by Jac M. Arbour CFP®, ChFC®, President
J.M. Arbour Wealth Management

Many people who earn a paycheck have never been paid. Sounds a little crazy, right?

When you hold your paycheck in your hand or view your electronic deposit, I’d like you to consider that the amount you see doesn’t represent what you actually earned. By this point, the amount you see has already had taxes deducted and the remainder will now go to pay for things such as your mortgage or rent, your electricity, water, sewer, cell phone, internet, cable, property tax, heating and cooling, your automobile, groceries, etc. When all of this is paid, how much remains for you? Do you get to keep any of it? If the answer is no, then YOU are not being paid.

Consider redefining what you are “paid” as what you “get to keep.” Consider opening an account for yourself that is earmarked for the “future you”—the person who might have a financial emergency someday and need cash or the future version of yourself who wants to retire with a solid nest egg. Either way, you are the person who determines your future capacity in both of these situations and many others.

If you have debt, consider the interest rates and terms of that debt and decide the best way to eliminate it. While eliminating debt, consider building an emergency fund equal to six to twelve months of expenses. After that, it’s time to start one or more investment accounts. Remember, you don’t need to invest much each month; it is amazing how a little bit of money over a long period of time can turn into something truly significant.

When you invest money in an IRA (Individual Retirement Account), 401(k), 403(b), TSP (Thrift Savings Plan), or some other pre-tax investment account, you are investing money before Uncle Sam gets his share. This is what I call paying yourself first. Before anyone, anything, or any monthly bill touches your paycheck, you put some away for yourself. Trust me: you’ll thank yourself later.

If you have questions about strategies to accomplish such goals, please reach out to one of the professionals at JMA or consult an advisor who has a fiduciary responsibility to you.

See you all next month.

Jac Arbour is the President of J.M. Arbour Wealth Management. He can be reached at 207-248-6767.
Investment advisory services are offered through Foundations Investment Advisors, LLC, an SEC registered investment adviser.

by Jac M. Arbour CFP®, ChFC®, President
J.M. Arbour Wealth Management

There is much confusion in people’s minds today about annuities and whether or not to purchase one. If you read the financial section of certain newspapers, you might have seen articles titled things like “Why I Hate Annuities and You Should Too.” If you pick up other papers, though, you might have seen “Why I Love Annuities and You Should Too.” So which perspective is correct? Which article should guide you in making financial decisions? The answer depends on your circumstances.

In the case of annuities—and, for that matter, stocks, bonds, mutual funds, index funds, exchange traded funds, money markets, certificates of deposit, or any other interest-bearing account—it isn’t accurate to say that they are generally “good” or “bad.” Like other types of accounts, annuities have their pros and cons, and you have to answer the question of which is which—a pro or a con—for you and your family.

So, how about this: Instead of loving or hating annuities, let’s take a peek at what annuities can and can’t do for you and why you may or may not want to consider one for purchase.

• Risk. Do you have the need or the desire to position some of your money where there is absolutely no stock market risk? If the answer is yes, a fixed annuity or a fixed index annuity might be worth considering. (In this case, a CD could be a valuable consideration as well.) If the answer is no, although a variable annuity would give you access to market performance, it typically comes at a much higher cost (this is the major reason why some literary contributors “hate annuities”); you would likely be better off investing in something other than an annuity.
• Guaranteed Income. Do you have the need or desire to have a percentage of your retirement income contractually guaranteed? If the answer is yes, be sure the annuity you consider offers an income rider, and that the rider comes at a fair cost. If the answer is no, do not buy an income rider: you do not need to pay for something you will likely never use.
• Costs and Fees. With the wrong annuity, you can quickly spend a bundle: some variable annuities cost up to 4% per year, once you consider all the bells and whistles. (In my opinion, this is way too much, no matter what.) On the other hand, fixed index annuities typically do not have an annual fee—unless you add an income rider, which typically costs around 1% per year. Fixed annuities are usually straightforward and offer a guaranteed rate of return—again, with no annual fee. Regardless, make sure you run the numbers, and make sure that what you buy has the highest probability of future applicability.
• Liquidity. Annuities come with what is called a surrender charge schedule. When you open an annuity contract, you are usually limited to free withdrawals of up to 10% per year. This means that not all of your money is available to you without a penalty. Be sure to know how, when, and how much of your money you will be able access without penalties, including how circumstances such as chronic, critical, and terminal illnesses might affect the liquidity of your money.
• Interest. Be clear about how your contract will earn interest. Annuity contracts earn either a guaranteed rate of interest (in the case of a fixed annuity) or a variable rate of interest that is linked directly to the upward and downward movements in the market (as a variable annuity), or the annuity can participate in a portion of market upside with no downside market risk (this is a fixed index annuity).

These five points do not cover all the bases, but I hope each promotes further clarity during your decision making process. For everything you need to know to make fully informed financial decisions, always consult with a financial professional who has a fiduciary responsibility to you.

See you all next month.

Jac Arbour is the President of J.M. Arbour Wealth Management. He can be reached at 207-248-6767

Investment advisory services are offered through Foundations Investment Advisors, LLC, an SEC registered investment adviser.

by Jac M. Arbour CFP, ChFC
President, J.M. Arbour Wealth Management

In this month’s column, I don’t want to discuss money, investment advice, or financial planning. Instead, I want to talk about the two most important days in a person’s life. What are these two days? According to Lou Holtz, former coach of Notre Dame Football and the New York Jets, the two most important days in a person’s life are the day he or she is born and the day he or she figures out why.

