ThimbleberryU

In this episode of ThimbleberryU, we begin a two-part series debunking common myths about retirement. Jag and Amy Walls dive into the misconceptions that many people have when planning for their post-work years.

The first myth we tackle is the belief that you need $1 million to retire comfortably. Amy explains that while this is often thrown around as a benchmark, the reality is far more nuanced. Retirement comfort depends on various factors like social security, pensions, and personal expenses. Many retirees live well on less than $1 million, provided they have a balanced financial plan and modest needs. Everyone’s situation is different, and it’s important to consider your own income sources and expenses, rather than focusing on an arbitrary number.

Next, we explore the idea that retirement means never working again. Amy highlights that many retirees continue to work part-time, start businesses, or freelance to stay active and fulfilled. In fact, 56% of retirees plan to work in some capacity after retirement, according to a Transamerica study. Interestingly, however, studies show that those who make a clean break from work tend to be happier in retirement. The trick is finding purpose, whether through work, volunteering, or family.

We also address the common belief that downsizing your home will always save money. While this might seem like a logical step, it doesn’t always pan out financially. Real estate fees, moving costs, and potential renovations in the new home can eat into savings. Additionally, many retirees find themselves emotionally attached to their homes, especially when considering family gatherings or memories, making downsizing less appealing or practical.

Another popular myth is that all debt should be paid off before retirement. While it’s a comforting idea to enter retirement debt-free, it’s not always necessary or even beneficial. Amy notes that paying off debt might require large withdrawals from retirement accounts, which can lead to significant tax consequences. Instead, it’s important to assess your cash flow, the interest rates on your debt, and whether paying it off makes sense in the bigger picture.

Finally, we debunk the notion that Medicare will cover all healthcare costs. While Medicare is essential, it doesn’t cover everything. Gaps like long-term care, dental, and vision expenses can add up, with retirees needing an estimated $315,000 to cover healthcare costs. It’s crucial to plan for these expenses early and consider supplement plans or health savings accounts.

In our next episode, where we’ll tackle five more retirement myths.

To get in touch with Amy and her team at Thimbleberry Financial, call 503-610-6510 or visit thimbleberryfinancial.com.

Today, Amy and Jag delve into the contrasting strategies of lump sum investing versus dollar-cost averaging (DCA). Amy starts by defining lump sum investing as the practice of investing a large amount of money all at once, like a $100,000 bonus, while dollar-cost averaging involves spreading the investment over time, such as $10,000 a month for ten months.

Amy explains that dollar-cost averaging helps mitigate risk by buying more shares when prices are low and fewer when prices are high, thereby balancing the overall cost. This strategy is particularly useful for those wary of market volatility. On the other hand, lump sum investing can yield higher returns as it gets the money working in the market immediately, a point backed by research from Vanguard which shows that lump sum investing outperforms DCA 68% of the time over one-year and ten-year periods.

We discuss why an investor might choose one strategy over the other. Lump sum investing offers simplicity and higher potential returns but comes with the risk of market downturns right after the investment. Dollar-cost averaging, while potentially yielding lower returns, reduces this risk and provides psychological comfort, preventing panic in the face of market drops.

Jag and his wife employ both strategies. She invests consistently each month through her 401(k), embodying dollar-cost averaging, while Jag, as a self-employed individual, saves throughout the year and make a lump sum investment into his SEP IRA at year’s end.

Market conditions also play a significant role in choosing a strategy. In a bull market, lump sum investing tends to perform better as the market is generally rising. During volatile or bear markets, dollar-cost averaging can be advantageous as it allows investors to benefit from lower prices over time.

Amy highlights historical performance, noting that lump sum investing generally yields more over a 10-year period, with 66-67% success across various markets like the US, UK, and Australia. However, risk-averse investors, or those who need time to adjust psychologically to seeing their cash reserves drop significantly, might prefer dollar-cost averaging.

Practical tips for deciding between these strategies include assessing personal risk tolerance, considering one’s financial situation and goals, avoiding market timing, and seeking professional advice. The key takeaway is that there’s no absolute right or wrong choice between lump sum investing and dollar-cost averaging. The best decision is the one that aligns with personal comfort and long-term financial objectives.

