Markets In A Minute: Market Volatility

Markets In A Minute: Market Volatility | CWT Blog

Volatility may not be fun, but it is normal. The market regularly experiences declines. Despite those declines, the market has consistently rewarded those who can patiently see through the short-term volatility, much like the famed investor Charlie Munger and his long attention span. In volatile times such as these, we favor a back-to-basics approach.

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5 Things to Do When Retiring as a Single Woman

CWT Blog | 5 Things to Do When Retiring as a Single Woman

As a single woman, it can be scary facing retirement alone. Single women face different challenges when retiring, including living longer and needing more financial resources. These challenges require advice for single women in retirement to be different than typical retirement advice. Continue reading to learn what things to do when retiring as a single woman.

Create a Retirement Plan

Having a plan for your finances in your golden years is crucial. No one wants to have to worry about making ends meet when trying to enjoy their retirement. When sitting down to set up a plan, you can find the best opportunities for you and avoid several mistakes. This plan includes at what age you can retire, how much you need to pay yourself in retirement, and what your sources of retirement income are.

Know Your Debt and Expenses

In retirement, you will be living off of a fixed income. To ensure that you will be using your money wisely, you will want to make a list of the debts that you owe and the current expenses you have before retirement. While you are still working, pay off your high-interest debt and begin to account for the low-interest debt that you will continue to pay off in retirement. Go through your other expenses to see where you can lower them to save extra money.

Avoid Taking Social Security as Long as Possible

Social Security is a reliable source of retirement income, but if you delay starting Social Security, you can receive more money. You could begin taking Social Security at the age of 62, but for each year that you wait, your benefit increases. The latest you should begin taking Social Security is at 70 years old because your benefit stops increasing.

Learn about Investing

Leveraging investing to grow your retirement savings is extremely helpful. Women are less likely to invest to avoid risk, but investing can provide a plentiful retirement income in your IRAs and 401(k)s. With women having a longer lifespan, they need to fund a longer retirement. Having a more aggressive investment strategy can provide more money to live off of in retirement.

Prioritize Your Health

One would not normally think about their health during retirement planning. Healthcare costs can be crippling in retirement if not planned for properly. It is inevitable that the older you are, the more expensive your medical bills will be. If you begin to be healthier, you can avoid the expensive medical bills for several years.

Utilizing a financial advisor can help you have a successful retirement plan. An advisor can assess your specific financial situation and provide guidance on how to improve. Here at California Wealth Transitions, we want to help women feel confident in their retirement plans.

Sources:
https://www.cbsnews.com/news/5-retirement-planning-tips-for-single-women/
https://www.approachfp.com/retirement-advice-for-women/
https://rvpllc.com/how-to-retire-successfully-as-a-single-woman/

How Much Is Your Advisor Charging You?

CWT Blog | How Much Is Your Advisor Charging You?

Are you familiar with the fees that your financial advisor is charging you for their services?

Here at California Wealth Transitions we charge a flat percentage rate to manage your investment assets, but not all financial firms operate this way. It’s important for you to know how a financial advisor’s fee schedule is set up when considering starting a new relationship or if you’re in the market for a new advisor, that way you know where your money is truly going.

There are key differences between flat rate fees and blended fees, and the difference between the two can mean more or less money in your pocket. Keep reading for more details on these exact differences.

Flat Rate Fees

If your financial advisor charges for their services based on a flat rate fee schedule, that means they charge you a flat, fixed rate based on your asset level. Every financial advisors’ fee schedule looks like a version of this:

Sample Fee Schedule
$0 – $1mil 1.25%
$1mil – $2.5mil 1.0%
$2.5mil – $5mil .90%
$5mil – $10mil .75%

Financial advisors with this schedule would charge clients with an asset level of up to $1mil an annual fee of 1.25%, clients between $1-2.5 million dollars in assets an annual fee of 1.0%, and so on.

The 1.25%, 1.0%, and .90% are flat rates that do not change. With flat rate fee schedules, clients know exactly what they will pay their financial advisor, no matter what.

In this example, if a client has 3.5 million dollars in assets, they will be charged .90% for the financial advisor’s services ($31,500 annually.) Of course, if a client’s assets increase to the next level of the fee schedule (above 5 million dollars); their annual fee will decrease to .75%. We use this type of fee schedule with our clients.

Blended Rate Fees

A blended rate fee schedule combines annual percentages together into a cumulative fee based on a client’s asset level. Instead of charging a client one asset level percentage, blended rate fees add up the previous percentages as well, hence the term blended rate. Let’s take the same client example from above; Say a client has 3.5 million dollars in assets. On a blended rate fee schedule, the client will be charged like this:

The first $1.0m* 1.25% = $12,500
The next $1.5m* 1.00% = $15,000
The next $1.0m* 0.90% = $9,000

Once you add those amounts together, on a portfolio worth $3.5 million, this investor would be charged $36,500 per year or 1.04% of their assets.

With a flat rate fee, a client with 3.5 million in assets will pay $31,500 annually (0.90%), but with a blended rate fee, that same client pays $36,500 annually (1.04%). The client’s financial advisor will often show the fee schedule to the client and say they are here (pointing at the 0.90% line). However, the client is actually paying over 1%. Rarely ever is this blended fee strategy properly explained to the client, often it is buried in the disclosures section of the initial account opening documents. These dollars can add up to a tremendous amount over the years, especially when you consider dividend reinvestment and compounding interest.

So, we ask again, do you know how your financial advisor is charging you?

We don’t want you to be in the dark when it comes to your finances. If you’d like to know more about the services that we provide here at California Wealth Transitions, contact us today!