FINANCIaL
FIELd NOTES
What Is in Your Control?
There has been nowhere to hide this year. Year-to-date (9/30/2022), the S&P 500 is down 25% and the bond aggregate is down a whopping 15%. It’s the worst-performing period for a balanced portfolio since 1931!
Do Future Retirees Benefit from Social Security’s 8.7% COLA Adjustment?
Many of my current retired clients received a sizeable cost-of-living adjustment (COLA) of 5.9% in 2022 and are set to receive an 8.7% increase in 2023 as inflation numbers remain high.
However, I recently had a client who has delayed taking their benefit ask if they will miss out on the high COLA adjustment since they do not have a current benefit that Social Security could increase…
Using Social Security's 8.7% COLA to Improve Your Finances
Social Security announced last week that there will be an 8.7% increase in Social Security Income payments in 2023. That equates to an average increase of $140/month starting in January. For many of my clients who worked into their late 60s, the increase will be $200-$300/month.
The increase is timely as many individuals have faced the burden of increased costs on everything from food to utilities. Many individuals have no other choice than to get caught up on bills that they have fallen behind on as prices have soared. For others, they may have the opportunity to start getting ahead…
Wealth Is What You Don't See
As I wrote about here before, one of my favorite finance books is The Psychology of Money by Morgan Housel. It is the most approachable book on managing your money I have ever read and tackles many of the softer areas of financial planning, such as common investor biases and psychology.
One of my favorite quotes from the book is “We tend to judge wealth by what we see because that’s the information we have in front of us. We can’t see people’s bank accounts or brokerage statements.”
Calculating Your Minimum Lifestyle Floor
I was recently listening to a financial advisor describe the “minimum lifestyle floor” (MLF) that they have their clients calculate. The idea is that your expenses can be divided into two categories, necessities, and fun money.
The necessities include food, housing, basic transportation, utilities, and health care. I also would add another “other” category for things like basic charitable giving, small gifts, personal care, and pets since you’re probably not going to pass on Christmas gifts or give away Buddy the dog because your finances are tight.
Real Risk vs. Perceived Risk
There are some risks in life that are permanent. If you live in a hurricane-prone area and don’t have hurricane insurance, you are taking a risk that could lead to a permanent loss. That is a real risk.
The financial advising world often talks about investment risk in the context of market fluctuations up and down. We categorize investors as risk-averse if they are unwilling to deal with bouts of volatility. What we are measuring is the perceived risk – the risk that values may temporarily decline in value.