What is risk tolerance and why is it important to investors? As an investor you’ve probably been asked this question by yourself, or your financial advisor. It’s not an easy question to answer and not a question that can be answered with one word or a quick sentence. Risk tolerance is simply a particular investor’s appetite for risk. Some investors have little appetite for risk and their stomach churns when they think about losing money in the market. Generally these investors are considered risk averse or risk intolerant. Other investors aren’t really concerned about the ups and downs of the market and are willing to accept these market gyrations in or to receive the benefit of potentially higher returns. This is called the risk/return trade-off. In order for investors to receive higher returns they generally have to be willing to accept more risk for those returns. In other words, these […]
August, 2013:
Can Both Spouses File and Suspend?
Note: with the passage of the Bipartisan Budget Act of 2015 into law, File & Suspend and Restricted Application have been effectively eliminated for anyone born in 1954 or later. If born before 1954 there are some options still available, but these are limited as well. Please see the article The Death of File & Suspend and Restricted Application for more details. This question continues to come up in my interactions with readers, so I thought I’d run through some more examples to illustrate the options and issues. The question is: Can both spouses file and suspend upon reaching Full Retirement Age, and collect the Spousal Benefit on the other spouse’s record, allowing our own benefit(s) to increase to age 70? Regarding file & suspend and taking spousal benefits, although technically both of you could file and suspend at the same time, only one of you *might* receive spousal benefits […]
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Book Review: The M Word
Subtitle: The MONEY TALK Every Family Needs to Have About Wealth and Their Financial Future This book, by Lori R. Sackler, presents to us a very insightful overview of the types of conversations that families need to have with one another – beginning with spouse to spouse, following with intergenerational conversations – about money topics. These conversations are critical to the success of most all financial plans that require some interaction between two or more people. Mrs. Sackler has a great deal of experience with the topic, having for several years hosted a radio program dealing specifically with this subject. It is this wealth of experiences, coupled with her own clients’ experiences, that really delivers a wonderful array of knowledge about the process. Throughout the book are excellent examples, which provide the reader with a portrait of each concept, in the flesh as it were. The book walks you through […]
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A Stable Pyramid
One of the basic fundamentals regarding financial planning and saving money revolves around what is known as the financial planning pyramid. You may hear other names such as the wealth management pyramid, the financial house, etc. You may also see different stages or “building blocks” added here or there, but I’ve broken it down for the purpose of this book to three basic levels for easier understanding. The first level is where we see risk management. This is the foundation of your plan. It’s important to have a strong base to build off of, otherwise the slightest of breezes or tremors can send it toppling. Risk management can be simply seen as your insurance – and this can range from your auto, home, renters, life, health, disability, and umbrella insurance, to your will, emergency fund, and debt management. The reason why insurance is the base is due to the fact […]
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Are You Protected?
I recently received a call from a friend of mine asking questions about his newly acquired rental property. He had just moved from a duplex where he owned the entire duplex and lived on one side. Having purchased a home and finding a new tenant to replace where he was living, he was surprised and upset when his insurance on the duplex nearly doubled. After some debate he decided to reduce the replacement cost of the building that the insurance company had placed on the building from $500,000 to $250,000. This, of course, sent red flags flying in every direction in my brain. His first question to me was why his insurance nearly doubled. The reason was that since he was no longer a tenant in his own duplex the insurance company assesses that as more risky and adjusts the premium accordingly. He further commented that the replacement cost was […]
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5 Essential Financial Planning Steps for Your 30s and 40s
(jb note: the article below is from my friend Roger Wohlner, who blogs at The Chicago Financial Planner.) Many of the calls that I receive are from folks in their 50s or 60s who are either within sight of retirement or already retired. Many of these callers are pretty well-prepared for retirement and are seeking my help to fine-tune their situation and/or to help them through this next phase of life. This type of financial readiness doesn’t just happen it takes planning and preparation. Here are 5 essential financial planning steps for those of you in your 30s and 40s to help you reach your retirement goals and more importantly to help you achieve financial independence. Get started If for whatever reason you haven’t done much of anything to ensure your financial future it’s time to get going. Today is the best day to get started, tomorrow is the second best […]
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Why Diversify?
