THE MONEY MINUTE: Do you work 9 – 5 for free?

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.

THE MONEY MINUTE – Your 401(k): How should you be invested?

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

The markets are volatile, interest rates are rising, both stocks and bonds were down in 2018, and an unprecedented 93% of asset classes experienced a loss. There was seemingly nowhere to turn to make a few bucks in 2018, and it’s no wonder that people want to be especially thoughtful about how they allocate money in 2019, specifically within their retirement accounts.

The most important thing to remember when allocating money in a retirement plan is exactly that: it’s a retirement plan, which means that the money is for later. Keeping this in mind, here are a few things to consider when allocating your funds.

Key Considerations

Time Horizon: There are two primary timelines to consider. The first is how many years until you will begin using the money in your retirement account. The second timeline is the income period. How many years do you expect to draw on this account? Also, in what fashion will you draw on it, meaning will you take random disbursements, or will you take a set amount each month to supplement other forms of income such as Social Security and/or pensions? The closer you are to retirement and the more you rely on these funds, typically the more conservative you should be when it comes to taking on market risk.

Investment Objective: Are you aiming for aggressive growth, slow and steady growth, an income portfolio, or will this be a legacy account designed for loved ones? Getting clear on the purpose of this account is important because it will dictate how the funds should be best invested.

Risk Tolerance: Any allocation you select is accompanied by numerical measurements of risk, including beta and standard deviation. If you are unaware of these measurements, ask your plan advisor to explain how each relates to portfolio expectations. Once you know, ask yourself if such expectations align with your needs and goals.

Target Rate of Return: The allocation you choose will dictate the returns you receive, and it is these returns, along with your contribution rate (see below), that will determine the value of your account when you arrive at retirement age. This means the rate of return affects the number of dollars you will be able to withdraw each month for the rest of your life. Be sure to speak with your advisor to make sure every decision you make will help to keep you within this target. The longer the time period you have until retirement, the more likely you will be able to hit your goals with small tweaks to the plan.

Contribution Rate: I can’t say it enough. Too many people choose an arbitrary percentage or dollar amount when contributing to their retirement plan. It is important to remember that, one day, you will stop receiving paychecks but will still need money, which means the important question to ask is, How much money will I need? When you are deciding on an amount to invest from your paycheck each pay period, be sure to learn what the account value is estimated to be at the time you retire, based on that contribution rate. Do your best to ensure it is enough to truly meet your retirement income needs.

There are many things to consider when investing in a retirement account, but these points are a great way to start the conversation. If you ever have questions, please reach out to one of the pros at JMA or discuss with your plan advisor.

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.

THE MONEY MINUTE: The truth about annuities

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.

FINANCIAL MATTER$: We don’t talk about money in this house!

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

We don’t talk about money in this house!

As a kid, did you ever hear your parents say that? In many homes across America, it was once a very common response when the topic of money was brought up.

How many classes did you take in middle school or high school that taught you about money? By the time you graduated, how many classes taught you about IRAs, 401(k)s, investments, tax deductions, renting an apartment versus buying a home, paying for a mortgage biweekly versus monthly, using credit cards and building your credit, buying investment property with no money down, leasing a car versus buying one, and so on? For many people, the answer is none. Zero. Nada. Not a single class.

So where do people get educated about money? Where does a person’s belief system about money—what it is and what it is not—come from? The answer is, it comes from our household when we are growing up. If money is not discussed in the home, financial skills usually go completely unlearned by the next generation. In turn, when these kids become adults, they are often uncomfortable or unqualified to discuss money with family members and their own children. Lack of financial literacy contributes to the mountains of college loan debt, maxed out credit cards, and negative savings rates epidemic here in our country.

We need to bring financial literacy into our schools as well as our homes.

