Energy Future

As Monty Python would say ‘and now for something completely different…’ and we delve into the energy future. Our focus tends to be retirement security and how to attain it. Periodically it is impossible to avoid the maelstrom that is DC politics. Energy, however, is an entirely new subject. What, you may ask, prompts this diversion? Today I heard a comment that ‘there is plenty of opportunity in oil & gas because those investors fear $30 oil.’ While you may feel I have some credibility when it comes to retirement, why think the same for a look at energy? Many of you know I spent several years in GE Power Systems, close at hand with both the power generation business and the oil & gas business. Devising strategies, leading businesses and spearheading the quality organization all brought a keen understanding of the marketplace and a sustained interest in its development. What I hope today is to bring you an overview of the technological playing field, particularly with alternatives … to answer the question, why the comment about oil & gas? One thing is certain, oil & gas (and coal) are not going away any time soon. Read on to become a smarter energy consumer.

Energy Future: First, where are we today?
In the perfect world, we would run on ‘clean’ power and ‘renewable’ energy. Imagine zero CO2 emission power sources. We actually have some forms of power like this already, right? Long ago we had hydro power running grain mills (why do you suppose Minneapolis is there?) and wind power doing all sorts of things (Dutch windmills, right?). More recently you have solar and nuclear, even baby steps on tidal power. Yet while there continues to be big emphasis on these technologies, each has distinct drawbacks, too. Environmental Impacts of Renewable Energy Technologies

Energy Future: Hydro
Hydropower Hydropower Technology and Types of Hydroelectric Power Plants Hydrokinetic Energy Alaska Hydrokinetic Energy Research Center Hydrokinetics Comes to the Forefront

Energy Future: Wind
Wind Power Unsustainable: 43 Million Tonnes of Wind Turbine Blade Waste by 2050 Why offshore wind turbines can’t handle the toughest hurricanes

Energy Future: Solar
Solar Energy Solar Power Will Kill Coal Faster Than You Think Environmental Impacts of Solar Power How Green are Those Solar Panels, Really?

Energy Future: Nuclear
Nuclear Energy Union of Concerned Scientists: Nuclear Power Safety First Can Nuclear Power Rise from the Chaos in Washington? Pros and Cons of Nuclear Power Nuclear Power Safety Concerns

Energy Future: Is there a better way?
The one unconquered field of power generation is fusion power. Quite simply replicating the sun’s approach in an Earthbound plant. Why is this better? Because there are no emissions, no waste, and no risk of a runaway process. Not just that, but no apparent side-effects. Presumably that was said about all the other clean energy, too, but it seems promising. Deceleration of runaway electrons paves the way for fusion power A new twist on fusion power could help bring limitless clean energy Fusion power could be here in less than a decade

Strange Times

Strange times call for strange measures. With Congressional hearings becoming commonplace, the White House under constant siege, and financial markets hard to predict, perhaps it is time to think differently. We are really quite consistent here in our guidance on retirement. Save as much as you can, starting as early as you can. Watch fees in everything you do, and maintain a balanced portfolio to protect against downturns. When you near and enter the distribution phase, start thinking about income products: annuities with lifetime guarantees and dividend champions. In keeping with current events, though, feels like a good time to pick up a whole slew of unusual ideas. Depending upon how sophisticated you want to be some of these may be worthy adventures for you. If nothing else, you may pick up some new lingo for your next meeting with your advisor.

Strange Times: Some alternative approaches to containing risk.
Whether you believe it, or not, this incredible bull run since the bottom in 2009 will eventually correct. Some of the greatest investing minds of the last 50 years seem to think it is sooner than later. Jim Rogers: The worst crash of our lifetime is coming and Here’s Why Bill Gross is Worried About Markets So, you can/should use some of the approaches we have already covered, or consider some of these ideas.

Stay Invested and Hedge

Options: They’re Not as Complicated as You Think

27 ETFs to Consider for Hedging Your Portfolio Risk

Whether you are heading into (or in) the distribution phase, or not, read this. Retired or Retiring in the Next 15 Years? Better Get Defensive.

Strange Times: Since we are stepping outside the box …
Having led several life insurance companies, I came to appreciate the hidden attributes of many oft derided products. Here’s a great article on one of these. Don’t scoff until you read it, please. What’s Your Safe Money Plan for Retirement?

