In our last Retirement post, entitled Is a Mini-Retirement Right For You?, we scratched the surface on the concept of a mini-retirement by defining the concept and what it might look like.

In this post, I want to dream a little and help you understand why this concept might work for you.  Let's look at two possible applications.

Our first example is a committed Christian couple. 

Here are the facts: let's say Kevin works in his own business and has been working in past years to outsource most elements of his business so he can work from anywhere.  Laurie works a couple of part-time jobs, but has the ability to take extended time off.

They see the value in mini-vacations because 1) they believe retirement is not really biblical (see Retirement: Is it a Birthright?) and 2) they want to involve their family in mission related travel and work while their two girls are still at home.

The couple decides they would like to spend two months per year abroad.   They have a friend from church who works in missions in Vietnam training pastors and lay leaders and they decide that would be an exciting place to visit and help with that mission.

The exchange rate with the U.S. dollar allows them to book extended stay accomodations for their family in Hanoi for a fraction of what it would cost here in the U.S.   Kevin is careful to make sure he has a dependible internet connection either where they stay or nearby to continue to operate his web related businesses.

They arrange to rent their home out during this summer period using one of the many internet sites for this purpose.  The rent offsets many of the costs of travel and lodging while away. Obviously travel costs to Vietnam for a family four is only partially offset by this rental difference.  The longer the trip the more likely they can offset more of these costs.  Also since they have decided to travel more often, they will be able to earn more frequent flyer miles they can use on future trips abroad. 

While in vietnam, they travel some, see sights and the family assists with the pastor training going on in many locations around this country.

Our second example is a man and wife (Bob and Betty) whose kids have left for college. 

Bob and Betty want to travel more and see more while they are both still healthy.  Unlike our first family, this couple is not concerned about the kids traveling with them.  In fact, this couple would like to be home during the summer months as this is when their children return from college.

Like our first couple, this couple decides to stay an extended period in one location per year…spending up to three months.  They choose Costa Rica as their first travel location.

Again they arrange a low cost, now tourist location to stay for an extended period.  Since the U.S. dollar goes far in this country, they are able to stay for a fraction of the rental dollars they receive by renting their home in Salt Lake City, Utah.

This leaves them with very manageable costs for transportation to and from San Jose, Costa Rica.

Next year, they plan to stay in the country of Panama.

Well you get the idea.  If you think outside the box this concept can work.  I didn't attempt to find actual rental values or run the numbers for you today (maybe in the future), however it is possible to do this and many Americans are already using this concept today.

My wife and family are exploring this same concept with the goal of traveling next summer.

So what are your thoughts?  Has anyone experienced a mini-retirement already?

There are a number of realities to life that become even more evident during tough times.  I found this list in a neat little publication by Ron Blue and Jeremy White, CPA called Surviving Financial Meltdown.  It is not a new book, but I do think these principles apply in good and tough times.

Here is their list:

1.  Economies and stock markets go up and down.

• Do plan for and expect downturns.
• Don't sell low and buy high based on emotion, or fret about periodic declines that show up on your statements.

2.  The only certainty is uncertainty.

• Do expect change and look for the opportunities it can bring.
• Don't worry, avoid risks because of fear, or attempt to control events.

3.  The conventional wisdom is usually wrong.

• Do seek wisdom from God as you pray and study Scripture; seek godly counsel from others.
• Don't look for "insider secrets" to success; don't avoid counsel offered by knowledgeable friends and professionals.

4.  No one investment works every time.

• Do diversify to spread out risk.
• Don't stop investing.

5.  Correct principles work correctly throughout time.

• Do remain calm even in financial storms.
• Don't let fear or lack of confidence keep you from sticking to solid financial plans.

I would add that under item number 4, above, that is why we tend to mix our version of "buy and hold" with more active, highly uncorrelated investment strategies (such as trend following) within the same client's portfolios.  It is one further layer of diversification!

What do you think?  Should there be additional dos and don'ts?  Or do you have an contrary opinion on one of the five economic realities listed?

CBS has done it again.  Did you see their new show?  The Amazing Race – Country Edition!

In this Amazing Race, countries continue to spend and print money in a race to see who can debase their currency the fastest.  All the major developed countries are participants in this race and, after this past weekend's elections in Greece and France, it is a full-on competition that your family will just love!

You need look no further than France where Francois Hollande swept into power by narrowing defeating Nicolas Sarkozy in a true people's mandate.  Hollande campaigned against the German solution of austerity (boo!!!) and for a return to the good old days of spending and borrowing.

