THE FISCAL BLUE PRINT
WITH COACH JEFF MONTGOMERY
Episode 38: Smart Women, Smart Wealth (Part 4) Security & Dream Baskets
Welcome to our 4th and final episode of this series Smart Women Smart Wealth! We have focused this series on the financial power of women and the unique challenges they face in retirement planning. Let’s wrap up the series by talking about Security and what all goes into the Security Basket. And in the coachable segment today we’ll talk about why this is important and what it means to fulfill your Dream Basket. Let’s go see what this all means and how it relates to your retirement.
Disclaimer: Please do not take advice from me on this show. As a licensed Fiduciary I am only allowed to give advice to clients. So, unless you are a client, I can’t give you advice because I don’t know you. So, think of this as helpful hints and education only. And please before implementing any information or ideas you hear on this show always consult your legal adviser, your tax adviser, and your financial adviser…………. right? that’s just common sense.
(2:30) Practical Planning Segment: The Security Basket – we call this “The What If Basket” 3 Steps to develop this basket. It holds the things you need to do or consider helping protect yourself and your family. Let’s start by asking this tough question.
If your husband or partner dies today – sorry, I’m not trying to kill them off – but go with me for a second here. Let’s say your husband passes away today. What do you need to know tomorrow about the money? The answer is, “Everything!”
(3:30) STEP 1: Make a list of what you need to know. Then, make the list longer. So, what does “everything” mean. The first thing it means when you reach retirement is you need to truly know where all the money is. In other words, you need to know where you stand financially.
Most people, by the time they reach retirement, have money and accounts everywhere. We call it the kitchen drawer approach to money management. There are IRAs, old 401(k) plans, annuities, insurance, mutual funds, brokerage accounts, bank accounts. Often, there are dozens of these accounts. What happens when you lose your spouse? All of this must be found! And if it is not found, it is lost. Additionally, once it is found, to get the accounts into your name, you need to get a death certificate and then go to each financial service company and fill out paperwork to have the money transferred to you. Imagine having to deal with this dozens of times after you have lost your spouse. Finding the money is where you start. The financial inventory planner begins on page 15 of the workbook which you can download by clicking here!
It is impossible, by the way, to implement or run a financial plan without knowing where you stand today financially. This is where all financial planning starts, and it will help protect you by having this all organized in one place.
(6:00) STEP 2 is to have a Will or Living Trusts. You need to have a will or living trust to protect your family in case something unforeseen happens. A living trust is a legal document that does two things: First, it allows you to transfer ownership of any of your assets to a trust while you are still alive. Second, it designates who should be given those assets after you die.
The main advantage of living trust over a will is that if you create a living trust properly, your assets won’t have to go through probate, which can save your family thousands of dollars in legal fees and allow you to maintain your estate’s privacy. (Once an estate goes through probate, all details become a matter of public record.)
There are a few basics here to remember. Make sure your will or trust is up to date. If you have not had it updated in the last five years, there is a good chance it’s out-of-date. Chances are, when you go home and check, some of you will find wills that have not been updated in 20 years. Sometimes, clients will go and look at their wills and see there’s a provision in it about who’s going to take care of little Johnny if anything happens to them, and you ask how old little Johnny is, and it turns out he’s 42.
Make sure your family knows where your will or trust is located. This may seem obvious, but a lot of times it’s in a safety deposit box or safe. If it’s in a safety deposit box and your family doesn’t know where the key is, it could take months and a court order to get it out. Think this can’t happen? It happens every day. Sometimes people never find the key to the safety deposit box, and the will stays hidden.
HIRE AN ATTORNEY TO SET UP OR REVIEW!
The next thing to be sure of is making sure all beneficiaries are up-to-date, especially if you’re in a second marriage. All too often in second marriages, we see old beneficiaries on the husbands’ retirement accounts, 401(k) plans, insurance policies, etc. Guess who the old beneficiary is? You guessed it! The ex-wife! How did she get left there? By accident or complete neglect of the previous financial advisor who didn’t force the issue of the update. This is obviously a situation you never want to be in, so it’s critically important that you review these.
