Head still in the sand?
It was perfectly understandable to play ostrich for a while. In the depths of the recession, with the stock market flailing and the real estate market floundering, thinking about financial plans and retirement was an exercise in disappointment. Some financial advisors did indeed tell workers to shred their 401(k) statements without even looking at them. The news was that grim.
While the economic landscape today isn’t exactly a bed of roses, the picture has improved considerably. The recession is behind us. Jobs reports keep improving. People are building bigger houses. The stock market is setting records again. The era of austerity is over. And with it goes the permissible period of ignorance-is-bliss personal financial management. It’s time to open our eyes, take a good, hard look at our financial plans, and make sure those plans still align with our lifetime hopes and dreams.
“A lot of people are worried about losing what they’ve saved,” says Brent Kimbel, a financial planner with Ameriprise Financial Services. That’s a reasonable worry, given what everyone has witnessed over the past decade. And that is why working with professionals is critically important, Kimbel notes, particularly as retirement approaches. “We focus on making sure our clients’ income in retirement is enough to maintain their lifestyles.”
Matthew Ruppe, director of investment services for UW Credit Union, agrees with Kimbel and encourages all individuals to consider some kind of financial planning regardless of income or wealth. While some professionals focus their practices on clients with higher net worths, there are many who work with all kinds of clients regardless of where the clients are in their careers or how much they earn or owe.
“Seeking a professional to assist you in your long-term goal planning or retirement planning can be the difference between long-term success and big surprises in their future,” Ruppe says. “There is never a time we can’t give someone some positive recommendation to get them in the right direction. It might not be the miracle they would have hoped for, but it can get them on a positive track.”
The retirement picture isn’t exactly grim for a lot of folks, but many have decided to delay retirement to pad the coffers a bit or to make up for losses sustained in the past decade. Others, Kimbel says, are gradually easing into retirement by scaling back hours or by working as consultants after leaving their prior positions. Some even pursue second careers, which often are more flexible and more reflective of personal passions and interests. As a result, the transition into full-scale retirement can take years, and some people never truly hang up their hats .
“The definition of retirement has definitely changed over the last ten years,” Kimbel says, noting that retirement goals are dialed back a bit as well. “In 2000, you had clients who wanted to retire and buy a vineyard, and we’re not hearing that these days.”
Of course, financial planners are not the only experts to consult. While they help create the plan to help you reach your life goals, other professionals help you assemble the pieces.
For example, the services of an attorney are often crucial when drawing up wills and estate plans, which protect loved ones after a death. They can also assist in establishing trusts and other legal instruments that help manage assets and tax liabilities.
“Each of us has our areas of strengths and focus,” says Daniel Lipman, an attorney with Murphy Desmond. “A proper estate plan provides the financial security and knowledge that our families will be properly cared for in the event of death or disability. This foresight and planning allows the client to focus on the important events and everyday necessities of their lives.”
An insurance agent is another expert to consult, says Jon Ballou, regional sales director for The Insurance Center, a full-service agency. “We look for solutions to complex financial problems, and we bring a lot of different ideas to solve those problems,” he says.
“Insurance is a financial tool and it helps transfer risk when you don’t want to accept it. Insurance doesn’t solve all the world’s problems, but it’s an important piece of the puzzle. It will be there when you need it. It’s the only product I know that’s exactly where you want it when you need it.”
Ballou says the services of an insurance agent are instrumental at obvious junctures, such as marriage, divorce and the birth of a child. They are also invaluable advisors in the decade before retirement, when starting a business, or when saving for college. He points to the increasingly popular option of using whole or universal life insurance policies as higher-education savings vehicles in place of or in addition to 529 savings plans. Insurance, he says, is not factored into financial aid applications, while 529 assets are, so it won’t affect children’s eligibility for other forms of assistance. There are also tax advantages worth exploring.
“We work together with our clients,” Ballou says. “Our agency has a lot of disciplined people. We work very well as a team.”
Kimbel encourages individuals to start assembling their team of advisers as soon as they get their first paycheck. Yet he knows that most of us don’t really get a good plan in place until we’ve been in the workforce a few years, have started to earn a decent amount of money and have assumed some responsibilities beyond ourselves. Usually that means marriage, a mortgage and kids.
Ruppe agrees that sooner is better than later, and he encourages credit union members to seek out advice when things are going well as well as when they aren’t. Often members are not aware of all of the options they could consider to improve their financial health.
The worst thing, Ruppe says, is for clients to go forth blindly hoping that things will work out and then “wake up one day and not understand why they can’t retire, protect their family, or reach their ultimate goal.”
The first call doesn’t have to be to a financial planner, either. Individuals and couples can turn to whichever expert they trust: a financial planner, an attorney, a certified public accountant, a banker. Many will provide referrals to other professionals, and some financial services institutions, such as Starion Financial, offer several different resources under one roof. Starion, an independent supercommunity bank, offers traditional banking services, including mortgages, along with insurance and other investment products.
The important thing, experts agree, is to start the conversation with someone as early as possible. •
For some individuals, financial planning includes setting aside funds to support favorite nonprofits, such as the YMCA. Sharon Baldwin, senior director of marketing and healthy living for the YMCA of Dane County, points out that charitable donations are an integral funding source for organizations such as hers that promote health, wellbeing and social responsibility.
Because of generous support, the YMCA can provide financial assistance and, therefore, access to enrichment programming that would otherwise be difficult or impossible for some members to receive. Around thirteen percent of YMCA members receive some amount of financial assistance.
“We are a powerful association of men, women and children joined together by a shared commitment to nurturing the potential of kids, promoting healthy living, and fostering a sense of social responsibility,” Baldwin says.