big pharmaceutical companies and others with an established healthy cash flow that pay dividends can be a good investment Just like real estate this type of investment is not for everyone but it can be part of a diversified portfolio Another tool that we use to protect against inflation is an annuity Steve and I own two annuities When we begin to take the income of the annuity it will continue as a paycheck that is guaranteed for the rest of our lives My specific annuity has an added benefit every year that the stock market indices go up

108 Stephanie Fullerton my paycheck increases but it never goes down even if the stock market finishes the year down Annuities are one type of option in the portfolio mix They are not necessarily right for everybody but our analysis of your specific situation will tell us whether they might be beneficial for you Also as mentioned in chapter 10 Diversification there are many different types of annuities each one appropriate under certain circumstances Our job is to understand them all recommend to you any that will fit your situation and explain the benefits and weaknesses of each to you When I create a retirement plan for my clients one of the foundations is their income plan I do not believe that anyone should ever depend on the market to provide his or her lifestyle because it s just too risky The income plan is so basic Everybody should be concerned about it Without pensions with long expected lifetimes and with inflation we have to become very creative in ensuring we have sufficient funds to support our desired lifestyle in retirement I ve mentioned in earlier chapters some of the ways to do this One is to contribute to your 401 k so you receive the maximum matching of funds from your company I also covered annuity insurance policies as the means for a steady income in retirement Even if you die prematurely and never touch it a well designed annuity policy will pay out as a tax free death benefit If you do live to collect the monthly payments they will be tax free which also helps keep your tax rate down as much as possible Many people I see come unprepared for the reality of funding their retirement Some feel forced to keep a lot of their investments fully in the stock market taking on too much risk because they are still are trying to make up from their losses in 2008 Some have been living paycheck to paycheck and unable to contribute enough to their 401 k to receive their employer s maximum match Even more disturbing is the situation for those who started their career twenty to thirty years ago certain of a pension plan when they retired and now as they approach that

Chapter 19 109 magic time their company of changes Good bye pension plan hello Social Security Regardless of the circumstance my job is to sit down with each client and create the best plan possible The sooner we start the better retirement plan we can create that ensures you will have enough money to last throughout your years That is my goal to give each one of you peace of mind a worry free retirement and sufficient funds for your golden years Happy Endings I lead the Fullerton family in planning our annual trip to Southern California and it always turns out great We know what to take what to expect and how to be prepared for any contingency stops along the way inclement weather for a day or two slow traffic on one road with alternatives How could it be anything but a grand fun time just as your retirement deserves to be

Acknowledgments I am forever grateful to my grandparents Clarence Pop Pop Abbott and Lola Mom Mom Abbott They were among the most influential people in my life and taught me that with God nothing is impossible The power of love and forgiveness and the steps of a righteous man are ordered by God I am how I am today because of them Through her life my mom has shown me that there is nothing more important than God and your family I thank her for standing by my side and for being my biggest cheerleader in life Every single day Steve my partner in life and business has loved me believed in me and encouraged me to live my dreams I am forever grateful to him and forever in love with him Steve and I share the blessings of having three true families to call our own I am grateful for all The first is our children Alexandrea Stevie and Samantha son in law Josh and grandchildren Shiloh and Indy Elaine The second is our peer group of some 650 like minded independent financial advisors who are affiliated with Advisors Excel and its always do the right thing code of conduct

112 Stephanie Fullerton The third is our growing base of client partners the very persons for whom Fullerton Financial Planning exists and the group we strive to nurture on a daily basis I could not have taken this major step on my life s journey without the help of Julie Scandora who helped me shape the contents of this book To all of you I say a heartfelt thank you

Contact Us Fullerton Financial Planning 14155 N 83rd Avenue Suite 144 Peoria Arizona 85381 Phone 623 974 0300 Fax 623 974 0330 www FullertonFP com We offer investment advisory services through Kingdom Financial Group LLC an SEC registered financial advisor RIA We are an independent firm helping individuals make retirement income planning more successful by using a variety of strategies customized to their needs and objectives By contacting us you may be provided with information regarding the purchase of insurance products and investment opportunities Annuity product guarantees are subject to the claims paying ability of the issuing company and are not offered by Kingdom Financial Group LLC Instead of hoping for success for our clients we are planning for success