We humans love a good question, always probing, thinking, exploring. Sometimes we ponder; other times we blurt them out without thinking.
And there are some questions that, for better or worse, many of us will eventually ask. They often surround impactful life events that can be both emotionally and financially challenging. But that doesn’t mean they don’t deserve to be asked. In fact, it probably means finding answers – with the help of someone who knows the way – is all the more valuable.
For most of us, retirement is the ultimate destination. A land of freedom and enough money to make our dreams come true. To get there, you need to know: Can you live without a paycheck? Have you saved enough to live comfortably ’til age 99 (it’s a real possibility)? Enough is relative, of course. For some, it’s living the lifestyle they’ve aspired to since they started working. For others, it’s maintaining a simple quality of life. Still others fear not having enough to eat or a roof over their heads, somehow falling into poverty despite decades of prudently saving. These unanswered questions – fears really – could drive investors to swing for the fences, thinking it’s necessary to take financial risks in an attempt to make up for perceived shortfalls or, conversely, being too cautious with their investments as they reach the drawdown phase of their lives.
When those emotions take over, and they will, turn to your advisor as a guide. He or she can help you and your spouse run hypotheticals – the worst-case scenarios that keep you awake at night – to show you just how confident you can be in the plan you have. Chances are, your fears are unfounded, but seeing it play out may go a long way to helping you feel prepared. Now if something changes, like you have to retire three years earlier than expected, you can see how that affects your well-laid plans, too. At that point, you can decide together where adjustments need to be made to get and stay on track. Your advisor likely has helped many others work through these same decisions and can help you navigate this stretch of road.
More important, your advisor can help you structure your required minimum distributions from IRAs, annuity payouts, Social Security benefits and other retirement income into a steady stream of cash flow that is designed to mimic the stability of a regular paycheck and help your money last as long as you need it to.
Dad fell. 800 miles from home. The cane won’t cut it anymore; he needs a walker and eventually a wheelchair. But first things first, getting him well enough to travel back home. Does his health insurance cover him out of state? Will he need rehab? Do you need to take a medical leave of absence? Can you afford to? Who will care for him when you go back to work? Should you go back?
Are you emotionally, financially and physically strong enough to be a caregiver? You may want to proclaim a resounding yes. But that may not be the case. Dad may be 250 pounds. Can you physically support him as he learns to get around again? Maybe not. Can you afford to hire help? Hopefully. Do you know where you can find the resources you need?
Any caregiving plan should be based on the needs and wishes of those who will be receiving the care. When possible, caregivers should form a team and divide responsibilities. A trusted financial advisor can provide invaluable guidance on long-term care, insurance, prudent spending and other considerations. Your advisor can also direct you to specialized services meant to alleviate some of the burdens of being a caregiver, freeing you up to spend quality time with the people you love.
Caring for elderly loved ones also requires a number of legal documents, especially an advance care directive. A comprehensive directive will include a durable power of attorney, which gives someone legal authority to make financial decisions; a healthcare proxy, which allows someone to make medical decisions; and a living will that outlines instructions for end-of-life care.
Most people prefer to get care at home for as long as possible. The time to research your long-term care and aging in place options – for yourself and your loved ones – is before you need it. Medicare doesn’t cover long-term care, so planning ahead is critical. Families who need information can turn to elder-law attorneys, financial planners, geriatric care managers and caregiver support groups.
The house is eerily empty. Her note says last night’s argument was one too many, and she’s done. What now?
Just as with a death of a spouse, divorce can leave you fending for yourself financially before you’re ready. Ambiguity or lack of knowledge about finances makes things more difficult and magnifies the chances of additional discord in the case of a divorce. While the financial realities of being newly single will be different for everyone, planning as best as you can before and after can make what will undoubtedly be a painful time a little easier.
If your issues can’t be worked out through counseling, it’s time to find a lawyer, and talk to your advisor and accountant. You’ll have to decide which of you gets to continue the relationship with your existing professional team and who has to find new representation. You’ll have a lot to work out, from child custody, visitation and support; division of assets, including retirement savings; and who pays for what going forward. Collaborative divorce may be the right answer, but if not, you’ll need objective counsel to help you keep emotions at bay and lines of communication open while you dissolve your marriage.
As you go through the details, you’ll need to methodically, analytically think through everything from budget and cash flow; assets and liabilities; health insurance; and whether you want to or can afford to keep your house. Retirement savings, too, often are a big point of contention as some states consider them joint assets and some actions may trigger taxable events.
As with the retirement question, your advisor can help you work out the projections to hypothetical situations, so you’ll know if you can afford to take extended time off from work to get things settled and how long your divorce settlement will last. In many cases, after a divorce, a stay-at-home parent may have to go back to work. The numbers will give you a fuller picture and, hopefully, bring some comfort. As the dust begins to clear, update your beneficiaries and amend life insurance policies, financial accounts, tangible property, wills and trusts, as well as powers of attorney to reflect your new family situation.
