Retirement

Estate Planning for Everyone

November 5, 2020 By Jacki Liautaud

Photo by Glenn Carstens-Peters on Unsplash

Take some action steps to get your financial estate in order.

Estate Planning For All Ages

I’d like to offer a reminder to make sure your estate affairs are in order. In today’s environment, having your estate and financial matters organized can help if your or a loved one’s health were to be compromised. Estate planning isn’t just for older people!

When you think of estate planning, you might immediately think of a will and/or trust. These are typically the first documents to be prepared, and can help you decide how your assets will be distributed, not the state. Consult an estate planning attorney to get started. I can offer referrals for Chicago-area attorneys who do this work – use the Contact Us form to send me a message.

Beyond a will, here are some other considerations

In addition to a will, there are several other areas of estate planning to consider. Here are some of them:

Powers of attorney for health care and financial matters. These documents give authority to a loved one in the event that you are incapacitated. Often when drafting a will, attorneys will also provide these documents for you to complete and sign. Make sure yours are up to date and properly reflect your wishes. Contact an attorney for assistance.
Beneficiaries on retirement accounts. If you have a retirement account (such as an IRA, Roth IRA, 401k, 403b), you have the ability to select a beneficiary who inherits these assets directly. Check your accounts to be sure your beneficiary is identified. And, if you don’t have a Contingent beneficiary listed, consider adding those in the event that your primary beneficiary predeceases you.
Passwords. Store your usernames and passwords in a safe place and let your family know where they are. This includes the password to your smartphone, online photos, and social media accounts, in addition to your banking and other financial relationships.

I am not an attorney and this information is not intended as legal advice. Consult with an attorney for your specific situation.

Reach out for a financial affairs summary sheet

I have a summary sheet that outlines a variety of financial documents and other materials to collect and have on hand in a physical folder. These materials can help your loved ones know where to go for all the important financial matters. It takes some time to assemble the documentation, but it can be very beneficial in a time of need. Reach out via this website’s Contact Us page if you’d like a copy of the financial affairs summary sheet.

Let’s get started talking about your goals!

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Lily Pads and Investing

October 1, 2020 By Jacki Liautaud

I visited the Art Institute of Chicago this weekend, which is hosting a special exhibition on Monet and Chicago (link opens in new tab). What a treat to learn about the special connection Chicago has to Monet, and see his gorgeous peaceful paintings of water lilies, bridges, and light. Which got me to thinking about a brain teaser I once read about lily pads.

What can lily pads teach us about investing?

There’s a riddle about lily pads that can provide a great example of the value of compounding in investing.

Here’s the riddle: A pond has lily pads growing on it, and the lily pads double in size every day. After 30 days, the lily pad completely covers the pond. At what day do the lily pads cover half the pond?

“Day 15” is probably the most common and quickest response. But in fact, if the lily pad doubles in size daily, the day it covers half the pond must be Day 29.

This riddle is interesting because it’s an example of exponential growth, not linear growth. Linear growth is easy for our brains to understand: 1, 2, 3, 4. Exponential growth is harder to visualize, and so it’s harder to estimate accurately.

There’s a blog post here (link opens in new tab) that covers this in more detail.

Investing money can help it grow exponentially

The parallel between investing and the lily pad in the riddle above is the power of exponential growth.

Here’s a chart that illustrates the value of compound growth.

The orange striped section represents the compound investment growth that can occur over time, while the blue portion represents the money a person contributed. You can see that over 30 years, the size of the orange portion is significantly more than the blue portion.

This is an illustration only, and does not represent actual performance or investment advice. From this example, though, you can get an idea of how you can put time to work for your financial goals.

In the first few years, the orange investment return portion of the bars is virtually insignificant, and the blue contributions far outpace the investment return. As the years go by, however, the orange portion shows how the contributions have been able to grow over time due to compounding.

Start saving today for the future

This is why it’s so important to get started investing in your future retirement, today. Even if you don’t think you can afford to save now because your salary is low, your debt is high, etc., turn this idea around: you can’t afford NOT to start saving for retirement now.

Let’s get started talking about your goals!

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Mindful Retirement

August 28, 2020 By Jacki Liautaud

A non-financial plan can be an asset in building a mindful future.

A mindful future can benefit from a non-financial plan

Thinking about the future is a tricky thing because we don’t actually know, and can’t actually know, what it will be like. And yet it’s coming. When I’ve worked with families and individuals on their financial plans and investment management, I’m often hearing about their deep-seated wishes and dreams for their future. In fact, typically my clients hope that their money and all the hard work they are putting in right now will eventually give them the future they want.

I’ve written quite a bit here about a financial plan and the benefit of having one. But there are other aspects of your future to consider, beyond just the financial side of things. And I believe it might be just as important to talk about your family’s “non-financial plan” as it is to discuss the financials. Being mindful about your dreams and ideas for your future can help you become more aligned and focused as you work towards your goals.

Here’s an example. For many, our work is a defining feature of who we are. When asked to say something about yourself, one of the quickest responses is to talk about what you do for a living. For those with children, often a close second is talking about parenting/being a parent. But in the future, when we are retired and our children are grown, what will consume our time? How can we be mindful about spending our time once the demands of work and child-rearing are over?

Retirement is no longer what it used to be

Along those same lines, when many younger people think of “retirement”, they imagine a retirement community in Florida, where seniors drive around in golf carts playing shuffle board. But is this what we would actually want for ourselves? In real life, retirement may look a lot different than this. I’ve spoken to clients who want to travel, move to a geography with ready access to the outdoors, or engage in volunteer work.

