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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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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When people ask us how much they should be saving, we tell them that ideally, if they want to retire with the same purchasing power in the future as they have today, they need to set aside a minimum of 15 percent. Under the old pension system, people contributed 15 to 20 percent. Companies built that amount into the benefit package. Nothing stops people from saving at that rate today, but many may not be doing so. The picture here is pretty clear: If people don’t contribute to their 401(k)s, or if they don’t contribute enough, of course they are not going to have enough in their accounts to cover their retirement. The 401(k)s and IRAs* have pretty much replaced pensions, but people may not have the investment skills needed to deal with them properly.

For example, people often change employers so it’s not unusual for them to have multiple accounts from previous jobs. What we see is that when people change jobs, they tend to look at their account with the previous employee as found money. They withdraw it and end up paying a penalty of 10 percent, if they are younger than 59 1/2. Not only that, but there will be taxes due on the contributions and earnings of the ‘windfall’ which may also result in putting them into a higher tax bracket. The result is that they may lose 40 percent of that money. If that’s the way you save for retirement, you are always starting from zero.

*Age, income and contribution limits vary for each plan.

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It’s important to understand the difference between taxable, tax deferred and tax-free investing. Let’s take a look at how each would affect a typical account. Suppose you started with $100,000 and added $10,000 each year for 20 years. Let’s presume a rate of return of 4 percent and a tax bracket of 25 percent.

• On a tax-free account, the account value after 20 years would be $516,893.
• On a fully taxable account, your rate of return is effectively only 3 percent. After 20 years, the account value would be $449,315.
• On a tax-deferred account, your account value after 20 years would again be $516,893. However, you have only postponed taxes. If you now paid them all, you would be left with an account value of $462,670.

A financial advisor can help you determine which is best for your individual needs. Here is some simple advice though: You should only pay taxes on money you are withdrawing as money to spend. Otherwise, there may be better ways to manage it. Visit www.familywealthadvisory.com for more resources and start uncovering what tax strategy works best for your situation.

Mutual of Omaha Investor Services, Inc. and its representatives do not provide tax advice. Consult your tax advisor for advice regarding your particular situation.

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People sometimes don’t even know, or they have only a vague idea. They’re not even sure of the scope of their assets. If you don’t know where your documents are, you’ll be leaving a mess for those who try to pick up the pieces when you are gone.

Coordinate and simplify your affairs through a written financial plan. Used in conjunction with an online financial center or service, where all of your assets and debts, bank accounts and mortgages, and more can be updated daily, you will be leaving things well in order.

For example, at Family Wealth Management we give our clients an online vault and scan everything into it, including wills and trusts and powers of attorney, property deeds, passports, birth certificates, and more. It’s all in the vault. It’s set up for access by your chosen executor or trustee upon your passing and is part of our “Total Client Profile.”

At the very least, you will want to create a document that lists everything important that you can bring to mind. There are online services that can help you, or just grab pen and paper and start writing. Who are your advisors? What are your assets and debts? Who carries your life insurance? Who should be contacted? What papers do you keep where? You’ll want to keep that list with your will or trust papers, and perhaps give it to your executor or your children in advance.

Learn more about our “Total Client Profile” and other services at www.familywealthadvisory.com.

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