In Greece, elections saw the ruling coalition support fall and candidates from the far right and left gain valuable seats in their Congress.  This virtually guarantees a change in stance towards continued austerity and a likely showdown with Germany over the EU's continued support.  According to CNBC ahead of the vote its leader Alexis Tsipras told the Observer Newspaper in the UK that "Merkel should worry and Europe should hope in us."

So what does this mean for you and little old me back here in the good old US of A?  Probably nothing immediately.  That is the good news!  This is why the stock markets have recovered from what looked large overnight losses in the futures.

However, if countries in the same spend, tax and borrow boat as the U.S. continue to do so to excess it will eventually drive several unintended consequences.  The first, is we are sure to see some countries defaults on their debt.  The first such country is likely to be Greece.  Why?  Because as a member of the EU, they do not have the flexibility to print more paper as the U.S. currently enjoys.  This will force them out of the EU and to default on its debt obligations, while reintroducing their national currencies.

Second, it appears the political and populous "will for change" (austerity) is weak!  We have seen that here in the U.S. and we see this all over the world.  So this means that countries will continue to spend and borrow.  It's citizens will likely do the same.

With all the spending and borrowing in the world, investors will require a higher rate of interest to take on the rising credit risk.  This will drive bond yields up and bond prices down globally.

Third, since we are continuing to spend, buy and use, global resource prices will rise.  We call this inflation.  The cost of everything should rise especially as we move out of this period of globally muted growth.

The result is going to be spiraling inflation and much higher commodity costs.

So what is an investor to do?  Quite simply start to move away from bonds that are interest rate sensitive.  Get more invested in assets that will rise with inflation such as commodities and precious metals.  Finally, hold the currencies of commodity rich countries while being short the currencies of the greatest currency debasers (such as the U.S. dollar).

This also likely means more U.S. qualitative easing.  So far this has been good for equities and to a point in the process, it will continue to be so.  So once again it appears cash should be trash!

What do you think?  Markets are strange animals, do you have an opinion?  If so, leave a comment below and let me know your thoughts.

Can we help you figure all this out?  The secret is having the right exit strategy.  Diversification by strategy and asset since no one truly knows the future.  The secret is likewise in the planning.  So call us today and get a Free Second Opinion at 813-253-2388 x 222.

Stay up to date will all our market updates and posts on retirement, trend following, educational funding, etc.

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Ever since I read about the concept of a "mini retirement" in Timothy Ferriss' book "The 4-Hour Workweek, I have been enthralled by the concept. By the way, I am sure Tim did not invent this concept, but it is the first I had read about it.

So what is a "mini retirement"? Well, Timothy Ferriss' book really doesn't provide one definition, here is how I would define it relative to what we do (not what Tim was suggesting for a much younger audience).

"It is the conscious decision to live elsewhere on an extended basis at least annually, while also deciding that a traditional retirement is not for you."

So let's unpack this and go a bit deeper.

In a traditional retirement, you wait until a certain age (say 65) and then leave your job and live off your savings and whatever Social Security pays you. The traditional vision is of one traveling the planet, while sipping Pina Coladas and living high on accumulated earnings from investment assets. There is nothing wrong with this dream, just that it is not for everyone and our best laid plans sometimes go astray.

The downside of this type of retirement is that it is very investment return driven (and we all know where investment returns have been over the past dozen years). It is also very health driven. What happens if you wait to have fun and travel until you retire, but you are not physically well enough to do these things? One word comes to mind….screwed!

In fact the bible even warns about this type of planned retirement when it says in Luke 12:16-21:

"A rich man had a fertile farm that produced fine crops. In fact, his barns were full to overflowing. So he said, ‘I know! I’ll tear down my barns and build bigger ones. Then I’ll sit back and say to myself, my friend, you have enough stored away for years to come. Now take it easy! Eat drink and be merry.’ But God said to him, ‘You fool! You will die this very night. Then who will get it all?’ Yes, a person is a fool to store up earthly wealth but not to have a relationship with God."

So what is the solution? One possible is the Mini Retirement.

Imagine this scenario! Every summer you rent your existing home in the U.S. to some other family from the U.S. or elsewhere in the world. You then travel with your family to live for one to three months in the country of your choice (preferably where your currency goes a long way). Then, while are still physically fit, you swim with your family, see new sites, and immerse yourself in a new culture. Wouldn't that be a hoot?

Well it can happen! Yes, it takes some planning (investment and retirement). Yes, it is not for everyone, but it can happen. In today's global, connected society, it is even more possible than just a decade ago.

What about traditional retirement then? My answer is that Is it Really a Birthright? Yes, that is plug for a past blog post. However, it is also one more reason why a traditional retirement may not be for everyone.

