Optimizing Your Financial Life | Dr. Mart McClellan & Tim Streid

Optimizing Your Financial Life

What does optimizing finances look like to you? Maybe you think of putting as much as possible into your retirement accounts, or moving money around to take advantage of certain tax breaks.

We see it differently. To effectively optimize finances, you need a holistic approach that considers all three phases of wealth – accumulation, distribution, and preservation – and creates a plan that builds wealth while giving you the peace of mind that’s absent from traditional financial planning.

Here’s how:

Mindset Shift

The majority of dentists retire with just 50% of their income. Does this sound good to you? While it may be acceptable, we don’t believe acceptable is good enough. We want our clients to retire with 100% of their income. It sounds challenging, yet it’s doable.

Your first step to optimizing your finances is to shift your mindset and believe that yes, it’s possible to retire without a pay cut, and yes, you can retire without a pay cut, too, with the right planning.

Out with the Old

Next, it’s time to let go of the “conventional wisdom” you’ve heard for years from financial gurus and traditional financial planners, such as paying down all debt fast and buying term life insurance. Because if your goal is to build exceptional wealth and retire with a high-income stream, this advice doesn’t work.

We take a different approach to building wealth and some of our recommendations may seem counterintuitive at first, but they work as part of the whole Financial Treatment Plan. For instance: Some debt can be good. Whole life insurance and annuities provide guaranteed income. Distribution is just as important as accumulation.

You will be surprised at what your financial future looks like when you throw off the age-old advice and open your mind to something new.

Gather Your Team

We mostly work with dentists, smart, educated people who work hard for their success. But we see the vast majority of them make the same mistake, and that’s not putting the right team in place to help them with their finances. They may rely on a single financial advisor, or – worse – they try to do it all themselves.

This is a mistake. We recommend you have a team giving you the financial support you need, including an accountant, an attorney, an investment advisor, and so forth, each one an expert in their particular area, plus one macro advisor to advise you on the big picture. We also recommend that any financial advisor you work with is a fiduciary, who is duty-bound to act in your best interest.

Start Now

Too many people let their financial life happen to them, and they end up taking a pay cut of 50% in retirement. However, this doesn’t have to be your financial future. The sooner you start, the better the position you’ll be in to retire with 100% of your income and the peace of mind you want.

Interested in learning more? Check out our book, Your Retirement Smile, or visit our website.

How Much Do I Need to Retire? | Tim Streid & Dr. Mart McClellan | Your Retirement Smile

How Much Do I Need to Retire?

This is one of the most frequently asked questions by people thinking about retirement planning. In order to answer the question “How much money do I need to retire?”, you need to answer these other questions first:

  • What will inflation be like between now and the time you retire?
  • How will tax and retirement plan laws change and how will that affect your financial future?
  • How will your family, lifestyle, and needs change in that time?
  • Will you face any unexpected catastrophes between now and your death?
  • When will you die?

Clearly these questions are impossible to answer. Our point is that the question of how much you need to retire is not as straightforward as it seems. In fact, we think it’s the wrong question to ask in the first place.

The real question is, “How do I best position and utilize my assets so that I can maximize income in retirement?”

Retirement Planning Is More Than Accumulation

One big issue with the question “How much do I need to retire?” is that it’s focused on accumulation. What it’s really asking is, “How big should my nest egg be?”

While you will never get where you want to be without good saving habits, accumulation is only part of the puzzle. There’s another equally important part that’s typically overlooked in most retirement planning, and that’s distribution. Distribution is about planning in advance how you’ll get your money out for steady cash flow in retirement. A retirement plan that overlooks distribution planning can cost you significant amounts of money.

Plus, the typical accumulation-focused retirement planning advice tells you to lock your money away for decades at a time and let it grow without touching it. But when you do this, you get only one use out of each dollar. Instead, with smart planning you can get more than one use out of each dollar in a way that can maximize your wealth.

Is There a 50% Pay Cut in Your Financial Future?

Retirement automatically means having less income. At least, that’s what we’ve been taught to believe.

Most dentists take a 50% pay cut when they retire. A dentist who may be used to taking home $300,000 annually will have to live their golden years on $150,000 – a drastic pay cut, wouldn’t you say? And in the vast majority of cases, that $150,000 isn’t even guaranteed!

Because a decrease in income like this this is “normal,” it’s accepted. But it doesn’t have to be this way. When we create a Financial Treatment Plan for one of our clients, our goal is for them to retire with 100% of their pre-retirement income.

Does this sound impossible? It’s not. It can be done. And it can happen for you, too.

