1. V IEWPOINT
Creating a Paycheck for Retirement (Second in Series)
Volume 1 Issue 5 Investing and Managing Retirement Income Using an Endowment Strategy
By Steve Stanganelli, CFP®
December 2010
Balancing Retirement Spending with Portfolio Performance
One of the biggest concerns for any retiree is running out of money. Considering that a cou-
ple reaching the age of 65 has a high likelihood of at least one spouse living into their 90s, it
is important to have a thoughtfully prepared spending plan in place.
The Lifestyle Approach:
The typical rule of thumb is to peg portfolio withdrawals at a set percentage somewhere be-
tween 4% and 5% each year. Generally, each year the retiree gives himself a “raise” by in-
creasing the amount withdrawn by the rate of inflation.
The downfall of this approach is that it does not tie spending to the actual performance level
of the investment portfolio. And in periods of high inflation, the amounts withdrawn may in-
Steve Stanganelli, CFP®, CRPC® crease too rapidly. And if there is an extended bear market coupled with significant inflation
as occurred during the 1970s, then there is a risk of premature depletion—ending up broke
in retirement.
About Clear View
Endowment Spending: Pretend You’re Like Harvard or Yale
Clear View Wealth Advisors, LLC To help minimize the risk of outliving your money, consider a different approach used by
is an independent Registered In- large organizations and endowments. They plan on being around a long time so they target
vestment Advisor providing finan-
cial planning, tax consulting, and a spending rate that allows the organization to sustain itself. This approach combines the
investment advisory services to previous year’s spending amount with a percentage of the portfolio’s performance. This
individuals and couples throughout approach is designed to “tighten the belt” when market performance has been down so that
Massachusetts. the portfolio can be sustained over the long term.
Clear View works on a FEE To use this approach, a retiree works with his adviser to determine what the first year
ONLY/FEE-for-SERVICE basis. spending is expected to be. Then you can determine the initial withdrawal rate between 3%
and 4% to use. The next factor needed is the “smoothing rule” to be used which determines
how quickly to increase or decrease annual spending based on portfolio performance.
For example, a 90/10 rule would mean that 90% of the current year spending will be based
on the total for the prior year plus 10% of the portfolio’s performance. So if the portfolio has
gone up 10%, then the amount allowed to be withdrawn will be another 1% on top of the
original spending target. If the portfolio has stayed flat or gone down, then the spending will
be held in check requiring a bit of belt tightening in the near term. Using this approach com-
pared to a simple “lifestyle” rule of thumb has shown the retiree’s portfolio can outlast by
several years and even have
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2. Page 2 V o lu m e 1 , I s s u e 5
Clear View Wealth Advisors, LLC 978-388-0020 or 617-398-7494
ASK THE MONEY COACH
With College Financial Aid Deadlines Approaching Tip #4: Change the Composition of Assets in Your In-
Fast, Are There Any Ways to Get More Aid? vestments
by Steve Stanganelli, CFP® Investment income and dividends reported on tax returns
for the Base Year (the year before your student will start the
freshman year) will potentially adversely impact the offer of
For many parents of college-bound juniors and sen- aid. So it makes sense to revisit your investment alloca-
iors as well as graduate school candidates, it will soon tions and consider shifting from dividend-paying or fixed
be time to file financial aid forms. income investments into more growth-oriented assets.
Last month I covered several strategies to lower your Tip #5: Change the Types of Income Reported on Your
expected family contribution (EFC) and resources of- Tax Return
fering scholarships and other free money. Check out For those who own investment real estate, there are ways
to shift the income from investment property to income from
the November issue in the newsletter archive on the
a business which is assessed at a lower rate.
Clear View site.
Such strategies will help lower the Expected Family Contri-
Consider these tips to help increase your eligibility for bution and improve the odds of receiving more aid. For
financial aid. every $1 reduction in income, you increase your chances of
aid by 47 cents.
Tip #1: Integrate financing with college search
Don't search for a college based on sticker price. Most stu- Tip #6: Work with a Financial Planner Who Under-
dents never pay the sticker price. And to improve the odds stands the Rules for Financial Aid
for aid, look at colleges where your student's credentials Not every tax or financial adviser is familiar with the intrica-
will put him or her at the top quartile for that college. cies of the financial aid system.
