Investopedia: Top 6 Expenses Cutting into Retirement Savings

Michael J Eugenio, CFP® was quoted in this article published by Investopedia today, September 15, 2017.  The article by Jim Probasco is directed at baby boomers hitting the retirement circuit without enough money saved.

Among the Top 6 Expenses That Are Cutting into Retirement Savings, Mike’s quote was featured as the 2nd leading expense:

2. Credit Cards and Other Accounts

“The average household pays out $2,630 in credit card interest each year. The more you reduce this amount, the more you can put into your nest egg.

‘Never roll consumer debt into a home mortgage,’ cautions Michael J Eugenio, CFP®, president of Eugenio Financial, Lake Oswego, Ore. ‘While it might save money monthly, long term you have added an enormous amount of interest. That car payment that you had 30 payments left on, now just became a 30-year car payment.’

Instead, first ask for a credit card rate reduction. If that’s a no-go, look into a balance transfer to another card with a lower rate. Or, if you can pay off your credit card debt within a year or so, look for a card with a 0% APR for 12 to 18 months. The interest you paid can go into your retirement savings.”

Use a rate comparison tool such as this one by Bankrate. And don’t just do it once; check on a regular basis.”

For more on retirement planning by Michael Eugenio, you may find this article of interest:  Managing Cash Flow in Retirement – Critical to Portfolio Planning


Eugenio Financial is a Fee-Only Independent Registered Investment Advisor, Michael Eugenio, is a Certified Financial Planner CFP™

If you wish to discuss your portfolio and/or any other money management matters, feel free to CONTACT US.  We look forward to hearing from you!

What is the Fiduciary Standard for Investment Advice?

This article is also published in Investopedia and NASDAQ
 You may have heard a great deal of discussion lately about something called the Fiduciary Standard and how it applies to investment advice.

Fiduciary Standard

The Fiduciary Standard has been around for hundreds of years.  (Yes! The Fiduciary Standard can trace its roots to 17th century England.) Very simply put, it means you place your trust and confidence in the hands of a professional to take care of your financial needs.  The professional fiduciary is expected to perform and advise you based on your best interests, even if it comes into conflict with the advisor’s own interests.

Not all investment advisors are held to this standard.  Many brokers, registered representatives and insurance agents are held to a lesser standard referred to as suitability.  They may offer you a product that may solve a problem. But did they keep your best interests at heart? Do they have a complete understanding of your financial situation?

A Fiduciary will have complete knowledge of everything about your financial life before making any recommendations.

Non-Fiduciary Broker:

  • A broker may offer you a Variable Annuity or an Indexed Annuity and tell you that it will resolve all of your investment needs.  What he may have failed to tell you is that the Variable Annuity comes with limited investment options, very high fees, and commissions. Also, the Variable Annuity has steep penalties if you try to cash it out early. Usually you must keep these things between 8-10 years — some of them longer.  He also may neglect to tell you that the sale of the Variable Annuity qualified him for an all-expense paid lavish trip.  He knows that a couple of low-cost mutual funds would have done the same thing with much less cost, but his commission would have been lower, and he would miss out on that trip (that you indirectly paid for).  In whose best interest did your broker work?  Did he disclose to you the commission or the trip he would earn?
  • The broker is not held responsible if the product he sells you didn’t work out.  He will most likely fail to provide ongoing oversight or service.  You can only hold him responsible if you can show that what he sold you was inappropriate (unsuitable). An example of an inappropriate sale would be to invest most of your portfolio into something with no liquidity and no exit strategy.

An Investment Advisor held to Fiduciary Standard…

  • …is going to take the time to learn what the issues are that need resolution, then he will place you into an investment portfolio that will best suit your needs.  He will also resolve any conflict of interest by not taking any commissions or going on any company-paid trips.  The conflict resolution is resolved through a fee arrangement between you and the advisor.  It is further reconciled with disclosure of any potential conflicts of interest. This way you know that he is working in your best interest.

Non-Fiduciary vs. Fiduciary Approach:

  • A broker, non-fiduciary, while making sure the product is appropriate for you, very often takes the approach of a solution (product) looking for a problem.
  • A Fiduciary will take the exact opposite approach by recognizing the problem first, then finding a solution. Once a Fiduciary builds a plan for you, he has a responsibility to execute and monitor that plan for as long as you remain his client. If something goes wrong, he will make every effort to fix it.  A good advisor will have performed Due Diligence on any and all products he uses as investment tools.  He also will perform Due Diligence on any outside advisors he might recommend.

Further, a Fiduciary is not bound to any one company.  Brokers very often can be limited to the products offered by one company.  Brokers very often maintain relationships with investment company representatives that promise expensive meals or lavish outings to win the brokers business. This is very similar to a Washington Lobbyist who curries favor with your representatives in Congress.  A Fiduciary will avoid all of that.

Think of it this way:

You don’t feel well, so you go to your doctor to find out what is wrong.  He does a cursory exam then writes you a prescription.  He then informs you that there is no charge for the office visit, however you will need to fill the Rx at the pharmacy across the hall. No need for a follow up visit!  What he didn’t tell you is everybody is given the same Rx, no matter the illness.  He further failed to disclose that the pharmacy gives him 8% on every prescription they fill for his patients.  Now the pharmacist tells you that the doctor wrote you a prescription for a Generic Rx.  The pharmacists lets you know that the name brand might be more effective, yes it is more expensive, but don’t worry its covered by insurance.