Strange Times: A little dose of reality …
Separating Retirement Fact from Retirement Fiction

Global retirement ‘timebomb’: Why you’ll have to work past 70

Adieu Paris

Like so many weeks before, last week gave us Adieu Paris from the always unpredictable White House. Unfortunately, it is far more complex than either the press or the President would have you believe. I recall thinking that the deal was not so great because there are self-selected standards, self-defined reporting and no teeth. While you tend to see gloom and doom reporting, it likely is not that simple. Just to feel better about this I managed to scour up some more even-handed reporting. Whether you think this is apocalyptic or a nonevent, have a look.

Don’t Cry for the Paris Agreement

The Plain Truth About the Climate Accord

Game Theory and Trump’s Climate Negotiations

Adieu Paris: So, what should you be doing about climate change?
That is a really good question, and I am pretty certain complaining on Facebook is not high on the list. The sure thing you can do is change your own behavior. Buy a high mileage car, don’t run the central air, walk more, those kinds of things. After that, probably engage locally, encouraging similar behavior in your own community. Then you start getting to lobbying your elected officials, local, state and Federal, to take meaningful action. Did you read those articles? What do you think of the CAFE standards? Should that process be changed? Tell your Congressional representatives and get your friends to do the same. Find discrete, actionable causes and advocate for them. Then you might actually make a difference. Venting on Facebook, not so much.

Adieu Paris: What else should you be doing? Like always, focus on what you actually control!
That is right, here we are right back to your retirement planning. Fact is our sudden obsession with what is wrong with DC is great, but it likely will not change a thing. Spending half as much time on your retirement will make a world of difference to you  think about it. Since I am pretty sure I have about exhausted your interest level, just a couple of things to make you think.

The Chart You Must See to Understand the Widespread Risk in the S&P 500 Today

Homeland secretary: People would ‘never leave the house’ if they knew what I knew

21 Informative Maps That Will Change Your Worldview

30 Mind Blowing Facts That are Actually True

Focus, Focus, Focus

What a week it has been, clearly it is time to focus, focus, focus. Donald Trump won the election by promising a whole lot of things. Not much of this has been done, one might argue none of it. Boy has there been controversy, though. Whether you agree that media reports and hearsay trump first person accounts from General McMaster or not, Congressional Democrats and the media will not let the latest story go. All this smoke seems to mean that any progress you were hoping for on taxes, healthcare, jobs, or any other important area of focus for the government is not likely to happen any time soon. That’s why you and I need to focus, focus, focus on what we can control. Sadly, this seems to be a theme of late because there is a never-ending stream of scandals or wanna be scandals. Don’t fall for it, wait for the process to work. Did you notice the reporting on Seth Rich and Wikileaks? Here, too, sensitivity to the nature of the underlying evidence produced – in both these cases none – is paramount, and the lack of actual evidence reinforces our topic today: focus, focus, focus.

Focus, Focus, Focus: Have a plan and stick to it.
There are only so many drums we beat here to help you navigate your way to a comfortable retirement. One of those is to have a plan and stick to it. This article reinforces this notion, pointing out that investor behavior is a big driver in returns. Don’t get sidetracked by Washington, please. Up on Trump or in the dumps, don’t invest emotionally
In that vein, here is a nice tutorial on why it is important to have a plan and stick to it. The Most Important Rule in Investing
Another important thing, have the right expectations. With retirement savings so anemic in the US, ever increasing longevity and related healthcare costs … what do you expect? This is somewhat cutesy way of slapping you on the same old retirement notion. A personal finance writer explains what too many people get wrong about retirement

Focus, Focus, Focus: Another dose of dividend investing ideas to keep you thinking.
Yes, dividend stocks and ETFs may not be the sole component of your strategy, but the right ones can provide income and principal protection. Here are some interesting takes on the space right now: Not all Dividend Growth ETFs are Created Equal Great Dividend ETF to Simulate Dividend Yield of 21.5% and Recent Price Declines Make MORL Attractive Dividend Champions Everywhere Patience Leads to Great Dividend Growth

Dividend Defense

Markets remain a perplexing, challenging read and a dividend defense may not be the worst approach.  The first thing you need to do is understand the environment. Whether you are in the accumulation phase or the distribution phase, dividend defense may be a good approach.

