An important rule I teach my clients is, “Don’t do anything you don’t understand!”
This seems obvious doesn’t it? Of course it does! But you would be surprised how many seniors don’t have a good grasp or understanding on the direction of their financial lives. Consequently, I uncover a lot of anxiety and worry in my early client meetings. I observe a collective sigh when I share my commitment to education and the importance of looking at one’s whole financial chessboard. Some may have a background or acumen in financial matters, but most do not and so a genuine yearning for clarity is ever present.
Consider the current economic environment seniors find themselves! The financial industry is laden with an endless barrage of media talking heads telling Americans what to do with their money. The problem is those giving advice are rarely objective and unfortunately few are rooted in core principles.
In addition, the accumulation phase strategies preached by the Wall Street crowd like “buy and hold” have little applicability to the preservation phase strategies most seniors know they should be pursuing. And what about when you are in the retirement red zone? That’s the period of time 5 years before and 5 years after retirement. Sometimes an average broker may not recommend repositioning assets to a guaranteed safe money strategy. Its often not their area of expertise and can be conflicting in terms of how they are compensated. This is why it’s important for seniors to have a good grasp on the trajectory of their financial lives.
Remember, the tools in the accumulation phase are different than the tools in the preservation phase. In the former, we focus more on “statement wealth” where as in the later we migrate towards “contractual wealth.” Few 40 year olds worry about long-term care or asset transfer issues and yet the average 75 year old realizes that a prolonged catastrophic illness could liquidate one’s estate. Seniors also have many questions in the areas of a wills, trusts and legacy issues whereas most traditional brokers simply don’t advise in these areas.
Is it any wonder why seniors might be confused?
Take the challenge to slow down and not do anything you don’t understand! An advisor worth engaging should welcome the opportunity to slow down with you. But remember, part of learning is to acknowledge one’s financial risks and economic realities. Unfortunately, many seniors do not seriously engage until they have experienced market losses. Their awareness also tends to spike when faced with a weighty financial decision forcing them to become a responsible part of their financial plan. Whatever the motivation, we must not procrastinate preparedness!
Remember, the average 65 year old could live 20-30 years in retirement. I have many clients in their 80’s who frequently say to me, “Mark, we didn’t think we would live this long!” and yet they are living vibrant, active lives. Understanding this should encourage seniors to become better financial students.
To engage in this process, I developed the Estate Preservation Wellness Check-Up. This is the central theme of my monthly educational events. The check-up covers the following 10 key points of estate preservation:
- Protection From Unwanted Litigation – Do you have sufficient liability protection from unwanted litigation or a frivolous lawsuit?
- Protection From a Catastrophic Illness – Are your assets protected from a long-term catastrophic illness?
- Combat Increased Taxes & Inflation – Will your assets and income withstand the incoming wave of increased taxes & inflation?
- Secure Guaranteed Lifetime Income – Do you have a guaranteed flow of income that cannot be outlived?
- Preserve Investment Capital / Earn Competitive Returns – Are your assets protected with effective capital preservation strategies while still earning a competitive rate of return?
- Advanced Planning to Combat Survivorship Risk – Are you positioned to replace lost income when a spouse passes?
- Prepare for Entitlement Erosion – Are you guarding yourself against the erosion of Social Security, Medicare and Medi-Cal benefits?
- Intelligent Asset Transfer at Passing – Have you provided for an intelligent transfer of your assets at death?
- Minimize Tax Liability to Heirs – Will your heirs pay an excessive tax liability due to your IRA, Annuity and/or Estate Taxes at your passing?
- Enhance Personal Legacy – Have you thought about and/or provided for your personal legacy?
Through the experience, attendees score themselves on their level of preparedness. Since the hallmarks education, attendees experience an increased level of understanding on a broad range of topics. The positive feedback from our events has been overwhelming and validates my sense that education is the key!
Being an active learner and participant in one’s own financial life is essential to success. Abdication is not an option! Yes, our financial world is complicated, but it’s not too complicated if one has a teachable spirit. As we take ownership to acquire a better understanding of our financial lives we will have a more credible claim on inner peace.