Broker Check

August newsletter

August 2, 2021

Today is the First Day of the Rest of Your Money"


For a majority of our clients, our first priority is to serve and guide them through making sense of their financial picture as it relates to their long-term goals.  According to a recent survey, only forty percent of Americans have calculated how much they need to save for retirement.  I find this to be an alarming statistic.  For our clients who have not reached full retirement, this calculation is crucial to determine their long-term financial goals.  Whether you are saving for your retirement years (the “accumulation phase”) or you are in retirement (the “distribution phase”), an important thing to be mindful of is that the average American spends more than twenty years in retirement, possibly over thirty years, depending on their overall health and family medical history. Making those years an enjoyable financial experience is at the core of our clients’ long-term financial goals.

To be successful in the “accumulation phase” of retirement planning, you must be disciplined about paying yourself first through regular contributions to your retirement and other investment accounts.  The gold standard has been to save at least ten percent of your earnings, but it is wiser to shoot for fifteen to twenty percent.  Having this savings goal will provide you more flexibility about when you are able to retire.  One of the things people in their working years fail to account for is the risk of having to retire earlier than they planned and thus, in most cases fail to fully fund their retirement nest egg in time.  I have seen research that shows that up to fifty percent of people retire earlier than they planned due to a job loss or health concerns for themselves or a loved one.   

By building your nest egg consistently over the long-term, you have a two-engine process working for you.  One engine is the returns you receive on the account, which is enhanced through the magic of compounding and “Intelligent” investing; using a proven investment strategy such as the one we have been successfully using for over twenty-five years.  This will make the difference in your long-term results.  The second engine that accelerates the growth process is making regular additions to the initial pool of investments.   The sooner regular additions can be made the bigger the impact on the investment results.

To illustrate this, let’s compare: a 30-year-old investing $100 per month until age 65, with someone starting one year later at age 31.  The 31-year-old contributes one year later thus adding $1,200 less than the 30-year-old, but the 30-year-old ended up with $37,125 more at age 65.  The impact of starting one year later is that the 30-year-old accumulated $37,125 more in retirement, based on a ten percent annualized return on her investment portfolio.

Additionally, I have told some of my younger clients the story of Jack and Jill.  Because Jack suffered head injuries from a fall he did not go onto college.  Instead, at age 18 he got a job that generated enough income to contribute $5,000 per year for eight years for a total of $40,000 towards the funding of his retirement portfolio.  Meanwhile, his sister Jill, inspired or guilt-ridden by Jack’s accident went on to medical school.  At age 26, when she started her working career, she began to contribute $5,000 each year for 40 years!  She put in a total of $200,000 compared to his $40,000, yet Jack had $375,000 more in his investment portfolio than Jill when they each reached age 65, based on a ten percent.   annualized return on their investments!  Both examples illustrate the importance of funding early and often to your pool of investments so the magic of compounding over time is amplified when our “Intelligent Investment” strategy is applied. 

Soon you will begin receiving quarterly reports from our new portfolio management software that will reflect one-year, five-year and ten-year investment results.  Looking at the aggregate history of all the portfolios we have managed we have returned an average of 24,10 and 8.4 percent, respectively over the above listed look-back periods, as of July 31, 2021.  Over our first 25 years we generated annualized returns over eight percent; however, we always explain to clients that looking forward we expect more typical annualized returns in the range of six to eight percent based on a ten-year time horizon.  Let’s consider the following projections for hypothetical portfolios:


Figures above are for illustration purposes only and are not actual results.

Past performance does not guarantee future performance. Results will vary but stated calculations are accurate.


You can see from the chart above by letting your investments growth through good portfolio management, your money does grow over time; the effect of the first engine. When you look at adding the second engine, contributions, you see even more significant results.  Putting these two engines together lets you be in the driver’s seat in your retirement!

 In office news, Laura and her husband Forrest became first-time grandparents on July 26th. The next time you see or talk to Laura you may want to congratulate her on the new bundle of joy in her family, Wyatt Thomas Vaughan. You’ll have to wait until August 16th though as she will be traveling to see her grandson for the first time this next week!


Intelligent Investment Management, LLP