Dividend Defense: What are the risks you face today and how can you protect against them?
As you plan your retirement you have to be wary of myriad risks, and reliable dividend stocks can be a good way to insulate your portfolio through the cycles.
Let’s start by assessing the risks that can derail your retirement plan. 7 Dangers that Could Derail Your Retirement (and What to Do About Them) and 5 Silent Killers of a Financial Plan
Then, of course, there’s the truly defensive way of thinking. Seems like we have been waiting forever for the ‘other shoe to drop.’ It really has been a long run up since the debacle that was 2008/2009. Will it go on forever? Unlikely. Retirement Strategy: Do You Have What it Takes for the Next Major Correction? or Positioning a Portfolio Properly for Any Outcome
A quick word of caution: all signs point to passive investing as the way to go. Indeed this week Warren Buffett essentially endorsed the model saying: “ “ Two ways of looking at this, if markets are going to correct, indices go with them and how much of the market rise comes from the move to indexed products? Indexing Investment Strategy Becoming Increasingly More Risky? Not to mention, Monday Morning Memo: Is Capacity a New Restriction for the ETF Industry?

Dividend Defense: Using dividend stars to deliver returns or income and preserve capital
All too often we focus solely on the income aspects of dividend stocks. They are a great way to deliver income and preserve capital in the distribution phase. They are also a decent way to deliver returns and build basis in the accumulation phase. Regardless how you plan to utilize your dividend investments, fundamentally sound selection is the key. 15 Straight Dividend Hikes, Raised Guidance Again, Major Earnings Growth, 12% Upside or 10 Champion Dividend Dogs Said to Gain 7% – 22% by May 2018 or Dividend ETF to Retire On

Dividend Defense: Evolving political landscape aims to make self-determination easier.
No matter your opinion on where markets are heading or dividends as a tool, this is a good idea. TIAA, IRI Back Bill Requiring Retirement Plan Income Projections

Moving Targets

We focus our effort on improving your retirement, today we start by looking at moving targets in Washington. Healthcare reform is dead. There is no coherent tax reform strategy. The budget talks will inevitably end in an impasse. They have no chance at a comprehensive immigration policy. Have you thought any of those things? Of course, you have, and now we have a stop-gap budget. There is a very high level White House outline of tax reform. The Affordable Care Act is back in the crosshairs, and immigration continues to brew on the side. Smart money seems to indicate that the House Republicans’ tax outline from last fall is the likely jumping off point. You can learn more about that here: Should the ACA repeal and replace fail again (Don’t look now but the Republican health care bill is in trouble again. Again.) All the more reason to believe they will fight mightily to get something done on taxes.

The apparent lesson of the first 100 days is that this will not be easy. Turns out the Washington system is so dysfunctional that you cannot simply will it to work. Coalition building, which should be a deal maker’s forte, seems to be a giant vacuum. The far right of the Republican party want little to do with progress, standing on principle. The Democrats see that as an opening to stand firm. So, how does the deal maker in chief make these big things happen? Seems to me there will have to be some serious horse trading. If neither the Freedom Caucus nor the Democrats play, we may be in for a long two years. Unfortunately, big things need to get done and there is no template for making that happen.

With all these moving targets where does that leave you and me? Well, we have said this before, focus on what you can control. Today we will throw out a few facts, figures and ideas to help you improve your retirement. Perhaps a little pressure on your elected representatives to move some of these big agenda items will help, too.

Moving Targets: What is the landscape now? What can you be doing?
As always when it comes to major policy changes in DC, don’t hold your breath. It is best to plan given what you do know and what you can control.
Then again, knowing what you are up against is perhaps the best place to start. Imagine this, global central bankers continue to intervene in the world economy on unprecedented scale. Presumably this cannot go on forever … what is their plan? What is yours? BAML: The ‘$1 trillion flow that conquers all’ explains everything happening in markets
In the what else is new category we find another study indicating that Americans are not saving nearly enough for a secure retirement. Hopefully since you are this far down in the piece you are not among them … or committed to changing your ways. Only 1 in 10 Americans in Peak Financial Health
So, start working on your own situation. These 3 easy steps can improve your retirement savings – in less than an hour and Slash your retirement costs with these 5 tips (everyone read #3)

Retirement Planning

Retirement planning is a vital tool in your retirement security arsenal. No one is doing this for you – if you are not paying them. Social Security alone will not deliver a secure retirement. If you are like most Americans, you are not saving enough for a secure retirement. So, you need to arm yourself with a plan and start following it.