On Nov­em­ber 12 and 13, I attended the Harvey Mackay Academy: Street Smarts Summit. It was held at the Hotel Camby in sunny Phoenix, Arizona. My friend and mentor, Harvey Mackay, author of “Swim with the Sharks without Being Eaten Alive” called me in late July to extend the invitation. The event magnetized sixty authors, speakers, entrepreneurs, and CEOs from all around the United States. There was some serious talent in that room and I was fortunate to be a part of it.

Over the course of those two days, I listened to the transformative messages of eight of the world’s foremost authorities on topics such as time management, leadership, networking, sleep, creativity, business development, kindness, and teamwork. Each speaker earned the undivided attention of every person in that room and did so for the entire sixty minutes he or she had the stage.

On day two, Lou Holtz took to the podium. The second he did, the room fell silent, interrupted only by roars of laughter that were evoked by his sense of humor. He began by telling us that the candles on his birthday cake now cost more than the cake itself and that over the years, he has learned a few things about life.

The energy in the room quickly shifted as he began to dispense life advice, the kind that hits you right in the heart. In his sixty minutes, he shared ideas such as, “The good Lord put eyes in front of our heads so we can see where we are going and not in the back of our heads to see where we’ve been. Do everything to the best of your ability. Everyone is capable, no matter what, of doing their best. Don’t let anyone else control your attitude; only you can do that. You can’t have a relationship if it is not based on trust. Always do the right thing. Show people love before the catastrophe hits.” These were just a few.

Amidst all the great ideas he shared, the comment about the two most important days in a person’s life held me suspended in deep thought.

Have you identified your “why”? Have you ever asked yourself why you were born? Why you are here? Why you have the skills that you have? Why you have the friends that you have? Why you have the job that you have? Why you have the happiness, or the frustrations, or the successes that you have? Why anything?

Some people think that the future is a predetermined sequence of events and wonder what those events include. Is this really the case? I have learned that the future is something we create for ourselves based on the choices we make, and as Mr. Holtz said, choice is the most important word in the English language. The future will include whatever we think about the most, want the most, and desire the most, granted we take action and actively pursue the results we demand for ourselves.

If you take an honest look at your life today, you will quickly realize that many of the things in it are the direct results of decisions you’ve made in the past. If we don’t like our current situation, we must consider changing our actions, which likely requires us to change our habits, which likely requires us to change our belief systems.

I believe that we are each eternally unique and that each one of us has greatness within us. Once we understand “why”, everything changes.

See you all next month.

by Jac M. Arbour CFP, ChFC
President, J.M. Arbour Wealth Management

People are living longer and, thus, living longer in retirement. This is both the good news and the bad news. Sure, living longer is a great thing, but in the world of financial planning, it is causing concerns for a number of retirees. One of the questions we are consistently asked is “will I have enough?” It’s a great question! Once you consider how many people are living into their late eighties or early nineties, the volatility of the markets, and how investment risk is now in the lap of the investor more so than ever (due to fewer pensions), it is understandable why so many people are wondering if they will outlive their money.

So what is the right amount to take? There are many things to consider and there is no simple answer. If you have an advisor, I suggest you review the following talking points on an annual basis to help derive the best answer for you:

Time Horizon: How many years do you plan to receive an income from your investments? Things such as health and the timing of the income payments should be considered and discussed annually.

Investment Objective: Are you focused on the growth of the account or more so on income? Maybe you are focused on a combination of the two. Maybe you are focused on something completely different. Clarifying the answer to this question will help determine the allocation of your portfolio and help answer some questions that pop up when discussing the following talking points.

Risk Tolerance: Conservative, Moderate, Balanced, Growth, and Aggressive. Which of these categories best suits you? What is aggressive to one person might be conservative to another and therefore, makes it important to understand what is truly meant by each of these categories. Have your advisor explain the expectations of each.

Target Rate of Return: Are you looking for slow and steady and higher predictability, or are you shooting for the moon and ready for a ride? Higher rewards often times means increased risks, which can lead to seemingly lower consistency when it comes to income planning.

Legacy Plans: Do you want to spend your last penny on your last day or do you want to leave something to the loved ones or to a charitable organization? Knowing how much you want to leave behind is a major factor when determining how much to spend while alive.

Consider discussing these topics and others with your advisor. Any of them is a good place to start the conversation. If we can be of any assistance to you in anyway with the above, or any concerns you may have with your retirement planning, please reach out for a free retirement planning consultation. As always, I hope this helps you and your family to make better financial decisions. See you next month.

Trivia Question: How many days does a person have to complete an indirect rollover of an IRA? A. 180 days B. 90 Days C. 60 days, or D. 30 days

Answer can be found here.

Jac M. Arbour, CFP®, ChFC®, is president of J.M. Arbour Wealth Management, 77 Water Street, Hallowell, ME 04347; phone: 207-248-6767 | cell: 207-431-3376 | fax: 207-620-7264; www.jmarbour.com; www.facebook.com/jmawealth.