(12:00) 3RD STEP: Finally, in the security basket, we have insurance. There are obviously several forms of insurance. There’s health insurance, long-term care insurance, disability insurance, life insurance, INCOME INSURANCE IN THE FORM OF ANNUITIES
Whenever we’re considering insurance, we need to start by asking a few key questions: First, do you truly need the coverage you’re paying for? Are there areas in your planning where you are not covered or lacking coverage?
Finally, we want to consider issues of legacy planning, meaning how might you be able to use insurance, such as life insurance, to plan for the legacy you want to leave loved ones?
(16:45) Coachable Segment: We’ve talked about how to look at your values and what matters most to you. And we’ve looked together at what you need to think about when it comes to retirement planning and your financial independence. Now we are here for our last basket of the three – your dream basket.
All of us have dreams of doing things if only we had the time and money.
The beauty of retirement is that now you have the time, and we find, in most cases, many of you actually do have the money. The key is that now you use that money you’ve worked so hard saving and enjoy it. That is what this Dream Basket is all about.
Many of you have heard about ROI but what about ROR (return on retirement)? Most financial services companies focus on the former – not the latter. They want YOU to focus on returns too. Will you earn 4%, 5%, 6%, 8%? We think it’s sad and a complete disservice to you to focus completely on ROI. Returns are meaningless if your returns don’t help you live your best retirement.
Remember Helen a little earlier? She had a decent return of 5% on her CDs at the time, but her financial advisor at her bank never once asked her what a great retirement looked like to her. He never asked her about what was really important to her. He simply focused on her CD rate and called her when it was time to renew it. That is not financial planning. That is, sadly, just about making a “sale.”
We happen to think the conversation about retirement needs to be elevated. “ROR” stands for return on retirement – in other words, how you get the best return possible on the best years of your life.The truth of the matter is that all of your years in retirement are not the same.
(21:55) Retirement really can be the best years of your life. A recent study by Merrill Lynch shows this to be true. The survey found most retirees are happy to be free from the daily grind, the pressure of juggling family and work, alarm clocks, deadlines, and never-ending emails. Nine out of ten (92 percent) say retirement gives them the freedom and flexibility to do whatever they want, and on their terms. Link Article
(22:30) Let’s look at the stages of retirement because they are not all created equally.
The first stage of retirement is what is often referred to as the “The Go-Go Years” within the financial stages of life. It is widely believed that these years are the happiest. Why? The first reason is time. The greatest benefit that retirees often talk about when they retire is, they have what is called “time affluence.” It’s the beauty of having the time to do what you want to do when you want to do it.
The second thing retirees enjoy early in The Go-Go Years is health. You will often be much stronger and healthier in your 60s and early 70s then you will in your late 70s, 80s, or 90s and beyond.
The third thing many of you might have in your 60s and early 70s is you often have grandchildren who still want to do things with you and you have friends who are also healthy and ready to enjoy activities with you.
The next stage of retirement is what is referred to as “The Slow-Go Years.” Now, this isn’t always the case, but it’s often the case. Often by age 75 to 85, people are traveling less, have more health issues and, unfortunately, often have more funerals to attend.
The next stage is “The Won’t Go Years.” In this stage, health issues become more acute, and the simple reality of retirement at this age is it’s often not as active as “The Go-Go Years” or “The Slow-Go Years
We think it’s important to get both clear and honest now with what you want to do in retirement – not a decade or two from now. We find that many of those we sit down with are afraid to spend money in retirement, and worse yet, they are afraid to spend money while they have their best health. The whole reason to have a written financial plan where you know where you stand financially in black and white, and how your money works for you, is to make sure your money works for you.
Many people often think, “I will go meet with a financial planner, and they are going to tell me I can’t spend money.” This fear leaves many people never wanting to hire a financial planner or get a second opinion. We might be a little different. My goal is to help my clients spend more money once we know they can!
So, remember ROR is the most important principle a good plan can give you.
“We appreciate you joining us today for this episode of The Fiscal Blueprint.
Remember it’s not about the money but about your life!
Having a mindset and living a life of abundance rather than scarcity will change the direction of your life forever!! Enjoy the Journey!!!
“Opinions voiced in this recording are for general information only and not intended to offer specific advice or recommendations to any individual. All performance references are historical and no guarantee of future results. All indices are unmanaged and not available for direct investment.”