For further advice, listeners can reach out to Amy and her team at Thimbleberry Financial via their website or phone. It’s important to remember that investing should always be approached with a long-term focus and in consultation with financial professionals

To get in touch with Amy and her team at Thimbleberry Financial, call 503-610-6510 or visit thimbleberryfinancial.com.

In this episode of ThimbleberryU, Jon "JAG" Gay and Amy Walls discuss strategies for making better decisions, particularly focusing on financial decision-making. We delve into what influences good and bad decisions and how we can improve our decision-making processes.

We start by recognizing that emotions significantly impact our decisions. Amy shares a personal anecdote about her current dilemma in buying a new car, highlighting how fear and greed can influence our choices. These emotions, she explains, can cloud our judgment, making us second-guess our financial decisions even when we are financially capable.

Cognitive biases also play a crucial role. Overconfidence, anchoring, and confirmation bias can lead to poor decision-making. For instance, anchoring on a specific price point or seeking out information that supports pre-existing beliefs can skew our choices. Additionally, heuristics or mental shortcuts, like the outdated 4% rule for retirement withdrawals, can lead to oversimplified and potentially harmful financial strategies.

Amy emphasizes the importance of rational analysis and comprehensive data in countering these biases. She also stresses the value of delayed gratification, learning from past mistakes, and remaining adaptable. Jon and Amy discuss the benefits of having rational conversations, especially on polarizing topics like politics, to understand different perspectives and make informed decisions.

A significant point Amy raises is the concept of mental accounting, where people treat money differently based on its source or intended use. This can lead to irrational spending habits, such as splurging bonuses or inheritance money multiple times over.

On the flip side, good decision-making strategies include rational analysis, focusing on long-term benefits, and emotional regulation. Amy advocates for making decisions based on logic rather than impulse, and seeking the advice of experts to provide objective insights.

Amy shares practical tips to avoid common financial pitfalls. Panic selling during market downturns, chasing trends without proper research, and overconfidence in unfamiliar areas are major traps. To avoid these, she suggests having a long-term investment plan, staying disciplined, diversifying investments, and regularly reviewing one's financial strategy.

Finally, Jon and Amy conclude by stressing the importance of professional financial advice. Whether one is working with an advisor or managing finances independently, education, thorough research, and the use of technology for data-driven decisions are key. Balancing the science of financial data with the art of human behavior is essential for successful financial management.

To get in touch with Amy and her team at Thimbleberry Financial, call 503-610-6510 or visit thimbleberryfinancial.com.

In this episode of ThimbleberryU, Jon Gay and Amy Walls discuss the risks of having a highly concentrated portfolio. Amy defines a highly concentrated portfolio as one where a single asset or a small group of assets constitutes 10% or more of the portfolio’s total value. This lack of diversification can increase risk significantly, as the portfolio’s performance hinges on those few investments.

Amy explains that increased volatility is a major risk factor. A portfolio with fewer assets is more susceptible to large swings in value based on the performance of those assets. For instance, if a single asset makes up 25% of the portfolio and its value drops significantly, the entire portfolio suffers. This risk is compounded if the concentrated asset belongs to a single company or industry, which can be affected by negative news, regulatory changes, or industry-specific challenges.

Jag and Amy also explore the emotional stress associated with a concentrated portfolio. Significant fluctuations can lead to stress, resulting in impulsive decision-making, such as selling low during downturns. Amy highlights the importance of diversification in spreading risk and reducing the impact of any single investment’s poor performance. Without diversification, investors are essentially putting all their eggs in one basket, which can be dangerous.

To assess if their portfolio concentration is acceptable, Amy suggests investors ask themselves several questions. These include evaluating their financial and emotional ability to handle a significant loss, understanding their level of diversification, considering their time horizon for needing the money, and determining their stress tolerance for market fluctuations. Investors should also reflect on their understanding of the investment and its risks, how it aligns with their long-term financial goals, and their exit strategy if things don’t go as planned.

