• Legacy & Estate Planning
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The Journey: Mapping Life’s Financial Decisions

September 10, 2018 | Personal Capital

Excerpts from a feature (“The Journey: Mapping Life’s Financial Decisions”) originally published in the Fall 2017 edition of the quarterly magazine Confident Money. (Digital Subscriptions to Confident Money are free.)

If you want to talk wealth management and financial planning, get ready. There are so many questions and so many variables involved in creating a strategy. The key to getting it right means putting all of your cards on the table – be honest with yourself about your financial needs and wants, now and in the future. And that’s usually when it hits you – the magnitude of the process. Our advisors see it firsthand when they interact with clients. Planning for what the future looks like from a financial perspective can be, well, daunting.

Start Planning Early

Sounds simple, right? Depends on the person, the situation and the timing. While the process can be pretty straightforward, it’s the wrapping-your-arms-around-everything part that takes some getting used to. Decision-making can be complicated when it comes to your financial life. Financial planning is basically walking through all of your life cycles.

Marriage. Birth. College. Real Estate. Life Insurance. Retirement. Each is an important moment and decision in the lives of most Americans. But are you ready?

“Most investors tend to procrastinate, and these planning items sneak up on them,” says Jonathan Lore, a Senior Financial Advisor with Personal Capital. Lore says too many consumers underestimate the “real” future costs of financial goals.

“Financial planning is a marathon not a sprint. If you take a holistic view, partner with the right advisor to set a strategy, then all you have to do from there is to execute the plan.”

Formulating a strategy that works means breaking down major life events into pieces you can plan for. Here’s a look at how you can put your plan into action:

Marriage

Creating unity between partners is one of the biggest and most important building blocks in this life stage. The process requires combining households and making financial decisions about having two accounts or a joint one. It means getting to know each other’s families’ financial tendencies. The best thing to do is identify your expectations and competence, then tailor the conversation so that both parties are comfortable with a plan moving forward together.

Birth

Review insurance coverage and options, employee benefits and leave policies, emergency funds. Look at daycare/early education programs to make sure you are prepared for cash flow planning/needs. Some families plan their children’s’ births around daycare accommodations. Once the above issues have been addressed, and after the baby arrives, start looking at higher education and savings planning. On average, the cost of raising a child is around $234,000.

Life Insurance

While there is no “one-size-fits-all” life insurance policy, people need insurance for a variety of reasons. While everyone’s circumstances are different, think through everything that must be taken care of if someone is left alone. This may mean replacing your annual income to cover daily living expenses for your spouse and dependents, paying off a home mortgage or other significant debts (credit cards, car loans, etc.). Paying for childcare and/or future college expenses, unpaid medical bills or taxes should also be considered. You may want to consider creating an inheritance or providing extra retirement income with a tax-free death benefit.

College

Wait to start saving for your child’s college until you have other priorities, such as an emergency fund, insurance, and your own retirement savings on track. It is important to ensure that your personal needs are met first. Providing for a child’s college education at the expense of your own financial well-being could mean you end up being a financial burden to your child in your retirement years. Once you’re ready, look at your options – what percent of expenses do you want to cover, are you planning for private vs. public institutions, will your child take out a student loan, etc. Identify strategies and get started. Revisit the strategy on at least an annual basis.

Real Estate

Understand that in terms of investments, real estate is just another illiquid asset class. Learn how much you can afford, or in the instance of an investment property, what you expect in terms of returns. Does it generate enough return to compensate you for the illiquidity premium?

Retirement

Understand your true spending and savings trends and complete forward-looking projections/analysis for your retirement years. See where you stand, and then what it will take to get where you need to go. Building a retirement portfolio is, essentially, the halfway point in the race. The second half is sustaining the retirement lifestyle you imagined. The key is to find a disciplined investment strategy that strikes a balance by providing the diversity, risk-tolerance, and flexibility you need. It is also important to understand where your money will be coming from when you retire and determine what income sources (retirement accounts, social security, other income sources) you will be drawing from and when to optimize your retirement income strategy. Personal Capital’s Retirement Paycheck feature is a good place to start with this.

Our Take

Creating a comprehensive strategy to address these major life events is crucial for long-term financial wellbeing. Consulting a trusted financial professional is a great first step in ensuring that you are prepared for whatever the future holds.

This piece was originally featured in the Fall 2017 issue of Confident Money, a quarterly magazine sponsored by Personal Capital. Confident Money endeavors to tackle the issues that matter most by sharing stories and insights that will help you stay poised and determined for life’s many challenges. For more stories like this one, subscribe to Confident Money.

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Disclaimer: The content contained in this blog post is intended for general informational purposes only and is not meant to constitute legal, tax, accounting or investment advice. No part of this blog, nor the links contained therein is a solicitation or offer to sell securities. Certain sections of this blog may contain forward-looking statements that are based on our reasonable expectations, estimates, projections and assumptions. Any reference to the advisory services refers to Personal Capital Advisors Corporation. Personal Capital Advisors Corporation is an investment adviser registered with the Securities and Exchange Commission (SEC). Registration does not imply a certain level of skill or training nor does it imply endorsement by the SEC.

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