Financial planning anew in retirement

Life changes spur adjustments

by Chia-Li Chien | Oct. 20,  2015

“We both continue to be engaged as” if we were working, John and Mary (not their real names) proudly described their retirement experience. John retired at age 55 and had been a middle manager at a DC area government agency.

Mary took an early retirement package from the Department of Education at age 52. According to Quadagno (2014), as a retiree Mary fits the “Social Role and Age” definition. She worked over 30 years for her employer, but had to take an early retirement due to her employer’s policy. She was not at a normal retirement age; therefore there was a significant reduction of her pension payment. Both John and Mary were considered quite young at their ages of retirement. They don’t have any children.

Can a Family Business Finance Your Retirement

With the right succession plan, it can!

by Chia-Li Chien | July 29,  2015


Can a Family Business Finance Your Retirement by Chia-Li ChienWhen retirement planning becomes a family affair, it’s difficult to sort out how a win-win situation could exist—with all the baggage, emotion and control issues familiar to every family. It’s not always easy or even clear-cut, but business owners can create favorable conditions now to finance retirement, while implementing a transition satisfactory to everyone when the time comes.

All in the Family

A few years ago, I worked with two clients, John and Mary (not their real names) who ran a business that consistently ranked in the top 15% in their industry. They had been in business about twenty years, but still had a limited retirement savings from the business. Even so, they continued to count on financing their retirement from the business.

John was 55 and Mary was 61 at the time I worked with them. Mary had two children from her previous marriage, Jerry and Mimi. Jerry had been the general manager of the business since its inception. Mimi was a family physician and had no interest in the business.

Make the right pick

How your choices now can affect three generations to come

by Chia-Li Chien | June 04,  2015

“When a man chooses the right wife, it can affect three generations of his life!” goes an age-old Chinese saying. (The three generations are: his parents, his own life and his children’s lives.)

Recent research sheds light on why this proverb continues to prove true. Although the study was not about mate selection, it revealed that having the right mate can ultimately lead to a more desirable outcome in retirement wealth and life. In research by D. W Eccles, P. Ward, E. Goldsmith, & G. Arsal1 in a 2013 paper, it was found that having the right retirement saving behaviors resulted in almost three times more wealth compared to those who do not possess the desired behaviors. (It is also worthwhile to note what this group does well so that others can replicate and benefit from adopting the same.)

First, the research focused on a group of couples married more than 10 years, between the ages of 51 and 61. They had one or more children, and stayed healthy with no major medical expenses. They did not have any prior bankruptcy records and read their social security statements annually.

Eccles’ research group found that this group of couples had a propensity toward self-learning. For example the husband tends to learn from reading magazines or newspapers to improve financial knowledge.

What Does the Rule of 72 Reveal About Your Business?

Treating your business as an investment can pay off in the long run!

by Chia-Li Chien | May 21,  2015

What Does the Rule of 72 Reveal About Your Business?  by Chia-Li ChienTo start, let’s all get on the same page about what the Rule of 72 is. For our purposes, the definition of the Rule Of 72 is: A rule stating that in order to find the number of years required to double your money at a given interest rate, you divide the compound return into 72. The result is the approximate number of years that it will take for your investment to double.

For example, if you want to know how long it will take to double your money at 12% interest, divide 12 into 72 and you get six years. (Via Investopedia.)

What would have been your ROI (Return of Investment) if you had invested in Apple stock on July 1, 2004? Well, according to Morningstar, if you bought Apple stock on that date, you paid $2.31 a share. On July 11, 2014, the same Apple stock was trading at $95.22 per share. A quick calculation reveals your ROI would have been 40 times greater than your initial purchase.

So that means if you started your business on July 1, 2004 and used your own hard earned $100,000 as start-up capital, once again, using the Rule of 72, with the average ROI of seven percent, your initial capital investment would have doubled and had a worth of $200,000 by July 1, 2014.

Timing, timing, and timing

And more things to know about business exit planning.

by Chia-Li Chien | Apr. 29,  2015

Timing, timing, and timing by Chia-Li ChienWhen I was recently thinking about how to explain what makes up a successful business cash out event, three words first came to mind—Timing, timing, and timing.

According to private capital expert Rob Slee, there are truly three timing factors that must be aligned when planning a successful business exit (2009): 

•    Personal timing: The readiness of the owner to move on to something else more or less challenging.
•    Business Timing: There must be a solid key management team able to operate with or without the owner or founder.
•    Economic Timing: Knowing where the economic cycle is and if your industry is trending in the Market M&A (Merger and Acquisition) movement (not performance). (See details from Slee; 2007.)

Then, two other words came to mind. In my experience, I’ve found that most privately-held business owners are interested in creating a win-win situation for both themselves and their buyer(s) when the window is right. And, creating such a situation takes considerable time and planning.

How is 2015 going?

Using the power of numbers, let your first quarter results be your guide for the rest of the year.

by Chia-Li Chien | Apr. 16,  2015

As hard as it is to believe, first quarter of 2015 is gone and (should be) in the books. While economic indicators can help us adjust our predications for the rest of the year, you also might have a set of assumptions for the year that helps you see how the first quarter of 2015 is on track with your yearly forecast or plan.

Numbers are sometimes difficult to understand, but as long as you know what to look for, what to compare and benchmark against and what it means to your business, you can leverage the power of these numbers to ensure your probability of success in the remainder of 2015 and beyond.

Begin second quarter with a focus on external assumptions to help you predict accurately the success of your plan or forecast. Start with the 2015 economic outlook.

What the Major Players Know About Succession Planning

And you should, too.

by Chia-Li Chien | Mar. 15, 2015

What the Major Players Know About Succession Planning by Chia-Li ChienIt’s already been 15 years since the 2000 tech bobble. According to the recent CNBC report[1], there are four CEOs who survived the tech bust.

As you can see, the chart on the left shows the difference between the stock prices on January 27, 2000 and February 25, 2015, under these flagship CEOs: Amazon's Jeff Bezos, Starbucks' Howard Schultz, Oracle's Larry Ellison and Cisco's John Chambers.

Columbia Business School adjunct professor William Klepper[1] indicates that the key is how these CEO reinvented the organization over the 15-year span. They were not afraid to take a portion of the company apart and hire from the outside. Most importantly, they were able to meet their investors’ expectations over time and/or create the maximum stakeholder value. Amazon delivered annualized returns of 1990% and Starbucks 544% from 2000 to 2015.

So at what stage is their CEO or employee succession planning now?