Remember Enron? I think we all do. Enron was once a powerhouse company that saw its empire crumble and took the wealth of many of its employees with it. Why was that the case? Many of Enron’s employees had their 401(k) retirement savings in Enron stock. This was the classic example of having all of your eggs in one basket and zero diversification. Let’s say that the employees had half of their retirement in Enron stock and half in a mutual fund. Enron tanks but their mutual fund stays afloat. This means that they lost, but only lost half of their retirement, all else being equal. Imagine if they had only a quarter of their retirement in Enron and the remaining 75% in three separate mutual funds. Enron’s demise is only responsible for a fourth of their retirement evaporating. This could go on and on. The point is that when […]
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Education Expense Tax Tips
One way to help ease the bite of the cost of a college education is to use all available tax rules to your advantage. There are several items you can use, including 529 plans, Coverdell ESAs, and various credits for tuition and fee payments. The IRS recently released their Summertime Tax Tip 2013-19: Back-to-School Tax Tips for Students and Parents, providing a valuable overview of a couple of important credits and deductions. The actual text of the Tip follows: Back-to-School Tax Tips for Students and Parents Going to college can be a stressful time for students and parents. The IRS offers these tips about education tax benefits that can help offset some college costs and maybe relieve some of that stress. American Opportunity Tax Credit. This credit can be up to $2,500 per eligible student. The AOTC is available for the first four years of post secondary education. Forty percent of […]
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Book Review: Asset Allocation-Balancing Financial Risk
This was a re-read for me, with the recent publishing of the fifth edition of this very important book. Roger Gibson has updated his excellent work with the results of his strategies during the Great Recession, up to date as of late 2012. Advisors have much to learn from Mr. Gibson’s tome regarding the optimal methods for allocating your investment assets. Throughout the first portion of the book, the concepts of market-timing and superior asset selection are summarily debunked, and the benefits of market index investment and diversification are shown to be optimal. The author uses real-world data to underpin his findings. The result is the explanation that, with known investment time horizons, an optimal mix of investments can be determined that will produce superior long-term risk-adjusted results. Much is written in the book, which is directed primarily to investment advisors, about the mind-set of the investor himself or herself. […]
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Book Review: The 7Twelve Portfolio
The 7Twelve Portfolio is an excellent concept for financial planners and novice investors alike. The book is very well written and easy to comprehend as Dr. Israelsen keeps the concepts simple and analogies easy to follow. The crux of the book is regarding diversification and Dr. Israelsen uses the analogy for making salsa as a reference. For example, you don’t have salsa of you just have diced tomatoes and it really doesn’t improve if you simply add some onions and salt. It improves a little bit, but still isn’t salsa. The same is true for diversification. You’re not diversified if you own one stock or bond in your portfolio and have all of your holdings in that one asset. The benefits of diversification begin when you start adding additional ingredients to the mix. This starts to lower risk and help maximize return. This is a concept us nerdy planners call correlation. The […]
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Social Security Spousal Benefit at or After FRA
Some time ago I wrote an article on the Social Security Spousal Benefit Before FRA, and an astute reader (thanks, SD!) pointed out the obvious to me: I hadn’t written the complementary piece on calculating the spousal benefit at or after FRA. So let’s get right to it! When you wait until Full Retirement Age to file for spousal benefits, there is no reduction of that portion of your benefits. In other words, the spousal benefit will be based on 50% of your spouse’s PIA minus your own PIA, and then this amount will be added to whatever retirement benefit that you’re receiving on your own record. This additional benefit can’t increase your total benefit to a point greater than 50% of your spouse’s PIA. Here are some examples: Started own benefits early Alice and Terry are both age 66. Alice started her own benefit early, at age 62. Her […]
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A Good Reason to File and Suspend: Back Benefits
Note: with the passage of the Bipartisan Budget Act of 2015 into law, File & Suspend and Restricted Application have been effectively eliminated for anyone born in 1954 or later. If born before 1954 there are some options still available, but these are limited as well. Please see the article The Death of File & Suspend and Restricted Application for more details. In particular, the provision discussed below is no longer available to anyone. We’ve discussed the file and suspend option in the past as it relates to enabling your spouse or dependents to begin receiving benefits based on your record while you delay filing to accrue the delay credits. But there’s another reason that you might want to file and suspend at Full Retirement Age (FRA) – and this one has little to do with a spouse, even single folks can take advantage of this. When you file and […]
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The Airplane Analogy
Many parents face the decision during their working years to try to fund both retirement and college education. Some can adequately do both while others are forced to do the best they can with what money they can save. Sometimes parents can get caught up in wanting to save as much as they can for their children’s college education and forgo the need to save for or save more for retirement. When this situation presents itself, I have given my clients my airplane analogy. It goes something like this: Have you ever flown on an airplane before? If you have you know that once you’re scrunched in and belted and the plane makes its way from the gate the flight attendants break radio silence and start with their routine flight instructions. After you’re taught where the exit rows are and how to use your seat as a floatation device they […]
Sterling Raskie, MSFS, CFP®, ChFC®
The latest in our Owner’s Manual series, A 401(k) Owner’s Manual, was published in January 2020 and is available on 
A Medicare Owner’s Manual, is updated with 2020 facts and figures. This manual is available on 
Social Security for the Suddenly Single can be found on Amazon at 
Sterling’s first book, Lose Weight Save Money, can be 
An IRA Owner’s Manual, 2nd Edition is available for purchase on Amazon. Click the link to choose the 
Jim’s book – A Social Security Owner’s Manual, is now available on Amazon. Click this link for the 
And if you’ve come here to learn about queuing waterfowl, I apologize for the confusion. You may want to discuss your question with Lester, my loyal watchduck and self-proclaimed “advisor’s advisor”.