Coordinating your financial affairs is one of the most important things you can do to secure your financial future. Let me illustrate my point with a story about a couple in their late 50s and who have two children going to college. It's not unusual for me to see people in this situation―many people are having children a little later in life and college-funding issues become a retirement planning problem. From a planning perspective it can be difficult to manage both college and retirement planning at the same time, and this couple was wrestling with a number of issues simultaneously.
The overriding issue was that he hoped to retire within the next three to five years, but the market was not cooperating and he was no longer sure that would be possible. He had lost a lot of money in the market and a lot of faith in his financial advisor. Second, they were tapping into their retirement nest egg to pay for the college expenses. They were beginning to understand that if they continued along this path, they could potentially bankrupt their retirement by putting their kids through college. Third, they were unsure about how much life insurance they should own and how to pay for it. Fourth, they were getting bombarded with literature with regard to long-term care insurance because they were now on everybody's list. Finally, the most daunting task was that they had two different brokers, two different insurance agents, an accountant and several friends all providing "guidance." They were totally confused and unsure of how to move forward with addressing the issues ahead of them.
The first thing that we did was create the foundation for the Retirement Roadmap. We went back to basics: What were their goals, what was important to them, and how would they like to prioritize all of the issues facing them? Once we spent some time developing their roadmap, the solutions became much clearer.
Next, we put in place the proper portfolio for him. Because he had lost faith and trust in the person who was giving him financial advice, his broker, he had taken over control of the investment portfolio without really knowing what to do.
Third, we addressed how to pay for the college expenses. They were fortunate to have enough equity in the house, and agreed it was better to pay a portion of the college expenses through the tax-deductible expense of a mortgage. We also gave them guidance about how to explain to their children that the financial situation had changed. The kids stepped up and agreed to take on a portion of the college expenses.
Fourth, they did not have enough life insurance. The best-laid plans will blow up if the unintended happens and you are not prepared. This is why we buy insurance. We helped them better understand how to put together a properly programmed life insurance portfolio and directed them to go back to the life insurance agent to purchase the correct amount of insurance.
Fifth, we addressed the issue of long-term care insurance. Many years ago there were all sorts of estate planning strategies available to protect one's assets in the event of a long-term care situation. For most of middle-class America, very few of these strategies are left. Long-term care insurance can be an excellent solution in the right scenario, such as for this couple. However, the timing wasn't right. So we put long-term care insurance on the back burner, planning to evaluate it again when the kids were out of college. Cash flow was too tight to add long-term care insurance to their budget.
Finally, they needed a "go to" trusted financial advisor who could coordinate all of the issues and find the correct solutions for them. This couple had too many voices saying too many different things, creating a tremendous amount of confusion and anxiety. When they chose to work with us, they were able to clearly and concisely understand what they needed to do and how to get there. Simplifying the decision-making process helped them to get back on track toward pursuing a successful retirement.
About Mark Singer
Mark Singer is a CERTIFIED FINANCIAL PLANNER™ professional and the author of The Changing Landscape of Retirement–What You Don't Know Could Hurt You. He has been The Retirement Guide to thousands of investors for close to 25 years and is the creator of the Retirement Roadmap and the Financial Organizer System, both of which contribute to a solution to investors' greatest concerns–properly coordinating their financial affairs. These systems have become a primary resource for the people who have worked with Mark over the years. You can download the first chapter of Mark's new book for free by Liking it on Facebook.