Rick Kahler's Financial Awakenings

I often say that fifty percent of my job is educating clients. However, from time to time that works in reverse, and they educate me. Recently a client told me about an obscure provision in the Social Security laws that allows you to increase your benefits, even after you’ve started to receive your monthly checks.

Here is how it works, according to an article by Mary Beth Franklin in the July 2008 issue of Kiplinger’s Personal Finance magazine:

If you elect to begin receiving Social Security benefits at age 62, your monthly checks are 25% smaller than they would be if you waited to start taking benefits at the full retirement age. That reduced amount applies for the rest of your life.

Social Security law, however, provides for a little-known method of changing your mind. You can begin to receive benefits at age 62. After reaching your full retirement age, you can cancel your application for benefits, repay what you have received up to that time, and reapply. At that time you’ll begin receiving the higher monthly amount. Continue Reading »

Do you need a Living Will? Do you have a Health Power of Attorney? Or maybe you’ve wondered what the difference is between the two.

I recently received an email that really touched me. It was from an editor of a newsletter for financial planners that I subscribe to. This man had tragically lost his wife a short time earlier, and this email informed his subscribers of the reason for his wife’s sudden death. She had committed suicide.

Let me quote a few portions of his email: “The reason I’m sharing so much personal information is that I firmly believe we are too close-mouthed as a society. . . . The fact that no one talks about these things is one reason why we don’t have better systems, as a society, to help people through these events.”

I have to admire this man’s transparency and courage. While I’ve never met him, my respect for him has grown exponentially as a result of his willingness to be open about such painful and personal information. Continue Reading »

In just a few weeks I will begin instructing a 16-week course on “The Psychology of Money: Understanding Your Clients From the Inside Out.” I will be using Facilitating Financial Health as the main text book. I’ll take participants on a journey of learning how to identify and change thoughts, beliefs, and behaviors around money, both in ourselves and in others.

The class is offered through Golden Gate University and is a graduate level course. They offer open enrollment, so anyone who is interested in the topic can participate. The tuition is $2,130 and counts for 3 credit hours.

An August 1, 2008 story by Laura Meckler in The Wall Street Journal included the following quote that got my blood boiling. She said: “Beginning in 2017, the government will start paying out more in Social Security benefits than it collects in taxes and will have to start drawing on the trust fund, money stored in government bonds, to pay promised benefits. By 2041 actuaries predict the trust fund would run out of money and the government would be unable to pay full benefits.”

This, like many other news items about Social Security, is both factually accurate and terribly misleading. Referring to a “trust fund” leads readers to think there is a pool of money, like a savings account, that will actually run out in the near future. In reality, there is no pool of money to run out, only a pile of IOU’s where both the borrower and the lender are the United States government. Continue Reading »

I recently wrote a column about “longevity insurance.” This topic raised the question of how financial planners estimate our clients’ life spans. Obviously, if we planners are going to tell you whether you’ll have enough money in retirement to last the rest of your life, we need to estimate when your time on earth will be over.

It would be ideal to have a crystal ball that would tell us whether you’re likely to be checking out at 65 or still going dancing when you’re 102. Instead, we’ve had to rely on industry averages, actuarial tables, and government statistics concerning life expectancy. Continue Reading »

Rarely a month goes by that I don’t talk with a reporter representing a national publication or wire service about various financial planning topics. In about half of those interviews, the reporters ask if they could talk with a client. Most of the requests revolve around talking about the benefits and experiences involved in various areas of financial planning. This is pretty normal, as people like to read stories about real people, so reporters are always looking to talk to someone who has actually experienced what a professional, like me, is theorizing about.

For example, in a recent interview with the Associated Press I was interviewed on our investment philosophy as it pertains to asset class diversification. At the conclusion of the interview, the reporter asked if he could talk with a client about how their investment life was before having a diversified portfolio and how it is today. I declined his request, which is typical. First, I am pledged to protect a client’s privacy. Second, I don’t have time to call 70 clients and poll who would be interested in responding. Continue Reading »

The July 28 online issue of Investment News included yet another indication that integrated financial planning is becoming more mainstream. An article, “Freud Meets Finance,” included Rick’s comment, “There’s a growing awareness of a void in the financial services and mental-health professions around the issue of money.” He was cited as a founder of the Planner-Therapist Alliance and the co-author of Conscious Finance.

The article, by Charles Paikert, focused on financial planning and wealth management firms which are hiring psychologists to work with wealthy clients and also advise their financial advisors. To read the complete article, click here.

Because I encourage clients to invest for the long term, I tend to be an optimist when it comes to the economy. Economic cycles are normal, and the one thing we can be sure of is that markets will go up and markets will go down. If a portfolio is properly diversified, however, with five or more asset classes, it will withstand economic fluctuations with little damage.

One of my first goals with new clients is to make sure their portfolios have that diversification. With the recent decline in the stock market, it’s not unusual for them to have investments in individual stocks which have decreased significantly in value since they were purchased. I usually recommend selling those stocks. I believe it is rarely a good idea for individual investors to own stocks directly, and in most cases they will be better off to sell and reinvest the proceeds in equity mutual funds. Continue Reading »