Retirement Planning: Where are you now?
Inasmuch as you probably do not believe you need to spend this time, why not assess your situation. If you are like most Americans you simply have not saved enough and do not save enough. Here’s how much the average family in their 40s has saved for retirement The most alarming statistic: to be financially ready to retire at 67, Fidelity says, you need to have six times your salary saved by 50. Do you? Will you? Did you?
Part of a retirement plan is a retirement budget. Since you will likely be on a ‘fixed income’ in retirement, managing expenses is vital. Knowing your expenses is an important part of developing your retirement plan. How to set a retirement budget
The flip side of your retirement budget is your retirement income. Just how will you be generating retirement income? Social Security? 401(k)? Pension? Working? Somehow you have to zero in on a balanced budget – income and expenses matching up over a likely very long time. What’s your retirement strategy?
This piece takes a more comprehensive look at the problem – expenses and income. Some good food for thought and guidance here. The 7 elements of a successful retirement

Retirement Planning: Plugging the gaps.
What should you be doing as you approach retirement age? Are there specific steps you should be taking? This article has some interesting perspective on moves to make before you stop working. An Investing Roadmap for Pre-Retirees (you may need to create a login, but access to Morningstar data is not a bad thing to have)
Since you just signed up for access to Morningstar, why not look at dividend stocks? One inexpensive way to generate quality income from dividend stocks is through a dividend ETF. This focuses on Schwab, but talks about the competitors, too. High-Quality Dividends for a Slim Fee
I loved the concept of this piece: focus on sequence, longevity and unplanned expenses. Fact is we talk a fair bit about the first two, and the last one is a good addition when thinking retirement planning. It is a super simple article, but helps reinforce the point. Take the time to read it. Prepare now for these 3 retirement risks

Core Investing Skills

I usually focus on a particular area in these posts, but today we consider two core investing skills. These may apply to your accumulation or distribution phase. Either way they are valuable skills to have in your arsenal.

Core Investing Skills: Protecting your principal balance.
No matter whether you are in the accumulation phase or the distribution phase, you want to protect your principal. Now, you do not want to do that at all costs, i.e. zero risk investing. You still need to grow your principal, you just do not want to lose it all – even on a paper basis. This article introduces a great term ‘margin of safety.’ Notionally you devote some portion of your principal to risk coverage. It seems like a good way to think of the concept. What to Do About Fading Stock Market Momentum
The article on stock market momentum does not tell you how to create your margin of safety. There are myriad ways to do so, and they depend – to a degree – on where you are in the retirement life cycle. A Qualified Lifetime Annuity Contract (QLAC), for instance, is a great element of a margin of safety for someone in the distribution phase. This article delivers a very specific, rather unusual approach. It focuses the majority of assets on a steady return and a very small portion on ‘home run’ investments. It is not for the faint of heart, or is it? The Holy Grail of Investing – The Barbell Approach
If that is too crazy for you, you may consider options as a means of delivering your margin of safety. This provides a nice primer for you to start. Options Strategy and Tactics: Diagonal Spreads

Core Investing Skills: Delivering consistent income in retirement.
As noted above, the QLAC is a great vehicle, if you can get it, for creating margin of safety in the distribution phase. It is also a great way to deliver consistent income in the distribution phase. Indeed, this article does a nice job of summarizing the prudent role an annuity can play in retirement security. It points out some of the key decision points – health in particular – and notes that annuities work beyond the QLAC. A Simple Way to Get Guaranteed Income in Retirement Whatever your preconceived notion of annuities, you need to do this research. This is Not Your Father’s 401(k): The Retirement Product You Should Know About Finally, another one that touches on the salient points around immediate annuities (outside your plans). The right way to get the retirement income you need
The other basic way we talk about delivering consistent retirement income is through dividend stocks, good ones. This is a very good article about the why of dividend stocks. Response to ‘Should You Build a Portfolio of Dividend Stocks?’
This piece takes a somewhat different tack, arguing that dividend growth investing works in both accumulation and distribution phases. It is a very valid perspective, and one worth considering. The Dividend Growth Investing Mindset
Finally, we all know the very best dividend stocks tend to be fluid and opportunities present themselves. High-Dividend Stock Yields 10%, 11 Straight Dividend Hikes, Pullback Buying Opportunity and 10 High-Yield Dividend Aristocrats Worth Considering

