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Top 5 Questions For Your Financial Advisor This Year

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We have come a long way since the bottom of the U.S. stock market on March 9, 2009. At its lows, the S&P 500 traded at 667. In the ensuing 6.5 years, the S&P 500 has more than tripled, to well over 2100 today. While the last six years have proven to be a welcome recovery from the dark days of the Great Recession, new questions now face as us. As the economic cycle becomes more mature, investment returns have moderated, and in some cases, even disappointed. Including dividends, the S&P 500 registered just a 1% gain in 2015. Results have been similarly feeble so far in 2016.

We now encounter a more challenging investment environment—one in which the global economy is slowing and financial markets (the U.S. stock market and bond market, for example) are more expensive than before. How should families navigate this increasingly complex time for their finances? As markets tread water, financial planning becomes even more critical.   Accordingly, here are the five key questions that your advisor should be asking you today.

  • Are you still on track to retire?


A lot has changed over the past 6.5 years. Investment returns have been robust, so portfolio values have increased markedly. But that’s not the only thing that has likely changed in your life. Life events happen, often resulting in long-term adjustments to financial goals. A retirement “update” conversation is usually quite helpful in this context. Despite having a financial advisor, it is quite common for families to have no idea if they are able to retire successfully with their current asset base.

Your retirement timeline may have changed in the last six years as well. According to Pew Research, 10,000 baby boomers reach the age of 65 each day in the United States. As executives approach their sixties, thoughts about retirement are increasingly common. Are you giving more thought to retiring from your career? If so, a retirement analysis is critically important.

A good financial plan will help families identify what an appropriate withdrawal rate in retirement looks like. By incorporating all of the variables that are very specific to your situation, including age, balance sheet and spending needs, a clear picture will emerge about what is realistic for retirement.

  • Have you rebalanced our investment portfolio recently?


Successful outcomes most likely occur when you have a plan in place. Part of a good plan is knowing when to take gains from the investments in your portfolio that have done extremely well, and adding the proceeds to investments in your portfolio that have underperformed.

Rebalancing is an automatic investment discipline to take from the investments that have done well, and shift capital to the investments that have done the worst. This can be painful for investors, as the natural human tendency is to favor, and add to, things that have done well for us. It can also be against our nature to add to investments that have done poorly. But by doing this, we have adopted a systematic approach to buying low and selling high.

Has your advisor worked with you to rebalance your portfolio in the past two years, given the stock market recovery that we have witnessed?

  • Have you addressed your income needs in this historically low-yield environment?


We are in a highly unusual bond environment, with interest rates close to all-time lows. As of this writing, the 10 Year U.S. Treasury Bond yields just under 1.70%. Assuming an inflation rate of 2%, Treasury Bond investors are actually losing money in real dollar terms. For investors of municipal bonds, a $1 million allocation to high quality bonds is producing less than $20,000 per year of income.

How do we plan for retirement income in this type of environment? Are we doomed to a lower withdrawal rate? While the low yield environment does present challenges, we can plan effectively for overcoming low yields.

A “total return” approach is the key maximizing your portfolio’s value over the long term. Your advisor should not be chasing yield in order to meet income needs, but should be diversifying across a well-balanced mix of investments. When the time comes to make a withdrawal, we raise capital by selling across our asset allocation—not simply relying on interest payments and dividends. The result is a much more diversified portfolio that is not overly reliant on bonds at a time of record low yields.

  • Have you planned for a stock market correction?


The old saying goes that trees do not grow to the sky. After a great 6.5 year run, the bull market is getting into its later stages. While no one has a crystal ball, it would not be a surprise to experience some type of market correction over the next 2-3 years. Is your portfolio positioned to withstand a drawdown, and has your financial plan accounted for a future rough patch?

The Retirement Shock Absorber® is a proprietary tool that we use at Brown & Tedstrom to help plan for stock market volatility. By incorporating a potential stock market correction into our initial financial plan, we can continue to operate as usual during a downturn. While we can’t guess the short-term direction of markets, we can create a plan with the goal to withstand any downturns that do occur. Your financial advisor should have a similar plan in place for you—well before a stock market correction occurs.


  • You are willing to do what it takes to create a successful retirement—what proactive steps can you take?


Retirement gloom and doom has been quite common in the financial press in recent months. Whether it deals with the solvency of Social Security, record low bond yields, or simply a bearish outlook for the stock market, headlines have created worry; future retirees may doubt their ability to retire on their own terms.

Fortunately, there are proactive steps that families can take to improve their retirement outcomes, regardless of the whims of the stock market. The following are a few which can help drastically improve retirement outcomes.

By delaying retirement, even by just a few years, retirement planning becomes much easier. The reason is twofold: you are simultaneously reducing the number of years that your savings need to support you and you are adding to your savings in the interim. The combination has a powerful effect on retirement calculations, even if retirement is delayed for just a short time.

By strategically deciding when to take Social Security, you can improve the long-term odds that your savings will last. Almost everyone should wait to take Social Security until their full retirement age of 66. But many families are actually even better off waiting until they are 70 to collect benefits. Your financial advisor should be walking you through this complex decision—it can literally mean the difference of many thousands of dollars of benefits.

If you are approaching retirement, you should be maxing out your 401(k) account. You should also be taking advantage of the “catch up” provision of our tax code, which allows for an additional $6,000 contribution to be made by people over the age of 50. Combined with the standard 401(k) limit, people over 50 can be setting aside $24,000 per year. Maxing out your defined contribution accounts is a no-brainer for those who can afford it as they approach retirement.


We live in interesting times, both for financial markets and for families who are beginning to plan for retirement. Planning for a successful retirement can be daunting, particularly given the unique challenges that investors face today. And because of these challenges, the ongoing advice from a competent financial advisor is more critical than ever. Through the incorporation of the five questions mentioned here, along with a solid financial plan, your retirement outcomes will likely improve—even in the face of lower investment returns.

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly. There is no guarantee that a diversified portfolio will enhance overall returns or outperform a non-diversified portfolio. Diversification does not protect against market risk. Rebalancing a portfolio may cause investors to incur tax liabilities and/or transaction costs. No strategy assures success or protects against loss. Bonds are subject to market and interest rate risk if sold prior to maturity. Bond values will decline as interest rates rise and bonds are subject to availability and change in price.

Brown & Tedstrom, Inc.

Written by: Brown & Tedstrom, Inc.

Brown & Tedstrom, Inc., a professional advisory firm serving clients across the United States. We provide strategic financial guidance to help manage the wealth of professionals, executives, business owners and their families to help develop financial strategies that seek to address all the stages of wealth – accumulation, preservation, & transfer.

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