As the founder of ePERSONAL FINANCIAL, Eric helps his clients take control of their finances through technology and advice. Eric has always been interested in the financial world, and over the past 28 years, he has been involved in every facet of wealth management. This includes, retirement, family business succession, and insurance planning.
Unlike traditional firms, Eric and his team have transformed wealth management into a solution that is truly built with their clients in mind. No longer do clients have to meet with a suit-clad advisor in a stuffy office. Instead, they can take control of their financial future, monitor their investments, and harness current technology in the comfort of their own home.
Eric graduated from Washington State University with a degree in Business Administration with specializations in Accounting and Finance. In addition, he holds his Accredited Investment Fiduciary® and Certified Exit Planning® designations. Eric has a thirst for continuing education and holding himself to a high standard of ethics.
Throughout his career, Eric has managed to find balance among his professional and personal life. Eric enjoys spending time with his life partner, Sherrie, and being a father to his young adult daughters, Kayla and Brooke. As a Washington native, Eric takes every opportunity to get outside. He is an avid cyclist, has taken up stand up paddle boarding, and enjoys snow skiing and training his Australian Labradoodle puppy, Blake.
BA, Business Administration, Washington State University
Eric Flaten is an advisor representative of Sowell Management Services, which does business as ePERSONAL FINANCIAL, LLC. Eric is also the founder of ePERSONAL FINANCIAL, LLC, a separate legal entity. Advisory services are offered through Sowell Management Services, a registered investment advisor.
Thank you for your question. It looks like you could use some guidance on how to build a portfolio before you invest your hard-earned money. My philosophy is that the best result for investors is when they focus on understanding their own tolerance for risk first. Then build a diversified portfolio that perfectly matches their own risk tolerance. Review your progress towards your goals. This creates a perfectly matched portfolio to their Risk Number and a systematic way to measure your progress and adjust along the way. This can be accomplished in three easy steps:
First, capture Your Risk Number. The first step is to answer a 5-minute questionnaire that covers topics such as portfolio size, top financial goals, and what you’re willing to risk for potential gains. This will pinpoint your exact Risk Number to guide the decision-making process.
Align Your Portfolio. After pinpointing your Risk Number, create a portfolio that aligns with your personal preferences and priorities, allowing you to feel comfortable with your expected outcomes. The resulting proposed portfolio will include projections for the potential gains and losses you should expect over time.
Meet Your Investment Goals. Review your progress toward your financial goals by building an Investment Map. When you finished this process, you’ll fully understand what is possible to increase the probability of success.
Thank you for your question and for being proactive with your retirement planning at age 41. You are exactly right! Retirement tools can often make the task of retirement planning more confusing. I have been helping individuals with retirement question for almost 20 years and I always ask, "How can I help simplify this process for my clients?". That's why I came up with term Retirement Number after choosing to work with the tech folks at Riskalyze. They streamlined the number of inputs and combined it with their Risk Number* tool. This simple process can help individuals either planning for retirement or individuals currently retired answer the question, "Am I on track?". The result will provide you with two key numbers, your personal Risk Number (RN) and your Retirement Number number. Yes, it’s that easy. This type of efficient retirement planning can really help you ease the stress of retirement planning down the road.
You have done a great job providing a lot of information that is needed to determine your Retirement number. I have made a couple of assumptions to see if you are on track or not; current income and Risk Number. Based upon your comments, I used 4% of your current retirement portfolio, or $48,000 as your annual income and a RN 43, which is a translates to annual rate of return of 4.88%. Don't worry if the numbers are not exact for this illustration, the Retirement Number tool can be easily updated as soon as you complete a personal RN questionnaire. You can learn more about RN or Retirement Number from any independent advisor that uses the Riskalyze applications or you can visit my website.
Based on your information, I could fill in the following inputs:
Current Investment Amount: $1,200,00
Month Savings (assuming 401k max plus company match): $2,000
Birth Year: 1976
Retirement Year: 2041
Monthly Withdrawal Amount (today’s dollars): $4,000
Life Expectancy: 90
Annual Inflation: 3%
Annual Savings Increase: 2%
Investment Annual Rate of Return: Risk Number 43 or 4.88%
Your Retirement Number: 95%+.