Find out more about how we help our dentist clients retire with more than the standard 50% at retirement and how you can, too, by visiting our website or checking out our book, Your Retirement Smile, today.

Investments: Doubling Your Dollars or Risking Your Resources? | Tim Streid & Mart McClellan

Investments: Doubling Your Dollars or Risking Your Resources?

For many people, investments make up a significant part of their financial portfolio. But with everything going on in the world today, is it still a smart move to commit your financial resources to stocks, bonds, funds, and other investments? Or is it asking for trouble?

The Trouble with Investments

Many people have become wealthy from their investments, there’s no doubt about that. Yet there are some issues to keep in mind.

For one, past rates of return are no guarantee of future returns. We trust and believe that putting money into investments now will grow our wealth in the future, but we don’t know for sure. No one can predict how the market will behave or what interest rates will be in two years, or twenty – no financial advisor, no billionaire investor, no sophisticated algorithm. Pinning future plans on past numbers is risky.

Next, changing interest rates can effectively kill gains from your bonds, and the market’s volatility means you can’t predict how your stocks and funds will behave. Recessions and crashes can wipe out a significant amount of your wealth in a matter of days, if not hours, and potentially delay your retirement date by years.

Taken together, it means that investments can be extremely risky – that is, when they represent too large a percentage of your overall financial plan.

Our Approach to Investments

Like many others in the world of finance, we believe in diversification. Relying too heavily on any one type of financial product puts you at risk. So, investments do have their place in a financial plan, as long as they are balanced with other products and have the right strategy behind them.

We also believe in peace of mind. Our clients are better able to weather the ups and downs of the market and interest rates when they know they will have enough guaranteed income in retirement to cover their basic expenses. Guaranteed income from well-positioned annuities means they don’t have to rely on a never-ending bull market to enjoy their golden years.

Another important part of our approach is keeping money in motion. Getting more than one use out of every dollar you earn helps you build substantial wealth while freeing yourself of the need to chase a higher (read: riskier) rate of return on each individual investment. By keeping your money in motion, you can use your financial resources to get an overall higher rate of return while keeping risk low.

An Important Piece of Your Financial Treatment Plan

Despite market volatility, fluctuating rates, and future uncertainty, we believe investments are still a good idea for most people as they plan for retirement. The key to building a solid financial future and having peace of mind is to know where and how they fit in your overall plan.

To learn how we develop Financial Treatment Plans for our clients, and how you can replace 100% of your income in retirement, check out our book, Your Retirement Smile, or visit our business website today.

Home Accessibility for Aging in Place | Claire Wentz for Streid & McClellan

Home Accessibility for Aging in Place

With people living longer and healthier lives, more seniors are choosing to age in place during retirement. However, you may have to tackle home accessibility modifications in order to do so. How can you navigate all the choices to make the best and most cost-effective decisions?

Aging In Place: Is It Right For You?

First, decide if aging in place is the right choice for you. For example, if you currently live in a two-story home, it may not be a wise idea. You’ll also need to consider what kind of budget you have now or will in the future to make renovations to accommodate your needs. Read more questions you should ask yourself at MoneyTips.

Despite the challenges, there are numerous benefits to aging in place, including:

  • Familiar surroundings as you age. Since you already know your home so well, you won’t have to adjust to a new place with new problems. You may also be safer as you age.
  • It helps you retain your independence.
  • You can avoid the hassle and inconvenience of relocating and finding all new service providers, faith groups, friends, and more. Keep the community you already know and love.

Aging in place has also given rise to the “Village Movement.” According to Zest Now, this movement supports areas where groups of seniors live, which helps them to stay in their homes. Home modification and other services are brought in or made easier for them.

Making Renovations: What To Consider

If you’ve chosen to stay in your home, it’s time to take stock of what changes your home will need.

  • Safety and Mobility
    Are your hallways well lit? Can your doorways accommodate a walker or wheelchair, if you need one? Do you have motion sensors to turn on lights? Finally, your bathroom is one of the most dangerous places in your home. Assess what changes you must do to make it safer (such as adding a non-slip shower floor, walk-in bathtub, and grab bars for the shower and toilet).
  • Convenience
    Aging often comes with difficulty in wrist mobility, so you may want to replace things like doorknobs with pulls and faucets with levers. You might also want a detachable shower head for added convenience while showering.
  • Accessibility
    If you use a wheelchair, you may want kitchen counters to be remodeled for accessibility and long-term use. This is a costly investment but may help you remain in place.
  • Budget
    While some financing is available, it’s best to see what kind of budget you have first and what you require. Do you need big changes, like a kitchen renovation, or small, like adding a ramp to a stairway?
  • Contractor
    You will need a contractor that you can trust to make modifications. They should be well-versed in options to improve accessibility, mobility, and all your needs. The Contractor Connection has a list of licensed and secure contractors in their finder tool.

