Choosing the Right Club

October 11, 2013

When I was a child, my Dad got me started with tennis and golf. I played team sports during my youth, but individual sports seemed to dominate my interest.

I was quite a tennis player as a teenager and made the varsity tennis team as a freshman in high school. For my sophomore, junior and senior years, I was even named the most valuable player. I have great memories of those years. In fact, at a recent 30-year high school class reunion I reconnected with an old doubles partner. We reminisced and had a wonderful time remembering great times on the tennis court.

My Dad also started me off playing golf. Unfortunately, I didn’t take to golf like I took to tennis. I found it much more challenging until I finally took a golf class in college. It was then that I fell in love with the game. In the late Utah afternoons, I would jump on my classic Honda 160cc motorcycle with my small golf bag positioned between my legs and over the handlebars, with hopes of getting in nine holes before the sunset. Those were fun times!

For me, one of the more challenging aspects of the game was club selection. Most golfers will likely recognize a common conversation while gathered on the tee box. “How long is the hole?” “Is this a 4 or 5 par?” “Where is the pin?” “Should we lay up before the water?” And most importantly, “What are you going to hit?” I still love the golf banter and strategy conversations that begin at each hole.

Choosing the right club is most important, especially on difficult holes with challenging terrain. With typically 13 clubs in a golf bag, professional golfers hire high-priced caddies to provide insight and advice for such decisions. They collectively know that each club has a unique purpose and so choosing the right club for each unique circumstance is essential for success.

It might seem like an odd comparison, but the same is true in our financial lives. The proverbial financial golf bag is filled with a variety of clubs or tools. Liquid money market and/or savings accounts, CD’s, stocks, bonds and mutual funds, the vast array of annuities, various types of life insurance, long-term care products, real estate and even living trusts fill the bag. Each financial club has it’s own unique function and/or purpose. Selecting just the right club or combination of clubs in the distribution phase of life is essential to a “happily ever after” retirement.

As for golf, everyone knows that you don’t tee off with a putter or use your driver in a sand trap. In approaching the green, one would likely never pull out a 5 wood or use a 3 iron. Even the most amateur of golfers understand these norms.

But in our financial lives, selecting the right financial club might not be so obvious. This is why I conduct educational seminars and write informative articles to educate pre-retirees and seniors on proper financial club selection. Too many clubs in the market and many seniors will experience the pain of yet another major market correction. Certain deferred annuities are great accumulation clubs, but might not be as beneficial from a legacy perspective because they can pass on taxable gain to heirs. If legacy is a prime objective, the club of life insurance is much more efficient.

To carry on the comparison, traditional long-term care insurance is often a poor choice when an asset based protection club can be used instead. Further, CD’s and money market accounts are terrible with respect to rates of return, whereas investment grade cash value permanent life insurance can provide many times the yield, produce great liquidity, supply many guaranteed elements and a leveraged tax-free death benefit to survivors. Wills and trusts are also effective asset transfer clubs, providing certainty and peace of mind to seniors and heirs when the unexpected occurs.

Make no mistake, knowing which financial clubs to use in these turbulent times is essential for financial peace. Counseling with a private financial caddy can be most helpful. As you avoid the financial bunkers and water hazards of life you will love adding up your score because you choose the right financial clubs!