Category Archives: Aging and Financial Affairs

Easy Peasy

By Larry Luxenberg  

Many people think there is nothing difficult about personal finance. Listen to a few gurus on TV and maybe scan a magazine or two.

That may have once been the case (I would argue not) but it’s certainly not the case after the passage of the Secure Act last December, which was followed quickly by the CARES Act and the possible Heroes Act.

Couple that with other changes to RMDs, add in QCDs, QLACs, IRMAA (Income Related Monthly Adjustment Amounts), partial Roth Conversions, pension options, tax loss harvesting, asset allocation, tax aware investing, market timing and the Social Security formula (the simple part — 35 years of monthly inflation adjusted earnings).

If you’ve got all that, knock yourself out and do your own planning and hope you don’t run out of money in retirement (See Monte Carlo simulations).

If you can’t sort your way through that alphabet soup and want help with ETFs, ETNs, open end mutual funds, closed end mutual funds, ADRs and plenty more, how about turning to a CFP (Certified Financial Planner), CFA (Chartered Financial Analyst) or CSA (Certified Senior Advisor) or better yet someone with all three.

We don’t know all the answers, but we do know a lot of the right questions and a lot of the places to start looking for answers.

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There’s Never a Good Time to Get Gas

By Larry Luxenberg  

I never feel pumped to get a gas fill up for my car. I’m always in a hurry or tired or it’s unpleasantly cold or rainy outside.

But I also don’t like it when the light goes on with the dire warning that I’m running on fumes.

It’s also like this about personal financial planning. There’s never a good time to straighten up the mess of your financial affairs. It takes energy and gumption to deal with the reality and the complicated forms and ideas that determine your financial fate.

But if you don’t do it, just as if you don’t get gas, dire consequences await.

Your financial affairs may be complex and daunting but you don’t have to do everything at once. It’s better to start small than not at all.

And it’s better to start now that waiting for whatever your current excuse is to pass.

The key thing in investing and personal finance is time. The younger you start, the easier things are. Investment returns compound over time and the longer you invest, the more money you will have.

It may not be pleasant to tackle financial planning but it can be very rewarding.

There’s never a good time to start, so just do it soon.

 

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Under the Hood

By Larry Luxenberg  

All investors crave simplicity. That can come at a high cost.

Many investors look at the title of the investment but don’t look under the hood.

A prime example is target date funds. These investments are one of the fastest growing investment products in history. According to the Investment Company Institute, more than $1 trillion is invested in target date funds.

A target date fund is is invested based on your retirement date. Essentially the only thing the investment manager knows about you is your age. But are all 52 year olds the same? Maybe some are skinny and some are fat. Some have plenty of money and some can barely rub two nickels together. Some will retire before 65 and some afterwards. Some will work part-time and some will retire in Central America. Few are average but that’s what target date funds assume.

It’s important to know a lot about an investor to decide how to invest for him. Otherwise you might take too much risk or not enough and returns and investors’ piece of mind might suffer.

Even more compelling, each target date fund is different. Investment managers have different ideas about how to invest for the average 52 year old.

It’s OK to invest in a target date fund but make sure you look at more than just the name. Otherwise, you may learn too late that you and the investment manager had different ideas about what was good for a 52 year old and the consequences may not be pleasant.

 

 

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Preparing Your Estate

By Larry Luxenberg  

Prosperity and cyberspace have combined to make dealing with estates more difficult than in previous times. Rather than leaving a mess behind — the proverbial shoebox of unorganized documents  — one can make the task of heirs a lot easier some simple and easy steps. Put together a list of all of your financial accounts, the institutions where they are held, current balances and contact information. Add to that list the professionals you deal with and relevant passwords. Many people accumulate a hodgepodge of accounts, insurance policies and other assets, some with small balances, and it’s easy for someone not familiar with these accounts to overlook some. The guesswork at an emotional time to piece together someone’s financial life can be daunting even if you do manage to find everything. Many do not. Evidence of that is in every state capital where abandoned or lost accounts total in the billions. Some simple steps can space loved ones a lot of grief so don’t put this off and leave a mess behind.

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Aging and Financial Decisions

By Larry Luxenberg  

Most of us expect that as we age, our capacity for making complex financial decisions diminishes. A professor at Texas Tech, Michael Finke, has compiled research that supports this supposition. From my own experience working with elderly relatives and clients, I believe this to be the case. Most of the “old old” that I’ve dealt with haven’t had the capacity or perhaps the interest in these complicated matters. For many, they simply don’t want to tackle these issues. They are more likely to want to visit with family and friends or pursue their passionate interests or merely handle the tasks of getting through the day. It’s important that we prepare for this stage by designating a trusted relative, friend or professional to step in and handle these matters when we no longer are capable of doing so  at the level we were in our peak years. A decline in skills may be combined with more difficult issues such as the onset of early stage dementia, paranoia or other cognitive impairment. There is no way to sugar coat the difficulty of living through or taking care of someone who is afflicted. But at least if we prepare for the typical decline or even worse issues we can prevent needless financial devastation as well.

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