Behavioral finance plays a crucial role in investment decisions. Amy advises listeners to consider their reaction to market volatility, potential overconfidence in investment decisions, and biases such as anchoring, confirmation, and recency bias. It's essential to recognize tendencies to hold onto losing investments or be influenced by herd behavior. Additionally, Amy emphasizes the importance of simplifying decision-making processes and understanding how personal experiences influence behavior.

If investors decide their portfolio is too concentrated, Amy recommends several steps. These include immediate or gradual diversification, using tax-advantaged accounts to minimize tax impacts, considering exchange funds to pool concentrated stocks with other investors, employing hedging strategies, making charitable donations of concentrated stock, and seeking professional guidance.

In conclusion, Jon and Amy stress the importance of regularly reviewing portfolios and reassessing risk tolerance. Each individual’s situation is different, and risk tolerance can change over time. Staying flexible, open-minded, and informed is crucial for managing investment risks effectively.

To get in touch with Amy and her team at Thimbleberry Financial, call 503-610-6510 or visit thimbleberryfinancial.com.

In this episode of ThimbleberryU, we delve into the critical topic of safeguarding senior finances with Amy Walls from Thimbleberry Financial. The discussion highlights the importance of recognizing signs of financial exploitation among seniors and offers practical advice on how adult children can approach their parents about financial matters. We stress the importance of maintaining open, empathetic, and proactive conversations to prevent financial abuse and ensure seniors' financial well-being.

Amy starts by explaining the signs of financial exploitation, such as unexplained withdrawals, sudden changes in spending patterns, and alterations in legal documents. These warning signs might indicate someone is trying to gain control over a senior's assets. Isolation from family and friends, as well as the sudden appearance of new friends or caregivers with a strong interest in finances, are also red flags.

Approaching the topic with parents can be challenging. Amy suggests starting these conversations early, even before there are signs of trouble. Regular check-ins can help normalize financial discussions and reduce anxiety. Empathy is key—approaching these conversations from a place of care and support rather than control. Setting clear agreements about when and how to get involved can prevent misunderstandings and ensure everyone is on the same page.

For senior listeners, open communication with their adult children is crucial to prevent exploitation. Statistics show that a significant number of seniors experience financial victimization, and regular discussions can help identify and stop abuse early. Seniors should also ensure their wishes are clearly communicated to avoid misunderstandings and ensure their intentions are honored.

Amy provides practical steps for both seniors and their adult children to make these conversations more effective. Organizing important documents, developing a financial plan, and using technology to monitor accounts and automate payments are essential measures. Regular reviews with or without a third party can keep everyone informed and prepared for any financial or health emergencies.

As we wrap up, the emphasis is on the importance of technology and communication. Technology offers great tools for managing finances, and maintaining an open and ongoing dialogue is crucial for building trust and ensuring financial security. Amy encourages starting these conversations early and being empathetic and respectful throughout the process. For those needing assistance, financial advisors and lawyers can provide valuable support and mediation.

To get in touch with Amy and her team at Thimbleberry Financial, call 503-610-6510 or visit thimbleberryfinancial.com.

In this episode of ThimbleberryU, Jon “JAG” Gay and Amy Walls tackle one of the biggest fears for retirees: running out of money before they die. They delve into the critical topic of deciding from which accounts to draw money in retirement, illustrating the profound impact these decisions can have on one's financial stability.

Amy emphasizes that this concern often leads people to adopt an "ostrich" mentality, where they bury their heads in the sand to avoid facing daunting financial decisions. Jon adds that this behavior is a form of fight or flight, driven by fear and unfamiliarity. They agree that simply winging it can be a costly mistake.

We introduce a case study to illustrate these points. They discuss a hypothetical couple, both aged 60, with different types of savings: $40,000 in cash, $600,000 in taxable investments, $2 million in IRAs, and $200,000 in Roth accounts. They compare the financial outcomes of spending $85,000 versus $100,000 annually in retirement.

• For $85,000 in annual spending, the optimal strategy involves withdrawing 45% from taxable accounts and 55% from IRAs. 
• For $100,000, the best approach shifts to 60% from taxable accounts and 40% from IRAs. 

Deviating from these strategies, even slightly, can significantly impact financial outcomes. 