I also firmly believe with the right planning, you can enjoy a transition in latter life while still working and enjoying the fulfillment of contributing to society. Why must retirement be One Size Fits All (yes, a second shameless past blog post plug)?

What do you think?  Could a Mini Retirement work for you?  Leave me a comment below. 

More on this in future blog posts. If we can help you sort things out, feel free to contact us. We offer a Free Second Opinion on your current planning and investments.

I said "many" because with the advent of LinkedIn, it happens more than you know.  Since I fully updated my LinkedIn profile and worked with a consultant on it (thanks Nancy Laine, The LinkedIn Concierge), I have been contacted twice about jobs in the past two months. 

Now this was not my intent with the update, it was supposed to encourage the unending flow of new potential client contacts (which it has not).  However, it is still nice to be loved!

So back to our dilemma. We recently worked with a woman that was trying to decide between her current position and a brand new position at another company just down the street.  She was going to get a bump in pay by $10,000 to $145,000 by leaving her old firm and a chance to be a part of a turnaround that could make her options package very valuable.

However, our candidate, let's call her Ruth, was focused purely on the pay and the retirement plan match differential.

As a prudent saver, Ruth noticed that her current company matched 150% of the first 4% of her retirement contributions.  They then match 50% of the next 2% of her contributions as a percentage of her compensation.

While this new position paid $10,000 more in compensation, this company only matched 50% of the first 4% of compensation.  She was worried that the Free money match from her current company would more than offset any taxable advantage in compensation.

So let's take a look at the results, assuming she saved the after-tax difference in compensation in a taxable account.  We also assumed both accounts achieved a gross 5% return (3.5% after tax).

It is quite clear that Ruth should take the $10,000 in extra compensation and run.  After tax and over the 15 years she has till she plans to retire, she would come out almost $54,000 ahead after taxes assuming the above assumptions.

The left column represents the compensation difference, after tax, compounded for 15 years.  The right most column represents the current employer compensation and match, which is higher, and the effect of compounded returns on that money.

Note that the savings accumulated from both scenarios comes out pretty close until you factor in the affect of taxes assuming she now distributes out those retirement plan savings.  Obviously, if she can stretch out those distributions, raise or lower the expected returns, tax rate, etc., it could change the outcome.

It is also a given that Ruth would likely need to rollover her current employer retirement account if she left for the Prospective Employer.  If you are in this situation, take advantage of our Free Report  – "5 Reasons to Roll Your Retirement Account Assets."

A recent article by Bernie Clark in Financial Advisor Magazine outlined The Changing Affluent Investor.  Here are some of the highlights of his article:

• Nearly 80% of the affluent report they have changed their investment strategies in recent years;
• More wealthy than ever have pushed back their retirement dates and refocused their investment strategies away from income and back to growth and protecting wealth;
• They are seeking advice from an advisor they feel a common, emotional connection and interviewing more advisors to find that bond;
• 93% of affluent are more focused on monitoring portfolio risk that in the past.  Safety has been (and will remain) a key concern for many affluent investors;
• Diversification among multiple advisors is what the affluent see as key to risk management.  35% of affluent households with $2 – $5 million work with multiple advisors.  This increases to 58% for households with $5 million or more in assets.

So what can we learn from this? 

1. Our guess is the affluent are still chasing performance in their equity and bond allocations by changing investment strategies.  These changes usually come at the very worst time, since EVERY investment strategy has periods of outperformance and underperformance.
2. Are both growth and wealth protection synonymous?  We think so but if the hot investment strategy is "buying and holding" of equities or bonds, the affluent are likely not getting the wealth protection they crave.  Even if they are in what are alleged to be principal protected products, are they not just picking up enterprise (going concern) risk in lieu of market risk?
3. What exactly are the 93% who claim to be monitoring risk more carefully really doing to accomplish this?  Our guess they are reviewing their statements more carefully and talking with their advisors more often.  Will this mitigate anything?  Our guess again is not much.
4. The affluent claim they are being more prudent in advisor selection and by working with multiple advisors.  We agree here as long as these advisors manage money differently.  Diversification not just in your holdings, but by investment strategy is smart in today's markets.

So some final thoughts:  Although it has been a bit out of favor, you need a non-correlated investment strategy on your side heading into the 2013, if not earlier.  What has been working today (i.e., buy and hold) will likely not work after the elections when the true state of the world economies is revealed and the next recession begins.

We believe that Central Bankers will be forced through massive debt levels to step aside and the true markets (unaffected by Central Bank mechanisms) will once again be revealed.  We also believe the path they will take is down.

