Mind Dump | 4/23/2020

A society grows great when old men plant trees whose shade they know they shall never sit in.

Greek Proverb

Reflections and Takeaways

Job Losses – some may be temporary, but many won’t

I am just going to keep sharing anecdotes about what I am seeing whether it is good, bad or ugly. So far I have mainly focused on the CARES Act and the stimulus aspects related to the recovery rebate and business provisions such as the Economic Injury Disaster Loan (EIDL) and the Paycheck Protection Program (PPP). What I haven’t spent much time on (yet) is unemployment and underemployment. I don’t think people understand quite how bad the unemployment situation is going to get and how long it is likely to last. Hopefully I will be able to take some time to provide further context on that soon.

With that said, here is a quick example of what we are going to be experiencing ourselves and / or through the testimony of others around us. I have recently re-registered my firm, moving the domicile from Florida to Michigan. It requires a pretty significant registration process and the state of Michigan has done an excellent job in managing the registration process and the post-registration follow up. Within a short time of my registration with the state my firm was audited and I had a significant amount of interaction with a securities examiner employed by the state. I just had a follow up call with her this morning and found out that she will be without a job effective next Monday. She isn’t sure if this will last a couple of weeks, a month, or be a permanent loss. She is pleasant, competent, and hard working. There was a time that with those characteristics employment was a certainty. I am sad for her and also am considering the fact that while things may slow down for her department a little bit, on a per-head basis the workload is likely to ramp up significantly.

For those of us that are lucky enough to remain gainfully employed we should be prepared to adapt to a new normal that requires more of us for less pay – or the same of us for a lot less pay. With that in mind we should also be thinking about taking a step back and consider reorganizing our lives from the inside out. I am actually working on building an outline for a manifesto that I hope to share with you titled “Back is the Way Forward“. The central theme is based on the idea that shrinking our lifestyle largely via our economic and environmental footprints will lead to a happier and healthier existence for not only you and me – but for the generations to follow us.

The quote at the beginning of this post means a lot to me. Sometimes just considering it makes me tear up. Maybe because it makes me think about my boys (ages 3 and 1) and the angst and hopelessness I feel when considering the difficult future that our society is creating for them. Or maybe, and more probably because it represents who I aspire to be in this world but fall short of. For most of my life I have been trying to figure out how to make my life better and more fulfilling through the creation of financial wealth, material possessions, social status, convenience, and comfort. In more recent years I have come to an understanding that the purpose of my life isn’t to be wealthy, liked, or comfortable – the purpose of my life is to be useful.

I don’t have the delusion of thinking that I have arrived in any way in terms of fulfilling on this sentiment, but I am committed to meditating on it and fighting to close the gap between where I stand today and where I aspire to be in the future in terms of my personal character and integrity. I’m also not saying that I don’t want to be wealthy, liked, or comfortable. I genuinely hope these are all bi-products of the life that I create for myself. They are not, however, the objective and will not govern the way that I choose to act in this world.

I believe that with an authentic attitude of service and front sight focus on being useful to God, our families, our friends, our communities, our country, and our world that we can all live rich and fulfilling (I didn’t say easy) lives while creating a way of life and natural world that is truly worth inheriting by the grandchildren of our grandchildren.

Thoughts, questions, comments on this one? Hit me up on my contact form.

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Mentions

Client Case Study – How to actually profit from falling interest rates and rising bond values

This video gets a little geeky but is probably worth watching even if you don’t totally follow the numbers and calculations but want to understand some basic financial market and investment principles. The bottom line is that there is a lot of confusion around interest rate fluctuations, bond prices, what it actually means, and what to do about it. This video will go through an actual client circumstance and the analysis that I ran to quantify the impact of their decision to sell T-Bills that have gone up in price and reinvest the proceeds into a series of IRA CDs.

I didn’t mention in the video that right now I am encouraging many clients to purchase CDs (especially with emergency savings money that is not likely to be needed immediately) and lock in the current rates that are still available because I just don’t think that they will remain as high as they are currently. If and when purchasing CDs it is a good idea to break them up into smaller chunks just in case there is a need to access some of the money and break the CD. For example, in most cases you can get the same CD rate for a $10,000 investment as for a $100,000 investment. With this in mind, someone with $100,000 that is going to be parked in CDs could open four separate $25,000 CDs and gain flexibility without sacrificing return.

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Reverse Mortgage CE Presentation

I attended a CE Webinar put on by Longbridge Financial, LLC this afternoon. I began my career in the financial space in the mortgage industry. I stuck to traditional purchase and refinance lending transactions but was pretty interested in learning more about reverse mortgages and then became even more interested later in my career in the context of financial planning for retirees.

Since that time there has been a considerable amount of academic work done related to reverse mortgages and the ways that they can be utilized as part of an integrated retirement strategy. Based on my experience and the cases that I have looked at, I don’t think it is always a slam dunk but have certainly seen situations that made the use of a reverse mortgage a very viable option.

There is quite a bit of confusion among the public regarding how reverse mortgages actually work. Before writing the idea off it is worth a small investment of time to better understand the planning opportunities along with the mechanics of how they actually work.

In his opening remarks, Christopher Mayer, PhD, discussed something that made my ears perk up based on my perspective of the future for the global economy and financial markets. For individuals and couples that would otherwise be a good candidate for considering a reverse mortgage now is an important time to dig in and explore this further. Real estate prices are likely to decline in the wake of the COVID-19 storm and economic fallout that will result from the disruption of industrial and economic activity.

While this is a strategy generally used for those over the age of 60, if you are younger, please consider at least raising the topic to your parents or grandparents – especially if it is possible that you may end up absorbing financial costs related to their financial needs in the future.

Maybe more on this topic to come in the future. Please drop me a line in my contact form if you would be interested in having me write further on this topic and / or bring a guest expert in for more detailed conversation on the topic.

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Published by

Sean Rogers, CFP®

Sean Rogers is a fee-only financial planner in Grand Rapids, MI. He serves individuals and families right in his back yard in West Michigan. He also works virtually with clients all over the country. Sean's firm, Capital Stewardship Partners delivers value-aligned, competent, conflict-free financial advice to Gen X and Millennials. The firm does not have any minimum requirements for net worth, investable assets, or income. This means that you can have affordable access to a fee-only fiduciary regardless of how much money you have available to invest. Sean Rogers is a CERTIFIED FINANCIAL PLANNER™, an XY Planning Network member, a NAPFA-Registered Financial Advisor, and member of the Financial Planning Association and Society of Financial Service Professionals.​