August 5, 2017

WTOP Interview: Why Financial Advice For The Masses Won't Work For You

LISTEN NOW! Rules of thumb are great guidelines, but smart financial decisions should be designed just for you.
Dawn Doebler, CPA, CFP®, CDFA®

Interview Transcript:

SHAWN: The advice in making money decisions. Well now we'll take a look at how they can directly affect your finances.

HILLARY: Joining us, Dawn Doebler; cofounder of Her Wealth and Senior Wealth Advisor at Bridgewater Wealth in Bethesda. Dawn, good to see you!

DAWN: Good to see you Hillary.

HILLARY: So, there are more than 40 dimensions of wealth that each person should really consider when making decisions. Let’s refresh everyone’s memory on what they are?

DAWN: That’s right! Well last week we talked about the importance of considering aspects of your life situation and how they impact your financial decisions. So we wanted to give our listeners a chart to review and take a look at. And in the chart, we have something called ''dimensions of wealth'', which you mentioned. We break them down into four categories:

  1. ‍Personal
  2. Wealth
  3. Family
  4. And money experience

And, all of these categories and all of these 40 things should be considered when you’re making financial decisions.

SHAWN: Now, how do all these dimensions of someone’s wealth play out in the advice and the decisions they make?

DAWN: Well, the reason we did this article this week is to point out that advice given to the masses may ignore some special situations that shouldn't and that means the advice may not be appropriate for you. So we illustrate this article by looking out for generally accepted financial rules of thumb. We looked at retirement income, college savings, investment alternatives and how much cash to keep on hand. Let’s talk about retirement income; there's a general rule of thumb that's called the ''4% rule'' because most people ask how much can I take out of my retirement account without running out of money.

So, 4% is generally accepted as the amount you can take out each year without running out of money. But, the wealth dimensions that we talk about in the article; things like your spending rate, your other sources of income and your tax bracket affect what that percentage should be. So for example; we work with a lot of people in the government who have really nice pension income. And when that’s the case and if that’s the case for you, you probably can withdraw actually more than 4% of your investments per year without exhausting them and that’s because you aren't going to be forced to liquidate assets in a potentially down market. So, another way to say that is, you can break that 4% rule.

HILLARY: Can you give us a few examples of how family dimension affects retirement income?

DAWN: Yes, so we just talked about some things that could allow you to withdraw more than 4%. Let’s talk about some family dimensions that could reduce that 4%.

So for example; if we have someone with a family history of chronic health conditions, we usually say you don’t want to withdraw 4%, you want to reserve more, but you have that available for long-term care especially because you may not be insurable.

Also, another one that generally causes people to withdraw less than 4%, is if they have a spouse who's substantially younger than them because you need to preserve that money for that spouse.

And then lastly, if we have children with special needs or other people in the family that might need the money, we would say that you want to not follow the 4% rule, but perhaps withdraw less than that.

So the bottom line is really, we have these rules of thumb, but it really depends on your specific circumstances. We suggest you use the chart in the article, make sure you're reviewing all of those things that are specific to you before you follow this general advice.

SHAWN: Alright Dawn, thanks so much. Dawn Doebler, Bridgewater Wealth in Bethesda. The article she refers to is on WTOP.com search Her Wealth.

Tweet

Sign up to receive the guide

Consider this your training manual to get and stay financially fit for life!

Thank you! Your submission has been received!
Oops! Something went wrong while submitting the form
Dawn Doebler, CPA, CFP®, CDFA®

Dawn’s experience spans more that 25 years providing wealth management, financial planning and corporate finance solutions for clients. As an MBA, CPA, Certified Financial Planner (CFP®), and a Certified Divorce Financial Analyst (CDFA®), she is uniquely qualified to understand the challenges and financial needs of clients from executives to entrepreneurs, as well as single breadwinner parents. Dawn is a weekly contributor to WTOP radio.