You have two choices 1) get out (assuming you have a market timing advisor) or 2) make money on the decline.  Since, the average affluent investor is well behind on their plan for retirement, we suggest our trend following strategies might be the answer.  Did you know that trend followers were the only group to make big money during the 2007-2008 financial crisis?  We expect that to be the case again in late 2012 and 2013.

Call us today for a Free Consultation at 813-253-2388 or via email at info@intrustadvisors.com.

There is no doubt that one of the strongest stocks you could follow is Apple, Inc. (Symbol AAPL).  It began a monster move in December 2011 breakout and continues to lead markets today.

So if we look at Apple's stock chart, what might it be telling us about the overall markets?

First, what it is telling us is that the trend is still up.  You can tell this by price continuing to stay above its orange 23 day moving average.  You can also tell by looking at the bottom indicator window and the way the stochastic oscillator has stayed above 80.

Second, you can see that momentum is waning a bit.  You can see this in the rate of change indicator at the top of the chart.  The moving average of this indicator is now starting to trend down.  You can also see it in the MACD indictor in the second to last indicator window….it has diverged with price in its direction.

So what it the overall diagnosis?  Price beats all and right now price is headed higher even today while the rest of the market is headed lower.

So our guess is that this stock heads higher and markets do as well for at least one more push higher.  By the way, the weekly charts fully confirm this diagnosis.  So it would see reasonable that it might be wise to accumulate AAPL (and U.S. equities) on any weakness.

The deadline for making a 2011 IRA contribution is fast approaching!  Mark your calendar for April 17, 2012.  This deadline is applicable to all individuals, even those filing for a tax-filing extension.

Here is a reminder of the contribution limits (IRA and Roth IRA) for 2011:

Under 50 years – $5,000

Great than 50 years – $6,000

There are no income limits on traditional non-deductible IRAs. 

The income limits for deductible IRA and Roth IRA are as follows:

• Traditional deductible (if covered by a plan) - $90,000 – $110,000 joint; $56,000 – $66,000 single and HOH; $0 – $10,000 married filing separately. 
• Traditional deductible (one spouse covered, one not) - $169,000 – $179,000 joint
• Roth IRA – $169,000 – $179,000 joint; $107,000 – $122,000 single or HOH; $0 – $10,000 married filing separately.

If you are like me, the last thing you want to be is a slave to a lender. Well now there is more hope in the fight against debt (at least if you own an iPhone). It is called Debt Snowball Pro and it helps you easily do a debt snowball right on your iPhone.

Check out this video on the software and how to implement a debt snowball of your own.

http://www.youtube.com/watch?v=vQ4Ce7ujDxc

Those like me that have an Android phone will just have to wait for the next release of this software or use one of the many tried and true free spreadsheets available on the web such as this one http://www.vertex42.com/Calculators/debt-reduction-calculator.html.

If you need further help, let us know.

So let's take a look.  Naturally, let's start with a big picture view and work our way to more short-term charts.  We will focus our review on the 10 year treasury yield charts.  Remember as yields rise, bond prices drop.  The inverse is also true.

Note how the overall long-term trend for yields is still down (dark blue diagonal line).  We say a trend is down when you are drawing trend lines (like the blue line) from the upper part of the chart to a lower portion of the chart.  Clearly the trend has not been broken.

However, we can also see that in 2011-2012 we fell below the prior 2009 lows yield (lower dotted pink line).  So in the near-term we are oversold and can expect yields to increase towards the upper dotted pink link around a 3.5% yield or possibly toward the blue diagonal line at around a 4% yield.

So the good news is that bond yield are still in a downward trend which means bond prices can rise further.  The bad news is yields should rise over the next few month and this will be bad for bond prices.

So we know what to expect over the next several months, but what should we expect in the short-term?

Here is your answer.  Check out the chart below of daily 10 year treasury yield:

Note how yields rose to near the previous October 2011 highs and now appear to be reversing.  As they say, nothing goes straight up and the same can be said of bonds. 

Our guess is yields will drop in the short-term to around 2.1% (the top of its prior consolidation range marked by the pink dotted line).  It is then, our guess (barring a worldwide crisis) that yields again move upward.  The latter would be an excellent time to at least lighten up on interest sensitive bonds.

Our belief is that high yield, floating rate, corporate and emerging market debt will be the place to be on this reversal.  TIPS will do ok, but will still be fighting against the negative impact of rising rates.

So there you have it.  Bonds are still good over the very long term (at least so far).  They will experience pain over the medium term.  However, we should see a short-term rally over the next few weeks where yields drop and bond prices rise.  The latter may be your last chance to lighten up or change the mix of bonds in your portfolio in 2012.