I  carefully saved for most of my life… now you are telling me that I need to spend my retirement nest egg?

One of the most difficult transitions many individuals will face in financial life is moving from being a “person at work” (the accumulation phase where you are saving and building wealth) into  someone now living off their “money at work” (the “decumulation” phase).  A recent study by BlackRock Retirement Institute found that “instead of actively and systematically decumulating assets, retirees display a tendency across all wealth levels to retain assets and not spend down their initial principal.” The study also found that, “More than one third of current retirees actually grew their assets – leaving considerable potential consumption on the table.”

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Careful! Avoid buying life insurance as a savings strategy!  Stop buying it as a tax-deferral vehicle for retirement savings!

Insurance of any kind is a risk-management tool.  From our perspective, an individual should buy life insurance for one reason: because there will be a financial impact on one’s family or business if they unexpectedly die.  For most individuals, that financial impact is typically highest early in life when working years ahead are many, financial assets accumulated are low, and financially dependent children and/or significant debts (such as home mortgage) exist.  Over time, one’s insurance need generally declines and ultimately reduces to zero at some point prior to retirement.

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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?

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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:

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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?

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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.

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