You don't get a haircut just once. Things change and evolve, adjustments need to be made on a regular basis. It’s the same way with your financial game plan. Financial planning is a process, not an event.
Let me tell you about Larry and Jane. Larry and Jane wanted to retire and move to Florida, but they didn't know if or when it would be possible. She qualified for a great pension from Honeywell and had been saving into her 401(k) for 30 years. She had also bought company stock over the years.
Larry and Jane were nervous about seeking financial advice. They had heard stories from friends and co-workers about complicated and expensive products they bought as they were trying to retire, and they were hesitant to work with a financial advisor. This situation is quite common. In many cases, as a couple gets closer to retirement, they will meet with a financial professional who has a strong incentive to promote one product over another. They often get a "fabulous new product" that is much better suited to meet the sales person's objectives than the client's financial planning goals.
How to find a trusted financial advisor
When I met with Larry and Jane I explained that, as a fee-only fiduciary, I’m required to provide completely objective advice. Instead of getting paid by commission on selling products, I get paid via fees so I have no incentive to recommend one product over another. This set their minds at ease, and we analyzed their financial situation.
They had questions:
- Do we have enough to retire based on our current assets?
- Can we afford to buy a new home in Florida?
- If we retire before age 65, what should we do about health insurance?
- Where can we get solid financial advice, not some sales pitch?
We looked at cash flow, risk protection, investment accounts, retirement income options, taxes and their estate plan. I found that, thanks to Jane's employer, they were in pretty good shape. We took a few simple, low-cost steps that got them well on their way to long-term financial security.
Steps to success
As a fee-only, fiduciary planner, I was able to analyze Larry and Jane's goals and present options for reaching those goals without any exotic products or complex strategies:
- Larry and Jane elected to take an early-retirement offer from Jane's work that would help with health insurance until they were both 65 and could switch to Medicare.
- They took an early pension option that covers basic living expenses and has a lifetime cost-of-living increase. They will only need a bit of part-time work to cover their vacations and other extras.
- When they reach age 70, they will start receiving Social Security benefits that will also have a cost of living increase each year for life. We estimate that money will be enough to provide enough of a monthly income cushion so they can stop working altogether.
- They rolled over their 401K to a professionally-managed, low-cost portfolio that is intended to grow safely until they need it after age 70.
- They have an after-tax stock account that helped pay for a house in Florida. With the proceeds from selling their house in St. Paul, plus the sale of their stock, they were able to pay cash for a place in Florida.
Complicated process made easy
Larry and Jane were very pleased with their experience. I met with them every month to review their progress and next steps as they neared their retirement date. The meetings were short and often done at Larry and Jane's home. The entire process was easy and effective. We kept meeting monthly up to our one-year anniversary of working together. At that point, all the pieces were in place and things began to run on their own. We then moved to a quarterly phone check in for another year. Now we are on a schedule for an annual review meeting and Larry and Jane are enjoying the retirement they always wanted.
If you want to start thinking about retirement planning as a process instead of a financial planning event, contact me at rdunn@dunncreekadvisors.com. I am always happy to meet with people who are working on their retirement plans.
Dunncreek Advisors does not provide legal or tax advice, nor is this article intended to do so.