Understanding Confusing Statements

Welcome to the Money Wisdom Podcast where Joel Johnson, CFP® of Johnson Brunetti, reviews retirement and investment topics weekly. Let’s get started…

Today’s Wisdom:

Your financial statements are confusing. We’ll work to clear up the confusion. Along the way, we’ll unpack the recent market volatility.

What You’ll Learn:

00:56 –Unpacking Market Volatility.

  • Wall Street certainly experienced ups and downs in the fall. We’ve been in a bull market since 2009. That probably means we’re due for a bear market in the future.

4:02 – Does Volatility Change The Mood Around The Office? 

  • Not particularly. We help our clients to plan for the long-term. Our financial plans are built upon the expectation getting a reasonable rate of return while protecting your assets.

7:32  – Is Volatility Acceptable In Retirement?   

  • While you need to protect your assets in retirement, you will need some growth in your portfolio to keep up with inflation. If you’re going to get growth, ,you must expose yourself to some level of volatility. Of course, there are ways to manage the amount of risk in your portfolio and protect your assets while still obtaining growth.

10:58 – Your Financial Statements Are Probably Confusing.

  • Each month, you probably get financial statements in the mail. Of course, it’s 2018. Perhaps you receive them via email. Regardless, they’re probably filled with a lot of jargon. We want to give you a clear picture of what’s happening with your finances. As an example, your statements might come with an income projection. They examine your net worth and in turn project what you can reasonably expect to live on each month. However, these statements are misleading. We really want you to see these as more of a baseline.

14:00 – Factor Inflation Into Your Retirement.

  • Because of inflation, you’re going to need more income in ten to fifteen years than you will today. In other words, inflation is the silent killer that tends to eat into your portfolio. Account for inflation when developing your income plan.

15:06 – Defining Your Asset Allocation Summary.

  • Your statements might contain a small pie chart divided into lots of different “slices.” These pie charts typically explain what you’re invested in.

17:29 – Find The Fees In Your Statements.

  • Fees are tricky in the financial world. They’re often hidden, and they usually don’t show up on your statements. Your advisor should be straight forward with you regarding the fees associated with your investments.

19:31 – Understand The Fine Print.

  • You probably don’t read the fine print associated with your investments. While you shouldn’t dwell upon it, we recommend you at least glancing over the fine print in your statements. As you see things you don’t understand, ask your advisor. The fine print will also contain many of the aforementioned fees associated with your account.

Final Thoughts:

“Since 2009, the markets have basically been going straight up…We’re actually due for a bear market.”  – Joel Johnson

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Thank you for listening!