You may or may not have received the right medicine for your illness, but in whose best interest are the doctor and pharmacists working?  Yours or theirs?

Determining the ‘Real Deal’

How can you determine who is an Investment Fiduciary and who is working on commission?  If your advisor carries a designation such as Certified Financial Planner (CFP®) and presents himself as an Independent Registered Investment Advisor (RIA) then you have the Real Deal’.

  • An RIA only works on a fee arrangement between his client and his firm. He accepts no outside compensation, gifts or gratuities.  Additionally, an RIA is governed by the Securities act of 1940 which puts into law the Fiduciary Standard.
  • A CFP® is governed by the CFP Board of Standards which maintains a high degree of fiduciary responsibilities for its designees. Those standards include Integrity, Objectivity, Competence, Fairness, Confidentiality and Professionalism.

Finally, don’t be fooled if an advisor tells you that his advice will cost you nothing.  That is just silly.  Of course, his advice comes with a cost, only it is built into and hidden in the product he sells you.  He just failed to disclose the cost.  If the investment underperforms or fails, then it cost you even more.

Eugenio Financial is a Registered Investment Advisor (RIA), and Michael Eugenio is a Certified Financial Planner (CFP®).

Contact Us to learn about Eugenio Financial services.

 

 

 

Trump Impact on Financial Goals?

What will be the new President Trump impact on financial goals be for you, your portfolio?After a tumultuous and bitter presidential campaign, for better or worse, Donald Trump has been elected President of the United States. Some of you may be happy, others not so much; indeed you may be anxious because there are so many unknowns. However, regardless of your political affiliation, sentiment or otherwise, there will be some important financial implications.

Since the election, the S&P 500 & Dow Jones Industrials Index have shot up to record highs.  We are calling it the “Trump Bump” Can this run up be sustained?

President Trump wants to reduce the corporate tax rates as well as the Individual Tax Rates.  He wants less regulation and big changes to Obama Care.  Infrastructure spending is also on his top 10 list.

Many will cheer this as good news for the economy and ultimately raise the value of the stock market.  Only time will tell.

What’s an investor to do?

It is important to stay focused on your goals and objectives.  Understand your time line for achieving those goals.  There are some time horizons such as your retirement that are 20 to 30+ years.

Nobody can predict the future.  Just ask the Atlanta Falcons!

Because the future is unknowable we need to build portfolios that balance rate of return while managing risk.  Your portfolio should be allocated across several asset categories.  They should be further diversified within each of those categories.  This offers both breadth as well as depth.  Coach Bill Belichick needed more than Tom Brady to win the Super Bowl.  He needed different payers with different skill sets working as a well-trained, cohesive team. Building a portfolio is pretty similar to building a sports team. We insert the players (investments) that will best fit our team.

While not perfect, (Tom Brady started out pretty low in the draft) we look at each player’s history and try to predict how he will perform in the Big Leagues.

When we build a portfolio we have the luxury of looking at many years of history to help us pick the investments. By doing this we start to understand how it will perform in good times and bad.  This gives you a portfolio that has stood the test of time, lived through good Presidents and bad ones.  It has weathered good economies and bad ones.  It has been knocked down only to recover and go onto new challenges & victories.

This gives you a fighting chance against the gods of fate

Nobody knows how the Trump administration will turn out, but a well-crafted portfolio that will be there long after DJT has moved on.

Our New Website – Modern and Accessible

Visit Our New Website

After a few months in the making, we’re excited to announce our newly refreshed website for clients and other visitors interested in their financial well-being for the long term. The updated site includes enhancements to navigation, design, content, dropdown menus and optimized viewing on any device — laptop, smartphone, notebook. Our goal with this new website is to provide clients and interested visitors with a better experience — learning about Eugenio Financials services and solutions, discovering insightful information and news in our — also newly refreshed — blog, and communicating with us.

Get to Know Us

This is a first in a series of blogs I’ll be writing so you can get a better idea of not just who I am, but how I think.

To start things off, oddly enough one of the toughest question I get is “What do you do for a living?”  Well, the short answer is “I make sure you have enough when you’ve had enough.” The hard part is elaborating on that statement, because that answer can cover so much of your life. Are you successful?  Have you been working hard and saving your pennies?

It’s been my belief for many years that the financial advisory business is over populated with cookie cutter programs that take the easy way out to handling client financial objectives. In our practice we take the attitude that  financial planning is not one size fits all.  You are different and deserve a personalized approach to solving the money challenges facing us today.

It is my strong belief that the best way to approach money in the 21st century is with a well-rounded, fully integrated plan — that is, a plan that addresses not only investments, but with a specific strategy that:

  • manages the obstacles of cash flow,
  • reduces the reach of government into your pocketbook,
  • understands your vision of retirement and
  • helps protect everything you’ve worked for from catastrophic calamities.

Furthermore, we can help you enjoy your retirement years…when you’ve had enough!

Contact Us

Take a moment and review our new, updated website.  We’ll attempt to articulate what we do,  how we do it and who we do it for. Let me know if you like it.