If aging in place sounds like a good fit for you, here are more questions you can consider to make sure it’s your best choice from Next Avenue. Use this planning guide from Aging In Place to move forward. 

Alternative Options

However, if staying in your home seems like a costly idea or you have far too much house for your post-retirement needs, you can consider other solutions:

  • Downsizing
    Buying a smaller home might be a good option for you. Review your local listings and recent sales to get an idea of current home values and prices. It’s also important to get a good idea of what you’ll get for your home when you put it on the market (online calculators can help you estimate the proceeds).
  • Senior Communities
    These communities feature one-story homes or condos and may even require residents to be over age 55. They also provide a built-in community of seniors.

If you are healthy, aging in place might be just the ticket. Research necessary modifications and costs, and compare those to the costs of downsizing to see which option works best for your needs.

MEET OUR GUEST AUTHOR – CLAIRE WENTZ:

Claire Wentz is creator of Caring From Afar and author of the upcoming book, Caring from Afar: A Comprehensive Guide for Long-Distance Senior Caregivers. Claire is a former home health nurse and recognizes that our aging population means many more people will become senior caregivers over the years. Specifically, she is interested in providing assistance and support to those caregivers who do not live near their loved ones. She hopes her writing will inform them, uplift them, and give them peace of mind when they need it.

Making the Most of Your Money | Tim Streid & Mart McClellan

Making the Most of Your Money

How can you make the most of your money? If you want a secure financial future – and who doesn’t – then you should ask yourself this question.

One common approach to make the most of your money is to ruthlessly cut expenses to the bone and stick to a draconian budget. Another approach is to max out your retirement account every year; yet another is to automatically reinvest interest and dividends you earn.

But when we work with our clients, many of whom are successful dentists, we don’t recommend any of these approaches. Instead, we talk about how the best way to make the most of your money is to keep your money in motion.

What is Money in Motion?

Just as blood needs to circulate in order to keep the body alive, so, too, does money need to stay in motion. Money that stagnates in one place goes stale and prevents you from reaching your full potential when it comes to building wealth.

Yet this is exactly what most people do, because it’s exactly what they’ve been taught. Financial experts almost all say the same thing: take the money you’ve earned and put it into a retirement account that can’t be touched (without incurring a penalty) for years, possibly decades, depending on your age. Or invest it and don’t touch those investments until retirement.

This “set it and forget it” approach is appealing because it requires so little effort. But it means that each dollar you’ve put into that account has now been used just once to build your wealth.

Why is this a problem? Because it’s not the best way to make the most of your money. It’s certainly not how the financial institutions, corporations, and government (which we collectively call “the rainmakers”) make theirs.

How the Rainmakers Do It

When you deposit $10,000 into a savings account, the bank does not literally put your $10,000 into the vault for safekeeping and let it sit there. Instead, it takes your money and makes more money off of it, mainly in the form of loans to other customers. It gives you a very low interest rate while making a lot of money off your one-time deposit, all because it’s keeping that money in motion.

We find it interesting that the institutions that advise individuals like us to lock away our money for our own good for long periods of time are doing the exact opposite – and making a lot of money in the process.

Making the Most of Your Financial Future

Now that you know how rainmakers make money by keeping it in motion, don’t you want to do the same? You can build the wealth and have the retirement you want without resorting to severe budgeting or locking away your money for decades.

You can read more about money in motion and how to set yourself up for retirement without a pay cut in our book, Your Retirement Smile, or visit our website to learn more.

What Is the Return That Can Support Your Lifestyle?

Are you prepared to retire at age 65? If you’re like most dentists, the answer to that question is No. In fact, dentists are retiring later than ever before. According to a report from the ADA, leaving their practices at the age of 68.8 on average. That’s almost four additional years of work beyond what we’ve been told is the “normal” age for retirement. Part of this can surely be blamed on the fact that many people aren’t quite prepared financially to retire at 65.

What about you, are you on track to retire at 65? Do you know what return is needed to support your lifestyle? Here’s what to know in order to retire on your schedule.

Don’t Focus Just on Accumulation

Many dentists believe that for successful retirement, it’s necessary to accumulate a huge pile of assets by age 65. That’s why they focus on the first of the three wealth-building phases – accumulation – and ignore the second and third – distribution and conservation.

But we believe this is the wrong way to approach it. These three phases aren’t sequential, but are intertwined throughout life; every decision you make impacts two or possibly all three. That’s why it’s imperative to understand and plan for the distribution and conservation phases during the wealth accumulation years (i.e., while you’re making money in your dental practice). If not, you’ll likely maximize your retirement accounts without understanding exactly why or exactly how you’ll get the money out of those accounts decades later.