Tip #2: Don't Overvalue Your Assets Improperly reporting income or assets will have a long-term
Too often parents will simply provide the current value of negative impact on your student's aid chances and may
investments, real estate or businesses. This may actually jeopardize a parent's retirement assets.
overvalue assets which may reduce the amount of aid that
your student may qualify for when it's needed most. You In one case, a widowed mother of a child going to college
need to consider the impact from a "liquidity" discount as took the advice of a stock broker who convinced here to
well as the impact of taxes from the sale of assets. shift more than $400,000 in cash inherited to an investment
portfolio of stocks and bonds. The investments did so well
Tip #3: Spend the Custodial Accounts producing dividends and income that the woman's child lost
Custodial accounts like UGMAs or UTMAs will be assessed out on financial aid.
at the higher student's rate by the financial aid system. It's
better to use the proceeds to buy big ticket items that the As cash there was a loophole that allowed this money to be
student may need now (i.e. computers, dorm furniture, car) exempted from financial aid consideration. But once it had
instead of having to list it as an asset on the aid form. Al- been invested and earned reportable income, this amount
ternately, you could transfer the proceeds to a 529 account was assumed to be available for covering college costs.
listing the parent as the owner.
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Viewpoint is produced by Clear View Wealth Advisors, LLC for the benefit of its clients and allied professionals. Although the information here is gathered from reliable sources, readers should not
act upon it without professional advice. Past performance is no guarantee of future results. Examples with hypothetical returns illustrated are not representative of a specific investment. Clear View
Wealth Advisors, LLC 12 Amidon Ave., Amesbury, MA 01913 & 25 Lowell St., Wilmington, MA 01887 Tel: 978 388-0020 Email: Steve@ClearViewWealthAdvisors.com

3. Page 3 Clear View Wealth Advisors, LLC 978-388-0020 or 617-398-7494 V o lu m e 1 , I s s u e 5
Coping with Change: The Impact of Divorce on Your Fiscal Health (continued from page 4)
Special points of interest:
Tip #4 Consider College Expenses
 Open a bank account in your own name Regardless of your child’s age, it is important to project
 Protect your credit and cancel or close joint cards to new purchases
college education expenses and negotiate how much each
parent will be expected to contribute
 Establish an interim joint checking account
 Change the name on utilities, tax bills, municipal charges or leases Tip #5 Call to change service listings with utilities
Otherwise there is the risk that an unpaid bill may end up
 Consider college costs as part of your future plan
in collection and result in a black mark on your credit.
 Call the Clear View Financial Planning Helpline for a FREE copy of
Once the divorce is finalized you should also contact mu-
“Divorce and Your Money” at 978-388-0020 or 617-398-7494.
nicipal authorities to make sure that your name is not listed
on property tax, water, sewer or other municipal bills.
a price tag to impose on the other spouse, it is more Tip #6 Consider selling the marital home while still married
important to get to closure and strike a deal which best The home is typically one of a divorcing couple’s largest finan-
positions each person for moving ahead. cial assets and therefore involves the greatest amount of anxi-
ety.
I’ve often said that life is a journey. And along this
journey we’ll each encounter all sorts of things. A di- A lot of my divorce financial planning practice centers on
vorce, like any other sudden, life-changing event, is this very question. Although you may love your home and
just another part of the journey. And while we cannot neighborhood, bear in mind that a house is a very costly, illiq-
plan perfectly for this or anything else, we can prepare. uid asset. The mortgage, real estate taxes, capital gains
taxes, utility bills, insurance and maintenance can add up
I’ve written in the past about the critical mistakes that over time. Will you be able to afford the house once the
divorcing couples will make that can set them up for marriage is dissolved?
financial failure now and as they start the next stage of Now if someone insists on keeping the home, I’ll spend a
their new life. (Visit the company website or blog). lot of time modeling the impact on near-term cash flow and
long-term financial security. It is not a guarantee that
Despite the pain, you will need to step up and deal with keeping the property is the best option.
these issues. Otherwise, there is a greater risk that While there may be support payments expected as a
the financial foundation put in place for your post- source of cash flow to cover these costs, what happens
divorce journey will simply crumble beneath you. when or if your ex-spouse is unable to pay or simply de-
cides to stop paying?
Tip #1 Open a bank account in your own name
If you receive your paycheck by direct deposit or pay It may be easier and wiser to simply sell the home and
bills through an online service, you may want to use take advantage of the $500,000 capital gains exclusion for
your new account information. married couples. Then split the proceeds, pay off out-
standing debts, fund the emergency reserves and start off
Tip #2 Protect your credit—cancel joint credit cards fresh without the added burden of running a home.