Not long ago, I gave a talk to a class of high school juniors here in Maine. I quickly confirmed the effects of social conditioning on the group’s beliefs about money: My first question to the 17 students was, “Who here thinks a million dollars is a lot of money?” All 17 hands went up. Second question: “Who here would like to have a million dollars?” Fifteen hands went up. Third question: “Who here thinks that he or she will be worth a million dollars at some point in their lifetime?” Two hands went up. Fourth question: “Who here thinks that saving a million dollars is hard to do?” All 17 hands went up again.


I then shared with the students that, if an 18-year-old could save and invest $2,045 per year (an amount all 17 students agreed was reasonable) at an eight percent rate of return, they would each pass the $1 million mark at age 65. Eyebrows lifted and ears perked up. Then I asked the question again: “Who here thinks he or she will be worth a million dollars at some point in their lifetime?” Seventeen hands went up.

Is it really that easy to change a person’s belief in their own ability? Yes, with the right information. The simple scenario I shared with these students demonstrates just one form of financial literacy, but it is an important one because it plants seeds of hope in today’s youth. They can realize they already have one of the most valuable assets when it comes to investing: time, which brings with it the power of compound interest.

Consider giving the gift of financial literacy to your kids and/or grandkids. Tell them some stories from your personal experience to teach them money concepts, or introduce them to an advisor. Let’s stop leaving the next generation’s relationship with money to chance.

See you all next month.

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

FINANCIAL MATTER$: The two most important days in a person’s life

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.

FINANCIAL MATTER$ – 401(k): When should you start?

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

Which would you rather have … a million dollars today or the result of one penny doubling every day for the next 30 days? If you chose the penny, good for you! It would be worth about $1.3M on the 28th day and $5,368.709.12 on the 30th day.

In my opinion, there is no factor that has a more profound effect on the value of money than time. Compound interest was once said to be the eighth wonder of the world, and when considering the previous example, you might agree.

As an advisor in the retirement industry, I hear many different reasons about why people choose to participate or not participate in their employer’s 401(k) plan. When speaking with investors, it has always been a goal of mine to effectively explain the power of time and compound interest. Yes, choosing the right stocks or funds is important, but equally important is having time on your side. It doesn’t take a lot of money from one’s paycheck (even $10/week can make a difference) to build something significant for down the road, as long as you start young.

Whether you end up with $100,000 or $5,000,000 at retirement, you’ll be glad you put some money away for yourself and you’ll likely be even happier if you started at a young age.

If you are a parent, grandparent, uncle, aunt, or a friend to a younger person, I hope you share this impactful concept with them and urge them to learn more.

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

FINANCIAL MATTER$ – IRA withdrawals: how much is too much?

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;;

FINANCIAL MATTERS: Finding the right financial advisor

by Lance Gilman

With so many people marketing themselves to the public as financial advisors, it is clear why some consumers are confused about who to select, and more importantly, why to select a certain person or firm. In this month’s column, I’m sharing thirteen questions you should ask any person you are considering as a potential financial advisor.

If you already have a financial services professional, use the following as a quiz to see how well you know your advisor.

  • Are you a fiduciary?
  • What are all of the services that your firm offers?
  • What are all the costs and fees associated with investing/working with your firm?
  • Specifically, how are you compensated as an advisor?
  • Who does your firm use as a custodian?
  • How long have you been a financial advisor? Please tell me about your experience so far.
  • What is your educational background? Do you have designations or are you credentialed in the financial planning industry?
  • Can you please share a copy of your disclosures with me?
  • How do you communicate with your clients and what is the frequency?
  • What type of access will I have to track my accounts?
  • What is your firm’s investment philosophy?
  • How quickly can I access my money should I need it?
  • What are the most important concepts that you want me to remember about you and your firm?

As always, I hope this helps you and your family to make better financial decisions. See you next month.

Jac M. Arbour, CFP®, ChFC®, President
J.M. Arbour Wealth Management
77 Water Street | Hallowell, ME 04347
phone: 207-248-6767 | cell: 207-431-3376 | fax: 207-620-7264

Trivia Question:

What is the maximum Social Security wage limit for 2018? A. 108,750 B. 128,700, C. 132,570, or D. 142,250?

Answer can be found here.