Everything that happens in people’s lives affects their finances. At Family Wealth Management, we use a program called Money Quotient that helps us get to people’s core values and beliefs and hopes for accomplishment. “Putting money in the context of life™” is Money Quotient’s motto.

The Money Quotient tolls can help with planning your immediate, short range, and long-term goals. We calculate how much those goals would cost, and we try to build an income plan that is designed to accommodate them. If you’re out to top the S&P 500, that’s not what a goal is.

As part of the process, we ask what you want in life. What’s important to you? If it’s a vacation each year with the kids and grandkids, we build that into your plan. If it’s an education scholarship to your alma mater, we set that aside. Whatever you wish to achieve, we calculate it into the target rate of return that would be needed to fulfill it. We won’t go after a 40 percent return just to beat some benchmark. Why would it matter?

When people don’t have a focus, they can wind up competing against financial benchmarks. But when they have a clear vision of their retirement goals, they can start planning to reach those goals instead. That’s why it’s important to start the planning at least five years before retirement, so you can lay the groundwork and begin building.

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For the most part, 401(k) plans have replaced pensions as the prevailing vehicle for people’s retirement. But surveys and studies show some very bleak numbers. The balances in 401(k)s and IRAs may not be nearly enough to pay for comfortable retirements, as the previous generation’s pensions once did. And today, few companies offer pensions.

Why is it possible that 401(k)s and IRAs may not provide as much retirement income as a pension? There are several reasons. First, not all companies offer 401(k) plans, just as some companies did not offer pensions. However, investors who do contribute to 401(k) plans often are unaware of the array of annual charges, such as administration fees, sales charges, management fees, and individual services that they are paying and that are siphoning away their earnings. Fees aren’t “hidden” so much as they’re judiciously disclosed. Many people simply don’t know how or where to look for those fees.

Fees, regardless of how conspicuously they’re disclosed, should be but one criterion you pick for your 401(k) investments. Look at asset class, management’s relative competence, and track record first. Each of them will have a far greater impact on your long-term returns than fees. If you aren’t sure what fees you are paying or how your 401(k) stacks up, seek out the advice of a professional. See how Family Wealth Management can help at www.familywealthadvisory.com.

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“I have it there for emergencies,” she explained.

Few of us need access to all of our money at one time. Holding on to $300,000, a large amount of liquid assets, is often squandering potential. The price of liquidity is a low rate of return, and low growth means that inflation may overtake you.

Don’t Overlook This Big Retirement Risk

Keeping direct access to all of your cash is a depression mentality: Some of those who endured hard times held on so tightly to their money that they sacrificed growth and eventually succumbed to the ravages of inflation. Remember your Grandma saying, “A dollar doesn’t buy what it used to buy?”

Be wary of the depression mentality as you approach retirement. If you have a hard time letting go of your liquidity, a financial advisor (www.familywealthadvisory.com) can help by creating a written retirement income plan that spells out the details and strives to make you feel comfortable with your potential future income growth.

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The goal is for you to feel free of financial worry so that you can spend your time focusing on what you enjoy. In my opinion, that’s so much better than the old planning model in which you are in the middle, and circling around you like the moons of Jupiter are all of your current advisors: your CPA, who calls you up every March to ask you where your receipts are; your lawyer, whom you haven’t seen in eight years since she handled your daughter’s auto accident; and your insurance agent, who calls too much, always at dinner time. Then don’t forget your investment advisor who hid under the desk in 2008 and wouldn’t answer the phone. If you have such a “team,” ask yourself when was the last time that they all got together and talked about your plan?

If you have a constellation of advisors, each will see just a piece of the jigsaw puzzle. None of them is likely to help you know how to fit those pieces together. That’s a job for a primary financial coordinator, your CFO, who will work to keep the big picture in mind. You should expect regular communication. Receive a free no obligation assessment of your retirement plan at www.mysecondopiniontoday.com. A good advisor will keep in touch so that you can make the adjustments to stay on course toward your goals. We can’t change the wind, but we certainly can trim the sails.

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In my opinion, you need to match your assets to your aspirations; in other words, you need to plan your life and legacy so that your life savings have meaning. Your spending should support your values and priorities. Otherwise, you may be blowing through money aimlessly, or you are just trying to grow your pile bigger. 

Like any journey of any distance through an unknown area, without a guide and without a clear picture of your finances, it would seem to be difficult to know for certain whether you will make it to your destination. Start your journey with a free chapter from my book DistributionLand at www.distributionland.com and start uncovering how to make your journey a safe and rewarding one.

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