It’s a nice problem to have, right? A life changing amount of money. Whether from selling a business or intellectual property, a settlement, an inheritance, an IPO, the lottery or finding a raw diamond at Crater of Diamonds State Park. How would you handle it? Could you handle it – and the emotions that go along with it?
When it comes to the question of what should you do, the answer is probably nothing, at first. Like any transition, sudden wealth requires an adjustment period, and it may take longer than you’d expect.
Experts recommend a 12-month waiting period where you analyze your next steps and adjust to your new situation, although you will have to take action in those early days to prudently invest and protect your new income. Quietly. You may want to shout from the rooftops, but doing so could open you up to every scam artist within earshot. This isn’t to say you should retreat, but rather to encourage you to make smart choices about wealth management and preservation.
Seek objective guidance to help you sort through the myriad tax, financial and legal questions that will pop up as you put a plan in place. You’ll want to look for estate attorneys, insurance and safety experts, and financial professionals with experience dealing with affluent families, who’ll understand the pressures you’re facing and help you manage the significant responsibilities that come with significant wealth. They’ll be the ones to fend off unscrupulous people and help you say no when you need to. They’ll also be the ones to help you decide if a trust, and what kind, is the right vehicle to protect your wealth and may even be able to serve as an objective trustee to ensure distributions are made wisely. \
You may have been contemplating getting married (or remarried) for a while. But have you thought through the realities of blending families and finances? The complexity of today’s families can make the associated financial planning significantly more challenging. With that in mind, here are some questions within the question to ask and answer before you say I do:
These are just to get the conversation rolling. There will be lots of other questions before you head down the aisle. As with many things, the key is communication. Be honest and open about what you’re trying to accomplish, and remember that your advisor can help if you run into a roadblock.
This question is a gut punch; it’s thinking about all the things you’ll miss and how you can help the people you loved the most. Of course, you want your loved ones to benefit from your wealth, but it’s more than that. It’s ensuring they are well taken care of when you’re no longer able to lend a guiding hand.
That means knowing who will take care of minor children and formalizing that in your will and letters of instructions; making arrangements for disabled or special needs loved ones in an ABLE account, trust or other vehicle; or ensuring aging parents get the care they need through home health aides, long-term insurance or specialized housing.
You need to know what documents to put in place to protect your family and ensure your wishes are crystal clear.
Although these questions are often ignored until age starts sending us hints about our mortality, they may be the most important. Done correctly, estate planning can save your heirs significant amounts of money and ensure that your assets are distributed how you wish. This is usually a collaborative effort, involving your advisor, as well as tax and estate planning specialists and perhaps other trusted professionals. While it’s sometimes viewed as difficult and fraught with potential conflict, proper estate planning can be an act of love, with your assets going to help others realize their hopes and dreams, while also softening the blow of your passing by thinking ahead about the specific challenges your survivors may face.
One day, he’s holding your hand or catching your gaze across a room. The next, gone. A sudden loss of a partner will rock your whole world – for you and your children. It may knock the wind right out of you, leaving you only able to focus on getting through today, the next day and the day after that. Priorities shift and you only have bandwidth to address the most important issues. And that’s to be expected, especially as you mark the first birthday, holiday and anniversary without the person you planned to grow old with. The first year can be so tough that common wisdom suggests waiting 12 months to make major decisions, if possible.
But, while financial flexibility may allow you the luxury of putting certain decisions on the back burner, there will come a time when you’ll have to step up as the primary decision maker, when you’ll have to figure out a way to create a new normal. You’ve got to figure out if you have enough income on your own; if you qualify for survivor Social Security benefits; if you want to stay in the house; if you can afford to. If the kids need someone to talk to; if you do. When the time comes, work with your advisor to determine what resources you can tap into to make life as stable as can be from a financial perspective.
Until then, be thoughtful, smart, detailed. Couples may be able to head confusion off at the pass by working with their advisor to create a master directory of all their financial assets along with the information needed to access them. If one person is more hands-on financially, part of their job should include creating a big picture document that will make things easier if the other person has to take over sooner than expected.
The common thread that runs through all these questions – and life itself – is that while what comes our way isn’t always predictable, things generally turn out better if we’ve put some thought into them ahead of time. An important part of that is risk management – thinking not just about what you’ve planned for, but what you haven’t – the “what ifs.”
What if you lose your job? A hurricane leaves you homeless? You didn’t see the other car coming?
In most cases, there’s a central assumption that underlies our planning. We project certain rates of return on our investments. We factor in inflation based on what it has been recently. We anticipate retiring at a specific age. We expect our marriage to last. And because we really want these things to occur as we’ve envisioned, we may be resistant to thinking about what happens if they don’t.
However, hope is not a plan. A downturn in the market, especially if it comes just as you’re entering retirement, can upset your projections. Unforeseen medical expenses can disrupt the best budgets. Loved ones and circumstances change. In fact, the only constant is change itself. Perhaps the best way to deal with all this is to establish a healthy “rainy” day fund; assess potential risks, insuring against the ones that we can; and remain flexible in our thinking and our planning.