I have endlessly been amazed at how often financial advisers focus only on managing money in the market as people approach retirement. Nothing good happens to people in retirement without a proper income plan, and yes, that involves assets that grow, but it also requires intense scrutinization of cash flow and expenditures.
Yes, it is important to have assets, and yes it is important to obtain a satisfactory rate of return. Still, if expenditures are not properly balanced for the amount of assets the persons have, the end result can be disastrous. Unfortunately, I do not see most advisers take the time and effort to actually review their clients’ budgets to determine whether expectations for the assets are adequate or not.
Some Millionaires Can’t Afford to Retire
I meet with people on a regular basis, and rarely do I find them to have a budget. Even though they have worked with a financial adviser for years, they are still guessing how much money they actually need in retirement to cover, not just their basic needs, but also their desired lifestyle. People come to my office, usually as excellent savers. Professionals who have faithfully put away hundreds of thousands of dollars (often millions) in their 401(k)s, and yet they are not sure they have enough.
From just $107.88 $24.99 for Kiplinger Personal Finance
Be a smarter, better informed investor.
Sign up for Kiplinger’s Free Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
Why is that? Well, there can be many reasons, but they have at least one thing in common: No budget. I have seen people with $5 million, and as it turns out, it is not enough — because their spending is too high for the assets they have. Yes, they have enough to "get by," but a person or couple who have saved that much often have a lifestyle they want to maintain in retirement as well. Had they just looked at and created a budget, they would not be so surprised that they will not be able to live the lifestyle they are accustomed to now they are entering retirement.
Financial Advisers Sometimes Drop the Ball
Their current financial adviser consistently reviewed their return rate on their investments, but it rarely went beyond that. They never checked the "what ifs." What if I die too young? What if I live too long? What if my taxes go up in retirement? What if the market drops dramatically early in retirement? What if my spouse goes into a nursing home or we get divorced? How much of a pension is left if my spouse passes away?
I think you get my point. It starts with a budget and goes forward from there.
Retirement is all about cash flow! When a spouse passes away, taxes go up on the remaining spouse. How do you keep the cash flow intact? Cash flow, cash flow cash flow.
Investments are just a part of the equation. Managing risks to the cash flow is another part of the equation. Knowing and managing expenditures is part of the equation. Unfortunately, it is commonly ignored by financial advisers. If yours has ignored it, bring it up yourself. Get your concerns addressed, and for heaven’s sake, get a budget.
-
Medicare Prior Authorization Expands to Ambulatory Surgical CentersStarting in December, Medicare will begin requiring prior authorization for certain procedures when performed in ambulatory surgical centers.
-
Frontier’s GoWild! Annual Flight Pass: Is the $299 All‑You‑Can‑Fly Deal Worth It?Frontier’s GoWild! Pass offers unlimited flights for $299, but blackout dates, standby rules, and fees apply. See who benefits and if it’s worth it.
-
Greed, Fear and Market Volatility: A Financial Adviser's Guide to Keeping Emotions Out of Investment DecisionsDon't panic! And don't be so confident in the stock market that you overlook risk. Instead, be logical. Your retirement security could depend on it.
-
Want a Financial Adviser Who Shares Your Faith? Look for One With a CKA DesignationFinancial professionals with a Certified Kingdom Advisor certification are committed to integrating biblical principles with sound financial advice.
-
10 Ways to Stay Safe From Grandparent Scams and Other Fraud, Courtesy of a Financial PlannerScams are increasingly hard to detect, and anyone can be fooled, from older people to educated professionals. Here are 10 ways to avoid becoming a victim.
-
This Is How the Student Loan Bubble Is Primed to Pop, From a Student Funding ExpertFueled by easy money, inflated tuition and high default rates, the student loan bubble mirrors the 2008 subprime mortgage crisis. We could be headed for a potential financial collapse. What can we do?
-
More Than Money: The Hidden Toll of Financial Abuse of Older AdultsFinancial abuse from schemes involving tech support, government impostors, false sweepstakes, grandchild hoaxes and online shopping issues can cause thousands of dollars in losses.
-
I'm a Financial Planner: Here Are Three High-Impact Ways to Make a Difference With Your DollarsThe world often feels out of control, but here are three ways to use your money — through investments, charitable giving and political donations — to help create a more just and sustainable future.
-
The Unsung Hero of Aisle 5: A Tale of Forgotten Change and Compassion at the SupermarketThis supermarket manager went above and beyond to help when a child forgot her change at the checkout counter. You might be surprised at some of the complications that supermarkets face when it comes to customers' forgotten change.
-
Train, Integrate, Retain: A Strategic Playbook for Adviser OnboardingsBuild a thriving practice by training new advisers with clear goals, structured processes and consistent mentorship for strong team growth.