The True Difference Between 3% and 8%

To illustrate the importance of distribution, imagine these scenarios. Two dentists are saving money before retirement, both with the same goal of continuing to live on $300,000 a year once they stop working. The first dentist must accumulate $10,000,000 by retirement to draw that annual income of $300,000 at a distribution rate of 3%. The second needs only $3,750,000 in assets to draw that same $300,000, this time at a distribution rate of 8%.

Which scenario sounds better to you? You can see that these scenarios don’t depend on a high rate of return or even the nature of the financial products themselves, but are dependent on having the right distribution strategy in place to maximize the assets that have been accumulated. What’s important here is not the rate of return, but the rate of distribution.

Planning for All Three Phases

Our goal is to help dentists retire when they want to with the peace of mind that they have financial security to see them through their golden years and don’t have to downgrade their lifestyle in the meantime. For more info on our philosophy and how we make that happen, we invite you to peruse our website and check out our book, Your Retirement Smile.

Financial future

How Decisions Today Impact Your Financial Future

How often are you making decisions about your financial future? A lot of people answer this question by saying something like “a few times a year.” After all, you only make a few big decisions every year about retirement accounts or investments that will fund your golden years. 

But that’s not the right answer. The right answer is every day. Every financial decision you make impacts your financial future, whether that’s paying your mortgage, covering a child’s college expenses, or making changes in your practice that will affect your bottom line. Some financial decisions are bigger than others, but they all affect your financial future. 

A Microeconomic vs Macroeconomic View

These individual decisions are microeconomic decisions. They’re made on an individual level, item by item. Over time, these microeconomic decisions add up to up to affect your financial life from a macroeconomic perspective, which takes a broader point of view. Understanding how these two levels interrelate is extremely important if you want to get a good handle on your financial well-being. 

For example, think about your mortgage. How often you pay your mortgage and how much you pay towards it doesn’t just affect the loan itself. It also affects your finances on a macroeconomic level and, therefore, your financial future. When you think of it like this, you see that each decision you make when you pay a bill or make a purchase has ramifications for the whole of your financial health. 

The Consequences of Ignoring the Macroeconomic Viewpoint

Many people only view their finances from the microeconomic point of view. But doing this can cause you to lose hundreds, thousands, or even millions of dollars over a lifetime without even realizing it. You miss out on the opportunities and added value that a macroeconomic approach brings. This is a big reason most dentists retire on just half of their preretirement income. 

This viewpoint also calls into question a lot of the conventional wisdom in the finance world. Some commonly advised strategies we aren’t in favor of include compounding of interest in a taxable environment, excessive tax deferrals for retirement plan contributions, or the acceleration of debt repayment. Purchasing the wrong financial products and following the wrong strategies can result in disappointing income in retirement, too. 

A Plan with Macroeconomic Positioning

The Financial Treatment Plan we create with our clients takes into account the relationship between microeconomic decisions and macroeconomic benefits. The way we help our dentist clients plan for their financial future results in a secure retirement with no cut in income.

Interested in learning more? Look out for our upcoming book Your Retirement Smile and check out our website to discover more about the Financial Treatment Plan as well as how to take control of your financial future.

Don't delay retirement

Don’t Delay Retirement: Put A Plan In Motion

People are retiring later and later in life, and missing out on the sixties…the best decade of your life! There are many reasons that cause people to delay retirement, but most are unnecessary and can be avoided with a strategic financial plan. Keep reading to find out more about utilizing your financial plan to prepare you for a happy, comfortable, on-time (or even early) retirement.

In order to avoid delaying your retirement, it’s vital to set yourself up for long-term wealth enjoyment. Just because you make a good income during your career and save money for retirement  (in the traditional sense) does not mean you will retire on time. In fact, many of our clients (particularly dentists) are doing both of these things and still retiring later—closer to age 70. If you are doing everything “right” according to the traditional method of retirement planning, why are you having to delay retirement to stay afloat?

 

Factors that delay retirement 

First, professionals pursuing higher education delay entering the workforce, naturally cutting down on the number of years they will have over the course of their career to accumulate wealth. Once you are finally in the workforce, it is likely that you have several large financial obligations such as student loans, purchasing a home, or starting a family. 

Additionally, many people do not understand the exponential curve of life and its impact on long-term wealth building, which can also slow down wealth creation and push out retirement. There are three phases of the curve (accumulation, distribution, and conservation), which are dynamically connected and intertwined. It is important to look beyond wealth accumulation and understand that your money decisions throughout life will affect multiple, if not all, of these phases. 

