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Monday, June 22, 2015

The Generational Communication Gap

Every parent knows that starting at about age 12, the communication with your children changes dramatically. That smiling face that always laughed at your silly jokes and asked you questions about everything now just rolls their eyes and gives you that dreaded “nuthin” to your inquiries. It is just part of growing up. Over time they mature and communication improves again as they become adults. One common exception to this improved open communication is personal finances.

Parents often are uncomfortable having their adult children know their personal business. The parents of Baby Boomers, in particular, are a generation where the father of the house handled all the finances in a private manner. Often the wife or mother wasn’t even involved in many personal financial decisions. The children are afraid to introduce the subject for fear of seeming greedy or insulting to their aging parents. Unfortunately, this communication gap can lead to some poor financial planning decisions and in some cases damage some otherwise healthy family relationships.

Loving relationships between brothers and sisters often turn sour when they are forced to be “partners” in businesses or vacation homes through the estate planning of their parents. Another common mistake is leaving all of the assets to one child with instructions to divide it up. This scenario, compounded by the emotion of the loss, has a great potential to drive a wedge between otherwise happy siblings. No parent wants this to be their legacy.

Ten Common Mistakes:

1. Procrastination: Don’t wait for a crisis.

2. Thinking that financial and estate planning is only for the wealthy.

3. Outdated or improper beneficiary on insurance and retirement plans: Will an ex-wife inherit an old 401(k) plan?

4. Leaving too much in IRA’s and other tax deferred accounts: This could create more taxation for next generation. Mom and Dad are often taxed at lower rates.

5. Forcing siblings to be business partners or to own property together for long periods of time.

6. Leaving everything to one child and letting them split it up: Almost guarantees misunderstandings and tension between siblings. Also, could create gifting problems.

7. Using joint ownership to transfer assets: More gifting problems and the loss of potential tax benefits. Also, more family disharmony.

8. Not putting special wishes in writing: Family heirlooms and valuable household items can become the source of major family squabbles. Once it is in writing, discuss it with everyone so that there are no misunderstandings.

9. Not discussing financial and estate decisions with other members of the family: More misunderstandings and hurt feelings.

10. Not properly using professional advice: Financial, tax, and legal professionals have experience with most family situations. They can also ask questions that might be uncomfortable for family to ask.

So, now you want to have this discussion with your parents. How do you approach them? When is the right time? Unfortunately, there is no perfect answer. Obviously, signs of forgetfulness or evidence that keeping up with household tasks is becoming overwhelming indicate that now is the time. It is a mistake, however, to wait for these signs. The best planning is done well in advance of needs.

Do not try and have a family meeting over the Thanksgiving turkey or other social event. Schedule a special time, have someone bring a homemade dessert and serve coffee with the good china. This will put everyone in the right frame of mind to have a loving, productive discussion. Enlisting the help of a qualified financial planning professional to help bridge the generational gap is a great way to minimize the emotion and anxiety over this type of planning.

A financial planning professional will meet with you, your siblings, and your parents individually to gain an understanding of each financial situation. Everyone’s financial situation is considered as plans are developed which focus on income, healthcare, and estate planning needs.

Monday, June 1, 2015


How much is ‘Enough’? [Hint: ‘More’ is not the answer]

One of my favorite client’s came into my life wondering if they had enough to retire. Upon reviewing their statements, I found they had enough to retire years ago! Which made me think – how many people go through their daily routine, without realizing they had already crossed the finish line? How much different would work feel if you knew that you no longer had to work, that it was a choice? Too often, we are told how much we should be saving but never have an idea of what the finish line is.

Below are four steps for setting and using financial finish lines to improve the quality of your life. 

Step One: Enough for Me

How much money do I need to take care of myself in retirement? If I become disabled? 

How much will I need to start my business? Buy the house? Get a new car?

The first step in the process is having a goal-setting conversation with your advisor. Any financial planning firm should be able to give you “Your Number,” whether it’s for education, retirement, or that shiny new toy. 

What are you looking for? You want one number for each goal that you set. Whether it is a purchase, retirement, or something else. 

Unfortunately, too often the conversation stops here.

Step Two: Enough for My Family

How much will it take to provide for my spouse? To leave something for my children?

The next layer of “Enough” comes in the form of what you leave to those you care about. Making sure their dependents are protected in the event of death or disability is a priority for many. But unless you define the ways in which you want to leave a legacy to your heirs, planning is nearly impossible.

What are you looking for? Again, you want one number for legacy that you want to leave to your family. Work with your advisor to have a full conversation on what your hopes are for your loved ones. 

Step Three: Setting a Finish Line

Add up your numbers. This is your finish line. 

These should be single, lump sums. Not how much you should be saving, but an end goal. 

One of the most depressing beliefs I encounter is that we MUST work eight hours a day until we hit “retirement age,” where we then get the privilege to start hoping that we won’t outlive our money. 

But let me ask you this: what would you do if you already had crossed your “retirement savings” finish line? If you knew you already had “enough”? Would you work less? Would you give more?

The Purpose of Finish Lines

The purpose of financial finish lines is to give us the confidence to do the things we’ve wished for. Knowing that we have “enough” lets us do the things we’ve wished for ourselves, and especially the things we’ve wished for others.