• Using the $85,000 strategy for $100,000 in spending could result in $400,000 less in available funds by age 95.
• Using the $100,000 strategy for $85,000 in spending could lead to $300,000 less.

The consequences are even more dramatic when retirees choose to withdraw 100% from either taxable accounts or IRAs. 

• Drawing solely from taxable accounts until depletion could result in $740,000 less by age 95. 
• Withdrawing entirely from IRAs could lead to $1.5 million less.

We underscore the importance of dynamic financial planning, which involves regular reassessment of one's strategy to adapt to changing circumstances and ensure efficiency. Amy concludes by stressing that thoughtful distribution strategies are essential not only for maintaining financial stability but also for achieving personal goals, whether it’s enjoying life, covering unexpected expenses, or leaving a legacy.

For listeners seeking personalized advice, Amy encourages reaching out to Thimbleberry Financial for guidance tailored to individual circumstances.

To get in touch with Amy and her team at Thimbleberry Financial, call 503-610-6510 or visit thimbleberryfinancial.com.

In this final episode of our six-part series for tech professionals, we focus on tying together the various aspects of equity compensation. We recap the key points discussed in previous episodes, including ESPPs, RSUs, ISOs, and NQSOs, emphasizing the importance of strategic management to leverage these tools effectively.

We discuss the common pitfalls tech professionals encounter when managing equity compensation on their own, such as significant tax bills from incorrectly selling ISOs and inadequate diversification. Holding onto stock with the hope of future gains, only to see the stock price plummet, is a recurring issue. We stress the importance of understanding the tax implications and maintaining a diversified portfolio to mitigate risks associated with over-concentration in company stock.

Amy highlights that while tech professionals are experts in their fields, they often lack expertise in financial planning, underscoring the value of consulting financial advisors. Using tools like Excel and calendar apps to track vesting schedules and exercise options can help, but disciplined execution is crucial. We recommend leveraging digital tools to manage equity compensation effectively, but also emphasize the importance of human expertise.

Work-life balance is another critical topic. We advise setting boundaries and scheduling dedicated time for financial planning to prevent it from overwhelming personal life. For instance, Amy shares how she and her husband hold regular meetings to discuss financial matters, integrating this practice into their routine to ensure it doesn’t interfere with family time.

Lastly, we encourage tech professionals to balance their involvement in financial planning with delegation to trusted advisors. Staying informed and asking questions about their equity compensation strategies ensures they understand and agree with the advice they receive. We suggest working with advisors who specialize in tech and behavioral finance to align financial strategies with personal goals and risk tolerance.

In conclusion, effectively managing equity compensation requires a blend of personal involvement and professional advice. By staying organized, disciplined, and informed, tech professionals can maximize their financial opportunities while maintaining a healthy work-life balance

To get in touch with Amy and her team at Thimbleberry Financial, call 503-610-6510 or visit thimbleberryfinancial.com.

Today Jag and Amy delve into five common myths surrounding retirement planning. Amy, leveraging her 20+ years of experience as a financial advisor, deconstructs each myth, providing insights grounded in real client interactions.

First, they address the myth "I'll spend less in retirement," discussing how retirement often brings new expenses, such as travel, hobbies, and healthcare, which may not decrease spending as expected. While fixed costs like mortgages might end, discretionary spending and healthcare needs can actually rise.

The second myth is the belief that being debt-free in retirement equates to reduced expenditures. Amy explains that having low-interest debts like mortgages during retirement isn't necessarily bad if the returns on investments exceed the interest rates, emphasizing the importance of financial planning over simply clearing all debts.

The conversation then shifts to the effectiveness of employer-sponsored retirement plans like 401(k)s and 403(b)s. Amy argues that merely saving the maximum in these plans may not suffice for a comfortable retirement due to factors such as investment choices, duration of savings, and the timing of retirement, highlighting the complexity of retirement planning.

The fourth myth tackled is the idea of downsizing homes in retirement. While some may intend to downsize, Amy points out that emotional attachments and the physical demands of moving often keep people in their current homes longer than planned, complicating the downsizing process.

