Another tax filing season is quickly drawing to a close, and for many people that means the anticipation of a sizable refund headed their way. The IRS indicates that about 80% of taxpayers receive a refund, with the average being around $3,000. That’s a nice chunk of cash! What’s not to be excited about?
According to a recent study, 90% of Americans will spend more time planning for vacation than they spend planning for retirement. Similarly, we often observe firsthand how many do not truly know where their money is spent; and they do not devote time to gain more clarity about it. Life becomes a foggy trip without rich meaning.
No one purposely sets out to have an undefined financial life… it just happens to us as we become a part of the culture in which we live. It’s human nature which spans all of time; we repeat actions generation after generation. One of the wisest men to ever live, Solomon, offers sage points in the Bible’s Ecclesiastes which can be simplified to these thoughts:
It’s often said that “no matter how carefully something is planned, things may still go awry”. The saying is adapted from a well-known line in the Poem “To a Mouse” by Robert Burns. Perhaps Mr. Burns was in the process of retirement planning when crafting this poem? Regardless, its cautionary tone can be applied. As we work with clients helping them articulate and achieve financial goals, there are a number of areas that can be underestimated relative to actual spending.
Did you ever write and share your “family love letter?” It’s probably safe to say that each of us is aware of tragic situations where a loved one died at too young an age, maybe suddenly and unexpectedly. These experiences are shocking, and it is natural to catch yourself wondering how those closest to the deceased will be cared for or work through the situation. Loved ones often find they are ill-prepared to attend to many aspects of another’s life.
On the topic of estate planning, we are regularly encouraged to plan properly for a sudden incapacitation and/or death. Unfortunately, the focus begins and ends with the execution of proper documents, titling of assets, and naming beneficiaries to various financial accounts. Often overlooked however, is ensuring that appropriate family members and decision makers can access adequate information about their loved one’s assets, liabilities, and intentions. And, even if deliberate thought was given to these matters, is information available and quickly accessible?
If you are at the doorsteps to retirement, you might regularly receive invitations to enjoy a free lunch/dinner as part of an “educational” seminar on various retirement, estate planning, or trust topics. Often these invitations are made extra enticing by featuring a fancy restaurant for the presentation. Yet as the saying goes, few of us believe these meals/events are without any strings attached; we know there will be some “catch” or pitch of a product or service.
One topic we regularly encounter with new clients approaching us for help is in the area of annuities. While there are advantages and disadvantages to these complex products, in our experience, they are often sold without full and adequate explanation. While we prefer and advocate the use of more customizable, and traditional investment structures (wherein you retain full control of your time horizon, investment options, and access to money), we would stop short of saying or suggesting that annuities are never appropriate. So let’s objectively review one of the most misunderstood financial products available.