Your Distribution Phase

We often speak of your distribution phase here as the income phase of your retirement planning. It is the time after the accumulation phase ends … once you retire. When you begin to draw down on your retirement savings your mindset must change and your decision making, too. Everyone … even financial advisors … focus their time, energy and attention on the accumulation phase. That makes sense because it used to be the bigger timeframe (and more lucrative for financial advisors). Now though, with longevity increasing, you may actually be in the distribution phase for a longer time. So, how do you most efficiently draw down your assets to deliver the comfortable, secure retirement you want?

Your Distribution Phase: Changing strategies to create lasting income.
The most important component of your distribution phase strategy is to generate enough income for as long as you need it. Without entering into the longevity risk discussion today we can focus on ways to optimize your retirement savings. This is an outstanding article based upon the Stanford Center on Longevity and Society of Actuaries work on the topic. Here’s an ‘income menu’ that could help retirees make their savings last
In a similar vein, while this seems like a sales pitch I think you can extract some value gratis. It may help you in the accumulation phase to adjust your saving strategy. It may help you in your distribution phase to optimize your withdrawal pattern. One online tool helps you turn many retirement factors into money magic
We speak often of dividend stocks (good ones) as a means of generating income and preserving principal. This article takes a look at the multi-generational potential for a solid dividend investing approach. Never Run Out of Money: The Gift That Keeps on Giving
To be fair we always temper our dividend discussions with the need to remain vigilant. Here the Motley Fool helps illustrate that point. 3 Most Wildly Overvalued Dividend Stocks

Your Distribution Phase: Remain vigilant, understand market conditions, and history.
Clearly there is some luck involved in retirement planning success. Far more is dependent upon hard work, by you or someone helping you. Whether it is the accumulation phase or your distribution phase you need to have a strategy. The 3 Characteristics of a Good Investing Framework
If you believe that a downturn is inevitable and coming soon, then understand what works. Here is an interesting look at Beta vs Volatility over time. Low Volatility and High Beta Stocks Prior to Last Downturn
Finally, in the vein of history as a guide, don’t be fooled by seemingly compelling charts. This author picks apart a classic chart to make you think hard about market timing. The World’s Most Deceptive Chart

Luck of the Irish

Happy St. Patrick’s Day, a day when the Luck of the Irish becomes topic for barroom discussion. One thing we all know is that a successful retirement has very little to do with luck. Beyond the possible sequence of return risk luck – good or bad – your retirement hinges far more on the effort you put into planning.

Luck of the Irish: Understand the environment in which you are investing.
Even the best plans need course correction, and understanding the environment is always a good place to start. Yes, retirement saving is long horizon, still there is room for prudence in where you invest new money. How is the economy doing? Do markets match up with macroeconomic reality? Is the Economy Doing Well?

Luck of the Irish: Leverage a combination of savings tools.
The foremost saving tool to leverage: compounding. That’s right, you do not need a government program to effectively save for retirement. You need to start early and be consistent in your saving habit. The power of compounding will repay you in spades. The Power of Compounding: A Patience Game (note that he points out the need to stay aware of the environment here)
While this comes at it from a different angle, the employer’s, it illustrates the power of the HSA. This tool is the Swiss Army Knife of saving, looking to become more powerful in Republican circles. What Clients Need to Tell Employees About HSAs

Luck of the Irish: Remain calm.
Understanding compounding, being diligent and consistent in investing you will accumulate a nice sum of money. Markets do have downturns and the key is not to panic. This article helps put this into better perspective for you. Early in the Accumulation Stage, Price Risk Can Look a Lot Different

Luck of the Irish: Focus on income in the distribution phase.
Once you retire the key is to transition your thinking to distribution of money from your savings. The distribution phase is largely about income, yet preserving principal is not a bad thing. You have the difficult balancing act of greater longevity and theoretically capped principal. That’s why we often highlight good dividend approaches and annuities as tools. Here’s an ‘income menu’ that could help retirees make their savings last Dividends Pile Up with This High-Yield Dividend ETF With Rising Rates Ahead, Stick with High-Quality Dividend Growers The right way to get the retirement income you need 4 Overlooked Tax Breaks for Retirees

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