Get mindful about planning your future

Having an idea of what that future might look like, and what your priorities are, can be an important aspect of having a non-financial plan. Start thinking mindfully about what you would like your future to look like, beyond just the financial side of things. And more important, start talking about these ideas with those who will be in that future with you. Then, write it down! This is a key step to defining your ideas.

Here are some benefits of having a written, non-financial plan, according to Robert Laura (link opens in new tab).

Direction and achievement. When you’ve ended your work routine and career, a non-financial plan can give you direction and help you build new achievements. As humans we typically need a purpose, and a non-financial plan can offer that.
Increased commitment. When you have a specific vision of your future, and when you and your spouse are in agreement on this vision, it’s much easier to keep committed to your plan, both now and in retirement. And besides the financial side of things, you may find ways of starting to build that future life now. For example, volunteering at a local charity of interest now, so that when you retire you’re moving into something that you already know about.
Memory lapse. People tend to forget things as time goes on, and it’s helpful to have a written reminder of what you’re striving for.
Process emotions. Retirement is not what it used to be. Thinking about retirement as having the financial independence to start a “second act”, can give you a head start as you think about the future.

How can a non-financial plan help you mindfully build your future?

Let’s get started talking about your goals!

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The Importance of a Plan

August 21, 2020 By Jacki Liautaud

Having a plan for our financial future is like having a destination for a family vacation.

Imagine you’re going on a vacation.

You’ve got the car packed, your spouse in the front seat, dog and kids in the back seat all buckled in and ready to go. So exciting! You drive onto the street. Then you stop. Wait, where are you going? You forgot to plan the destination!

While this may seem like a silly example, there is an analogy here to financial planning. Imagine financial independence or retirement as your destination. You’re preparing (packing your bags): you bought a home and are paying the mortgage; you are saving in your company’s retirement savings plan; you’ve set aside something for the kids’ college costs. But every time you think about it, you wonder – am I saving enough in my 401k? Is my money working for me in the form of compound interest and growth over time? I heard college is going to be really expensive when my kids graduate from high school, but how much should I actually expect to spend? Essentially, you’ve packed the car, but you don’t have a destination.

A financial plan can help you define your destination.

What does retirement look like for you and your spouse? Some people prefer to call this stage “financial independence” instead of retirement, because it’s the point at which you are financially independent and no longer need to rely on a 9-5 job to cover the cost of your lifestyle. But have you taken the time to think about what your financial independence might look like? What are your priorities in financial independence – travel, living near family, spending time on specific interests? How does your financial independence compare to paying for your kids’ college? What if the future looks different than you planned and are you prepared if one spouse were to pass away or get ill? These are all issues that are typically considered when you build a financial plan.

If you don’t have a plan for your future, reach out. I’d be happy to help you and your family.

Let’s get started talking about your goals!

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Your Parents and Financial Planning

February 14, 2020 By Jacki Liautaud

Photo by August de Richelieu from Pexels

In this article, we examine the potential impact of a parent’s financial planning (or lack thereof) on their grown children.

Baby Boomers and (no) pensions

The Baby Boomer generation is the among first generations where pension income is likely not their main source of retirement income. In 1978, Congress passed the Revenue Act of 1978, which included a new section of the Internal Revenue Code, Section 401(k). Section 401(k) allowed employees to avoid being taxed on deferred compensation.

This meant that corporate employers were able to create plans, commonly called 401ks, that allowed employees to contribute to a retirement account using salary deferrals that were not taxed. As companies phased out pensions due to high costs and a changing workforce, more of the burden for retirement savings was shifted to employees.

However, not all Baby Boomers have saved what they needed to for retirement, even though many of them are already in – or fast approaching – their retirement years. And this lack of savings may end up impacting their grown children.

An article (link opens in new tab) from Yahoo! Money highlights this potential problem. The article cites an alarming statistic: “The median amount saved by those between 56 and 61 is $21,000, according to the Economic Policy Institute.”

Social Security may not be enough to make up the gap

I’ve talked in this space before about social security and how it may not make up the gap. According to Fast Facts and Figures about Social Security – 2019, as of December 2018 the average monthly retirement benefit for men is $1,627 and for women is $1,297. So the average retired couple, according to these figures, may be receiving about $35,000 per year from Social Security. Unless a couple has another income source, this average couple may have a pretty difficult time making ends meet. Now you can see why the median amount saved of $21,000 is probably not enough.

Grown children may have to help parents financially

And that’s where the grown children of Baby Boomers may be impacted. I personally know families who have had to make difficult choices in taking care of their aging parents. This could include parents moving in with their grown children and their family; grown children paying for some (or all) of Mom and Dad’s monthly bills; grown children quitting a job to care for a sick parent; and more.

Ask some uncomfortable questions

Do you know what your parents’ financial situation is? Even though the conversation might be difficult, in my view it’s always better to know the facts. Even if what you learn could be troublesome, it’s better to know in advance when you can do some planning around the possibilities than to be taken by surprise.

Do you have siblings? Talk things over with them and see how each of you might be able to help. And don’t forget to talk it over with your spouse as well.

Perhaps most important, make good saving choices now for yourself so that you don’t put your children in the same situation.

Need help with these conversations, or planning for your financial future? Contact Tree Fort Financial for help.

Let’s get started talking about your goals!

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