6 Steps to Intelligent Investing

STEP 1 - Redefine Retirement

How to Rethink Retirement

We should stop looking at retirement as a noun or a time in our life. Instead look at retirement as a state of mind. It is when we are at our happiest and free of stress.

Steps We Can Take Now

  1. Identify what truly makes you happy in life on a deep and visceral level.
  2. Figure out how to incorporate some of the small things that make you happy into your daily activities.
  3. For the larger, more expensive items, try to work them into your budget and maybe sacrifice some expenses that don't make you as happy.

Don't Wait

You don't need to save everything for 30+ years down the road. We can figure out how to save for the long-term while still living the retirement state of mind now. There are certain things you may not be able to do when you are older.

STEP 2 - Investing the Mason Jars

What is a Mason Jar?

Now that we have identified our passions and what makes us truly happy, we need an organized way to save and invest so we can live them out and cover all our other expenses.

Criteria for a Mason Jar:

  • It has to have a specific passion or goal tied into a financial objective.
  • The financial objective needs to be tied into an investment strategy unique to that mason jar.
  • Address the most important mason jars first (take care of yourself before trying help others).
  • Jars are funded with current assets and future savings.


Mason Jars for Younger Investors

Here are some examples of mason jars for a younger investor:

Retirement Account Funding - Determine how much to put into retirement accounts (IRA, 401(k), Roth, etc.) for age 59.5+

College Savings - If you have kids or will have kids how much should we save for their college

House - Purchasing a primary residence or rental property

Business - If you own a business and need capital purchases or if you are looking to start a business down the road

Pay Off Debt - Instead of paying off debt or a mortgage you may want to fund an account to pay it off at a future date

Mini Retirement - Funding travel & experiences now instead of waiting to do everything down the road


Mason Jars for Investors in Later Stages of Life

Some examples of mason jars for investors approaching or living in the later stages of life:

Income Replacement - Determine how much income is needed to be pulled from investment accounts to cover spending

Safety Net - Fund up to three years of your annual budget

Long-Term Care - Self funding potential long-term care needs

Family - Fund needs for other family members (grandchildren, children, etc.)

Charity - Plan for ongoing donations and/or future contributions

Extra Vacations/Spending - Fund extra trips, experiences or other expenses above and beyond core budget

STEP 3 - Investing the Mason Jars

What to Accomplish Within the Investment Strategy

After the Mason Jars are set up, an investment strategy needs to be assigned to each mason jar:

  • Needs to be tax efficient with account structure and investment selection
  • The strategy needs to address reaching the goal of the jar with the least amount of risk possible

Value Investing

There are lots of different theories and styles of investing. At Intelligent Investing we think it is best to keep things simple and utilize sound and tested strategies used by the most successful investors.

Value investing is an investment strategy that derives from the ideas on investments that Ben Graham and David Dodd began teaching at Columbia University in 1928 and used later by Warren Buffet. It involves buying securities that appear undervalued by some form of fundamental analysis and are financially secure. The securities are then paired with other components which are negatively correlated to reduce the over risk of the portfolio.

The goal of the portfolio is to reach the desired returns in accordance with the mason jar of the portfolio, and do so with the least amount of risk possible.

STEP 4 - Reduce Your Taxes

Save Taxes on the Account Level

Saving and deferring taxes is where we can make the most impact with the investment strategy of your mason jars. There are two main areas were this can be accomplished. The first is on the account level. By sheltering your funds in an IRA, Roth IRA or one of many retirement account options we can either cut your tax bill, defer taxes to a later date and/or reduce your tax bill when you are older.

Small Business Owners

For some small business owners we an explore retirement accounts that can shelter upwards of $250,000 per year if you have the available cash flow.

Save Taxes with Investment Choices

The second way we can save taxes is on the actual investment choices inside the accounts. Certain investments are better served in IRAs versus Roth IRAs versus taxable accounts. By simply putting the correct investments in the proper accounts we can reduce your tax burden.

STEP 5 - Protect Your Wealth

Now that we have identified all your passions, organized your funds into mason jars, and have tax efficiently invested everything, it is time to protect your wealth in the case of a catastrophic event.

If you have a family or if there are people in your life who will be financially effected in the case of your passing, you should look at a life insurance policy. There are many different types of life insurance products and most of them can be confusing and costly. The easiest way to protect your family is through a term life insurance policy. You can purchase however much insurance is needed over a defined period of years for a low cost.

The need for disability insurance depends on your line of work and how you would be affected if you got injured or inflicted with a serious disease. You can buy different policies ranging from short to long term needs and covering different percentages of your wages.

Long Term Care

The last area to look at is protecting against the need for a long term care facility. This could significantly increase your budget in the later stages of your life and deplete your assets. You can purchase insurance and/or self fund this potential need. The important thing is to be aware of this when planning and we can come up with the appropriate strategy.

STEP 6 - Legacy Planning

The hardest part of planning is looking past your life and figuring out where you want your assets to go when you pass. The main considerations are:

  • where you want your money to go
  • how you can do it tax efficiently
  • can you and do you want to utilize any of the assets while you are alive
The first step to legacy planning is to set up a will, trusts and health care proxies. This will help ensure your money goes exactly where you want it after you pass. You can also identify who will manage the money for any minors, who will take care of any minors and how much control you want over the funds for people or organizations on the receiving end.

Estate tax laws are constantly changing, but your estate should be evaluated on a regular basis to ensure their is a plan in place to reduce or eliminate estate taxes if you have significant assets. The earlier you start the more strategies will be available.

Most people put together great strategies to help family members and charitable causes after they pass away. To maximize your happiness we should look at potentially addressing these causes while you are alive so you can see the fruits of your labor. It is important to take care of yourself first, but once that is done you may be able to spend some of your legacy planning and enjoy it while you are alive.
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