Establish new credit accounts in your name only. Call to
freeze new charges on existing joint cards. Obtain and
review a copy of your credit report and work with your
attorney to resolve any negative entries.
Tip #3 Establish an interim joint checking account “Divorce & Your Money”
For any money issues that may be unresolved at set-
FREE Booklet
tlement, your attorney can advise you about creating
a joint checking account. You can use this account to
also cover family expenses during the period be- Clear View Wealth Advisors, LLC
tween separation and the final divorce. Amesbury * Wilmington * Woburn
Viewpoint is produced by Clear View Wealth Advisors, LLC for the benefit of its clients and allied professionals. Although the information here is gathered from reliable sources, readers should not
act upon it without professional advice. Past performance is no guarantee of future results. Examples with hypothetical returns illustrated are not representative of a specific investment. Clear View
Wealth Advisors, LLC 12 Amidon Ave., Amesbury, MA 01913 & 25 Lowell St., Wilmington, MA 01887 Tel: 978 388-0020 Email: Steve@ClearViewWealthAdvisors.com

4. Page 4 V o lu m e 1 , I s s u e 5
Clear View Wealth Advisors, LLC 978-388-0020 or 617-398-7494
About Clear View Wealth Advisors, LLC
Clear View is a Registered Investment Advisor providing
fee-only / fee-for-service financial planning, consulting
and investment management services.
Primary Business Address Our Mission:
12 Amidon Avenue
Amesbury, MA 01913 Guiding individuals to better financial decisions through
all of life’s transitions by planning well and investing
Branch Offices: smart so that clients can live better.
Woburn & Wilmington
THE BOTTOM LINE
Phone: 978-388-0020 or 617-398-7494
Fax: 866-654-4301 When your life savings are at stake, you want advice you
Email: steve@ClearViewWealthAdvisors.com can trust and someone you can count on. You need a
trusted advisor that is objective, an advisor that is not
Visit us on the Web! paid more to sell you one product over another. You
need a relationship with a firm and an advisor that prom-
More Financial Tools: www.ClearViewWealthAdvisors.com ises to always put your interest first, a firm with proven
FREE Road Map Tool: www.BabyBoomerRetirementPro.com experience and the right professional credentials.
Our Blog: www.MoneyLinkPro.Wordpress.com
To explore how Clear View and Steve Stanganelli, CFP®
Visit our website to find out more about our approach and services. can help you, call 978-388-0020 today to schedule an
exploratory meeting (via phone or in-person). There is no
charge or obligation.
Coping with Change:
The Impact of Divorce on Your Fiscal Health
By Steve Stanganelli, CFP®, CRPC®
Steve Stanganelli and Clear View As soon as you can, it’s essential to take control of your finances. Here
specialize in the following services: are some initial steps you can take as you work through your divorce.
As always, it’s best to consult with your attorney should you have
 Retirement Income Planning questions.
 IRA Rollovers
 Roth IRA Conversion Analysis Divorce is emotionally traumatic on everyone involved especially if there are
 College Funding Strategies & children. While it may seem mundane, dealing with the money and tax issues
529 Plans
that arise from the unwinding of a life together is as important for both psychic
 Divorce Settlement Analysis
and fiscal sanity.
 Qualified Plans for Businesses
 One-to-One Money Coaching
 Periodic or One-Time Invest- In the big scheme of things, there are more important things than
ment Advice money. And many who are faced with this kind of life-changing event will
 On-Going Investment Manage- cope by simply ignoring the details, shutting down trying to avoid confronta-
ment & Monitoring tion and more emotional pain.
 Financial Education Programs
for Groups If I’ve learned anything from years of working with people and their money, it
is that money is emotionally charged. And while it may seem satisfying to try
to extract some sort of revenge for the pain by attaching (Continued on Page 3)
FREE Online Planning Tool
“The Money Coach Road Map Series:”
FREE Webinars
Live on the 2nd Thursday Each Month
Get Yours at www.SmartMoneyRoadMap.com
Check the Clear View Site
Viewpoint is produced by Clear View Wealth Advisors, LLC for the benefit of its clients and allied professionals. Although the information here is gathered from reliable sources, readers should not
act upon it without professional advice. Past performance is no guarantee of future results. Examples with hypothetical returns illustrated are not representative of a specific investment. Clear View
Wealth Advisors, LLC 12 Amidon Ave., Amesbury, MA 01913 & 25 Lowell St., Wilmington, MA 01887 Tel: 978 388-0020 Email: Steve@ClearViewWealthAdvisors.com