Financial Planning -- Not Just For Baby Boomers

You are old, father William, the young man said,

and your hair has become very white.

and yet you incessantly stand on your head.

Do you think at your age, it is right?   

-- Lewis Carrol, Alice’s Adventures in Wonderland

A question retired people sometimes ask is whether it’s right to do financial planning at an older age.  Setting personal financial goals is great when we’re buying a first house, starting a family, or sending the kids to college.   But why do it once we’ve retired?

Six areas of financial planning.  In reality, financial planning, which is the process of meeting life goals through the proper management of finances, may be more important now than ever.  Typically, there are six areas of financial planning:

1.      Examining your current financial situation -- A look at net worth, income and expenses and emergency funds.

2.      Having adequate protection -- Providing for dependents in case of death, auto, home and personal liability protection, or potential long-term care costs.

3.      Accumulating wealth -- Having assets work effectively.  Having an investment portfolio that’s appropriately balanced.  

4.      Managing taxes -- Minimizing federal and state income taxes.

5.      Retirement planning -- Ensuring adequate retirement income.

6.      Preserving wealth -- Minimizing excessive estate settlement and inheritance taxes.

Making wise investment decisions.  Of course these six areas can help anyone monitor and control their assets, yet they’re especially effective later in life.  They can help answer questions about how a financial decision could affect other areas of finances.  For example:

·        Can assets be positioned today to avoid outliving retirement income tomorrow?

·        At the death of a spouse, will there be a change to Social Security or pension income to the surviving spouse?  Will this affect the survivor’s ability to meet his or her needs?

·        If a house, rental property, land, or a former employer’s stocks is sold, will it be subject to a large capital gains tax liability?

·        Does a Roth IRA make sense for retirement plan dollars?

·        Will estate assets, such as the home, insurance policies or retirement accounts -- and the current estate plan -- result in estate and inheritance taxes?

·        If home care or nursing home care is needed, will there be sufficient assets to pay for it?

·        Is there an effective way to help grandchildren with college expenses?

Looking at each decision as part of a whole helps you see short- and long-term effects of those decisions.  Financial planning keeps your goals on track and allows you to stay in charge of your life.  A reputable personal financial advisor can show you a number of recommendations to consider when making choices.

Choosing a financial advisor.  It’s perfectly appropriate to ask pointed questions when choosing a financial advisor.  Here are some to start with:

1.      What experience and qualifications do you have? -- Look for someone with strong background and experience in insurance, tax planning, investments, estate and retirement planning.

2.      How are you paid for your services? -- Your financial planning agreement should describe this in writing. Some advisors receive a salary, others may charge a fee based on an hourly rate, a flat rate or on a percentage of assets you invest with the company.  Some are paid by commissions, usually a percentage of the investments you make.  Some use a combination of fees and commissions.  Ask for an estimate of possible costs based on the work you want to be done.  You may be surprised at how reasonable the cost is.

3.      Have you ever been disciplined for anything in your professional career? -- To assess the reputation of a financial advisor or his or her company, you can check with the NASD Regulations Public Disclosure Hotline to get information on any disciplinary action of registered representatives and securities investment firms by calling 1-800-289-9999 or using their online Broker Check at www.nasdr.com/2000.asp.

Start now.  If you’ve postponed using the financial planning process until now, you’re not alone.  Many retirees who’ve never consulted a financial advisor before are pleased to learn that, like anything in life, it helps to have a friend around when making important life decisions.

Brandon Miller is a Financial Advisor with American Express Financial Advisors based in San Francisco, California and can be reached at brandon.j.miller@aexp.com    One of his specialties is comprehensive financial planning for gay and lesbian individuals and couples.

Brandon Miller has a website that can be found at http://gayfinancialadvisors.com/California.htm

This information is provided for informational purposes only. The information is intended to be generic in nature and should not be applied or relied upon in any particular situation without the advice of your tax, legal and/or your financial advisor. The views expressed may not be suitable for every situation.

American Express Financial Advisors Inc. Member NASD. American Express Company is separate from American Express Financial Advisors Inc. and is not a broker-dealer.