Congratulations! A 95%+ means that you are on track with your stated goals based upon your assumptions. I hope that this information has been helpful in your quest to simplify the retirement puzzle.
* Risk Number is a registered trademark of Riskalyze
First off, what is your investment objective? Income? Growth? Or both? What is your tolerance for volatility over time? Short, mid, and long term? Target rate of return? These are important questions and probably not what you were expecting when you posted your question. These fundamental questions must be answered first to establish your objective and to establish your RiskNumber. The RiskNumber is derived from a 7-15 question exercise that establishes your personal tolerance for market volatility. Once that is known along with your objective, a custom portfolio can be constructed. The investment portfolio will perfectly align with your objective and your comfort level of investment volatility. Aligning expectations of your portfolio volatility, along with your comfort level is often overlooked or misunderstood by investors until it’s too late (i.e. Tech Bubble 2000, Financial Crisis 2008). You have worked too hard for your money and it’s very important that you have a high level of confidence (expectation) in every investment decision you make.
Congratulations on being 'actively' involved in your financial future. Since there is no 'right' way of answering your questions, I will instead provide you with known facts and you will be able to choose the best option to meet your goals. First, let's understand what is guaranteed and not guaranteed.
1.99% Truck Loan
Any payment to principal, would be considered a 'guaranteed' savings rate. Why? Because you have a fixed interest rate established in each of the promissory notes to the lender. Any interest savings by paying off the principal early is guaranteed.
4.00-9.00% return from your financial advisor. I would venture that this estimate could be expanded to include a negative number, but this is all dependent on the underlying investments and time horizon. My point is that your actual return on invested money is not guaranteed. This also holds true with your self-directed investing via Scottrade.
INCREASING YOUR CONFIDENCE ON MAKING INVESTMENT DECISIONS:
Now let’s improve your confidence on what to expect from any investment portfolio. There is a tool available that provides you a 95% confidence of range of return for a given investment portfolio over a six-month period. The first steps are to determine your Risk Number and your current portfolios Risk Number. I would suggest that you complete a two-minute exercise by clicking the following link: Find Your RiskNumber. This will provide you with your unique tolerance for market risk (or the volatility in value of your holdings). Additionally, if you enter in the holdings (ticker symbols) of any of your investment accounts, you will be able to determine that portfolios unique Risk Number ranging from (1 - lower risk to 99 - high risk), including bond funds and indexes.
For example, if a given portfolio has a combined Risk Number of 86. Hypothetically, a Risk Number of 86 represents that over the next six months, there is a 95% probability of a return falling between -21.1% - + 32.2%. That's a 50+% range, or in other words, a highly volatile investment holding. If your personal Risk Number was 48, then there would be cause for concern. If your Risk Number was an 84, then you are pretty much on target for meeting expectations.
This exercise is more about affirmation for the investor. This helps you confirm that prior to investing one dollar, you have a 95% chance of what to expect over the next six months. Thank you for your question and time. I hope that you are now better prepared to prioritize your surplus money.
No, you cannot roll your traditional 401(k) or IRA into your pension. However, if you elect to take a lump sum distribution from your pension, you could roll it into a IRA rollover account (IRRA). Both your traditional 401(k) and pension are pre-tax funded and can be commingled because any of your IRRA distributions will be taxed as ordinary income.
PENSION- You need to carefully weigh all your options before taking a lump sum distribution from your pension and rolling over your 401(k). The annuitized payment (from your pension paid to you monthly) should be added to monthly fixed income bucket. This bucket should be measured against your "needs" (expense) bucket (i.e. medical, housing, transportation, food budget). Many retirees find it comforting to have these types of expenses covered entirely by fixed payments, typically from a combination of pension, Social Security, and other types of annuitized payments.
401(k- Rolling over a 401(k) may increase your investment expenses depending on what type of IRA rollover account you open (i.e. self-directed IRA, investment advisor, annuity, etc.). You need to prudently determine if it’s less expensive to remain in your current 401(k) plan or any alternative outside the company sponsored plan. There are always tradeoffs and it may be helpful to speak with a financial professional that can help you examine your total financial picture and provide you with the proper guidance for your specific situation.