Lastly, they debunk the myth that taxes will be lower in retirement, with Amy warning that retirement income can trigger higher taxes and health insurance costs under Medicare's IRMAA surcharges. She stresses the importance of strategic financial planning to manage these potential increases effectively. Jag asks about the possibility of tax increases in the coming years.

Throughout the podcast, Amy and Jag emphasize that effective retirement planning requires a holistic approach, considering not only savings but also spending strategies, tax implications, and personal circumstances to ensure financial stability and fulfillment in retirement. They conclude by reminding listeners to consider retirement as a phase requiring its own unique set of strategies and preparations

To get in touch with Amy and her team at Thimbleberry Financial, call 503-610-6510 or visit thimbleberryfinancial.com.

Today, Amy Walls and Jag into the world of Non-Qualified Stock Options (NQSOs), a versatile form of equity compensation often offered to tech professionals. In our fifth episode of a six-part series, we explore how NQSOs, despite their simplicity in terms of taxation, require careful planning to effectively manage within one's financial portfolio.

NQSOs allow employees to purchase company stock at a predetermined price but come with no preferential tax treatment, meaning they are taxed as ordinary income upon exercise. This straightforward taxation can seem appealing, but it necessitates a keen understanding of one's tax situation, especially in pivotal life moments such as receiving a spouse's bonus or facing unemployment.

A key strategy in managing NQSOs is knowing when to exercise them to minimize the tax burden, particularly during years with lower income. However, it's crucial to only exercise options when the stock's market price exceeds the exercise price, ensuring a financial benefit.

Further discussing diversification, Amy emphasizes that once the stock is acquired through NQSOs, it should be treated like any other asset in the portfolio. The strategy here involves not just holding onto the shares hoping for appreciation but planning their sale to align with broader financial goals such as funding children's education, planning for retirement, or aiding family members financially.

Amy also shared a success story of  "Emily," who leveraged her well-timed exercise of NQSOs to significantly advance her retirement plans and support her children's education, demonstrating the potent role these options can play in achieving financial independence and meeting family goals.

Conclusively, while NQSOs offer no direct tax advantages, their real value lies in strategic exercise and diversification, underscoring the importance of planning and professional guidance to avoid pitfalls and maximize potential benefits. Remember, it's not just about having the shares; it's about integrating them thoughtfully into your financial landscape to meet personal and familial aspirations.

To get in touch with Amy and her team at Thimbleberry Financial, call 503-610-6510 or visit thimbleberryfinancial.com.

We dive into a conversation about embracing future life phases today on ThimbleberryU. Amy and Jag discuss the importance of planning for both financial and non-financial aspects of our future. Amy emphasizes the significance of visualizing and imagining the life we want to lead, pointing out that financial planning isn't just about money—it's about making our desired future a reality. This involves considering future expenses and the lifestyle we aspire to maintain.

Amy highlights the challenges people face when trying to envision their future, including fear of the unknown and the difficulty of imagining life changes. She shares personal stories to illustrate these challenges, such as her fear of financial independence after college (this contrasts with Jag's approach to college). We explore how different life stages, like becoming parents or transitioning to retirement, come with their own sets of fears and uncertainties.

The conversation then shifts to the importance of being clear about what we want in later life stages to avoid being unprepared financially. Amy stresses the value of having specific goals to motivate saving and planning for the future. We discuss how changing priorities or goals is natural and not problematic as long as there's a willingness to adapt and adjust financial plans accordingly.

Amy offers strategies for looking ahead and connecting with our future selves, such as setting aside time for contemplation, getting in touch with our values, and recognizing how today's choices impact our future. She shares personal anecdotes about preparing to enjoy activities with future grandchildren and the importance of taking care of oneself to maintain health and vitality in later years.

Finally, we touch on the concept of living in limbo and the stress it causes due to a perceived lack of control. Amy suggests finding at least one aspect of a situation that can be influenced or controlled as a way to navigate forward.   And as a bonus, you'll hear a couple of Shel Silverstein references.

To get in touch with Amy and her team at Thimbleberry Financial, call 503-610-6510 or visit thimbleberryfinancial.com.