Five reasons to track expenses before retiring

For individuals nearing retirement, one of the first things to consider is: How much money will I be able to withdraw from my portfolio on an annual basis? This is a very important issue and ideally should be determined before entering into retirement.

Whether you use spreadsheets, receipts in shoe boxes or a computer program to track your expenses, it is important to know how much you spend to support your lifestyle. Before considering how much equity you will need in your portfolio during retirement, you should track your expenses for a few years to give you a firm idea of your outflows.

There are a number of software solutions available to help, including Quicken, Microsoft Money and While I don’t recommend any particular software, I do think you should find and use one that suits your needs. Here’s why:

  1. You can easily view expenses broken down by category. Until you actually measure the monthly expenses in an accurate and systematic way, you may only have a vague idea of how much is being spent in each category.
  2. With financial software, it is much easier to prepare your tax return. This is especially true if you itemize. All of the good personal finance software options have preloaded categories that are set up to capture deductible items. Once entered, you can produce individual category reports.
  3. With the aid of software, you always have access to a current balance on your credit card and personal checking accounts. This data can also be downloaded into the software, making catching errors or fraud very easy.
  4. The personal financial software can make it easier to pay bills on time and keep track of your automatic payments. Since it is possible to automate some of your monthly bills to be charged to a credit card or auto-debit from your checking account, the software helps you track all the different payment transactions in one central location.
  5. It allows for a smoother transition in the event you become incapacitated. Your spouse, partner or other family member will have a much easier time assuming bill paying responsibilities if you are using expense software.

Personal expense tracking software will help give you accurate, reliable information about how much money you are likely to need in retirement. This will help you determine if your monthly expenses can be supported by your current portfolio and if any changes need to be made – either to your expenses or your portfolio. Remember, if you can track it, you can manage it.

The best way to begin retirement planning is to start early. The sooner you know if your annual requirements are out of sync with what a balanced portfolio can produce, the more options you will have to correct the situation.


Is Your 401(k) Healthy?

If you are like most of us, you likely visit your doctor’s office at least a couple of times a year. But when was the last time you had a check-up for your 401(k)?

It would not surprise me if you said, “not in quite a while”. But getting a financial check-up for your 401(k) account is extremely important, especially given the heightened economic issues and market turbulence over these last few years.

One of the many benefits of being a Merriman client is that we have the tools to help you align your 401(k) investments once a year. All you have to do is provide us with the mutual fund choices within your 401(k).


Stretch IRA?

Have you ever heard the term “stretch IRA”? According to the IRS, there is no such thing. What has become known as a stretch IRA is really a withdrawal strategy geared to spread the tax-deferred status of your IRA assets across multiple generations. Basically this is a provision you can add to any traditional IRA, ROTH, SEP-IRA, or SIMPLE IRA by using a beneficiary designation form.

Typically, a spouse is named as the primary beneficiary of an IRA, with children as the contingent beneficiaries. In this approach, after your death your surviving spouse rolls the balance of your IRA into his or her own IRA. This will allow your spouse to use the money from your IRA to cover his or her living expenses.

Alternatively, if your spouse will not need the assets in your IRA for living expenses in retirement, then you may consider naming your children and/or grandchildren as the primary beneficiaries. This will create the “stretch IRA.” After your death, your beneficiaries would each acquire what’s known as an inherited IRA from which he or she would have to withdraw a required minimum distribution each year thereafter. Here is an example to illustrate:


Raising kids in the age of instant

Do you remember having to wait patiently for someone to return your call, instead of texting them your question?  I remember the excitement of call waiting, when it became an option to answer an incoming call when you were already on the phone. At my house now we don’t even have a landline any more. My children will probably rarely encounter a busy signal; they can practically call anyone from almost anywhere. Do you remember having to make an appointment and then wait for the date to talk to the doctor? I recently emailed the doctor my question, and then wondered why it took so long for him to answer.

With cell phones, email and internet at your hip, how do we teach our children we can’t get everything by pushing a button? How do we raise patient children when things are so available and instant to our children? My wife and I have struggled with these questions. (more…)

Fancy seeing you here

Recently my wife and I took our children to Disneyland. From Seattle the trip is a quick two-hour plane ride and a short ride to the resort. As fast as the trip appears on paper, I always worry about taking young children on a plane where there is no place to go if that all-too-familiar tantrum occurs.

With that thought in mind, we boarded the plane early to allow the children to get settled into their surroundings before we have to take off. As the kids were working out who was going to sit by the window, I sat in my aisle seat across from them and wondered who would be joining me by my window. (more…)

Emotions and the market

With the high volatility in the stock market over the past year, emotions have been running at an all-time high for many investors. Staying on track has become harder than ever.

Although the overall stock market has recovered some of its lost ground this spring, many people are still very spooked by stocks. Unfortunately, that trepidation can lead to decisions that investors may later regret.

Long-term investors have two basic jobs: managing their investments and managing their emotions. You can hire somebody to manage your money — and we think you should. But only you can manage your emotions.

This is important because if emotions get out of control, they can undercut even the best money-management practices. (more…)