 

The role of your Financial Treatment Plan

In order to overcome these factors that delay retirement, you must have a dynamic Financial Treatment Plan in place. This plan should be set up long before you are ready to retire, and it is incredibly important to look at this plan holistically and at a macro-level. Nothing works in a vacuum, and your financial decisions in each area of your plan affect the others, including your retirement. A Financial Treatment Plan will help you make the right decisions with every dollar that comes into your life by positioning it to benefit your long-term wealth.

You deserve to be able to retire on time without stressing over your finances. Learn more about our philosophy and the importance of a Financial Treatment Plan in our book, Your Retirement Smile. You can also learn more about our services on our website, and give us a call to schedule a consultation to discuss your financial future!

Man donating money on phone

Charitable Giving: The Ultimate Triple Win

When planning for your financial future, there are a few things that are top-of-mind: a retirement fund, money to leave behind for your family, and saving, conserving, and protecting your wealth. Charitable giving can help with all of those factors. While it may sound counter-intuitive, giving more can mean that you have more money in retirement and more to give to your family when you are gone.

We speak with many people who are hesitant to make sizeable charitable donations because they view it as a transaction, or a wealth deduction. Thinking of charitable giving in this way is a microeconomic perspective and can put you at a financial disadvantage. We challenge you to evaluate your financial situation and plan on a macro-level, where all facets of the plan are connected and you keep your wealth in motion. This approach means that your charitable giving can actually increase your wealth and be a strong part of your strategy.

With a holistic and well-balanced financial treatment plan, charitable giving can act as a “triple win” in the following ways: 

  1. Have more income in retirement.
  2. Not disinherit your spouse or children.
  3. Make a gift to the charity of your choice and see the results of your gift during your lifetime.

When a well-positioned charitable strategy is paired with a traditional retirement plan, the tax benefits are three-fold. There is the potential to receive a tax deduction up front, a tax deferral on growth inside the plan, and tax-free access to investments at the end. Charitable giving, when carried out properly along with other diversified assets can be one of the most powerful distribution strategies.

There are a few different approaches to take, such as the TurboTithe strategy or a charitable remainder annuity trust (more on this in our book, Your Retirement Smile). Many people don’t take advantage of these opportunities in their financial plan because they are unaware of the benefits, or they did not find out about them early enough in their career. The right financial advisor who is concerned with your passions and best interest can help you work through the ideal method for your overall financial plan.

The bottom line is this: the better you are positioned financially, the more options and income streams you will have in the future. This gives you the freedom to make proactive decisions, and allocate your money how you want to—whether that means giving to charity or using it in other ways.

Let us talk to you more about charitable giving as a win-win-win strategy. Visit our website and give us a call to get on the right track with your financial future.

Pension vs 401k

Pension vs 401k: What You Need to Know

When thinking about retirement, there may seem like there are a lot of different paths to take. The best way to make good financial decisions for yourself and your future is to be well-versed and educated in personal finance topics, such as retirement plans. In this blog post, we are breaking down pensions vs 401k plans, two common retirement plan options, to help you better understand them.

Pensions

A pension is a retirement fund that an employer contributes to while you are working. In retirement, the funds from this provide you with guaranteed income, typically on a monthly basis.

There are several factors that determine how much income you receive in retirement, including: your age, how long you have been with the company, and your income while working. Additionally, different companies may have rules about pension eligibility.

Pensions are being phased-out across the country and it is becoming increasingly hard to find companies that still offer them. However, if you like the idea of a guaranteed income in retirement, which most people do, an annuity can be an alternative and acts as a “self-made pension.”

401k Plans

A 401k plan is a retirement fund that is offered by your employer and is funded by you. You are responsible for making all of the investment decisions, therefore you take on all of the risk associated with it. Even if your company matches your contribution, the burden of figuring out how much to contribute to save enough for your retirement falls entirely on you.

Additionally, 401k plans are controlled by the government and they make all the rules. The government dictates when you can take money out of a 401k and how it will be taxed. They can also change these rules, meaning that you may not be able to take out your money at the age you expected, or you may be taxed differently than you had planned.

What you should know

The best route to take when planning for retirement is extremely dependent on your situation, preferences, and retirement goals. We are big proponents of keeping your wealth in motion, as well as devising a retirement plan that doesn’t require you to take a pay cut in retirement. It is always best to talk through these decisions with a financial advisor so that you can set yourself up to be smiling through your retirement! In need of retirement planning or wealth management advice? Visit our website to learn about our services and give us a call to schedule an appointment.