MONEY Aging

A Sad Lesson From My Mother’s Decline

senior woman staring out window
Getty Images

A diagnosis of dementia spotlights the importance of protecting against devastating outcomes.

Lessons of financial awareness and self-sufficiency began early for me. I was just 13 and my sister was 11 when our father left us. My mother was 35 at the time and had no work experience and only a high school diploma. She had dedicated her married life to our family and supporting my father’s career.

She never had access to our household finances, ever. In the blink of an eye she was faced with having to learn how to provide for the three of us. She found a retail position, making little more than minimum wage. My sister and I did what we could to help, both working full-time in addition to going to school.

When my mother was 53, I was 31 and married with two young children. My sister and I started to notice Mom’s increasingly odd behavior. She got lost while driving familiar places, acted like a child, and forgot to bathe and wash her clothes, among other worrisome behavior. We thought perhaps she was dealing with depression and we sought professional help. She was prescribed antidepressants and went to counseling. Over the next year she continued to decline, and lost her job as a customer service representative.

Shortly thereafter, she was a target of a financial scam. She initiated three outgoing wire transfers totaling nearly $30,000, her life’s savings. To her, in her increasing confusion, it was great news! She had won the Mexican lottery! We only learned of it from a bank teller who was suspicious of the wire instructions. (If a loved one is exhibiting early signs of dementia, it’s very helpful to get to know the local bank branch staff and title accounts so they can alert family if they notice odd or uncharacteristic behavior by a longtime customer).

She soon could not pay her mortgage and we were forced to sell her home. She moved in with us. I was able to find an adult daycare to care for her while my husband and I were at work. So on we went day by day. I’d drop my kids off at school and mom off at daycare, at my expense.

Several years later, when she needed around-the-clock care, we looked for a facility that approved Medicaid, since she had no resources to pay for long-term care. This was a painful, difficult lesson – and one that I share with my clients: The time to purchase long-term care is when you don’t need it. My mother would hate knowing that my sister and I are paying out of pocket for preventative care and day-to-day expenses.

Dementia may have a long life cycle. Today my mother is 68. She has not recognized my sister or me for over six years. We have seen firsthand how 13 years in long-term care facilities can devastate a family both financially and emotionally.

There was a time when we had resources to purchase protection again these risks, and we didn’t. Dementia or other disabilities can happen at any age, and the lessons have been painful on many levels. A proud woman, my mother never expected to be financially dependent on anyone. It is a painful lesson for all of us. But if there is a silver lining, it’s this: As a financial adviser, I have been able to help others avoid making a similar mistake.

As the Baby Boomer generation ages, some estimate that as many as one in three individuals will suffer some form of cognitive dysfunction, from mild impairment to full-blown dementia. Our family wasn’t ready for this. Is yours?

———

Margaret Paddock, who oversees U.S. Bank’s wealth managers and financial advisers in the Minneapolis/St. Paul market, is quick to advise her clients to make preparations for catastrophic care and provisions for situations that are hard to envision, but which can come to pass.

MONEY Careers

A Good Reason to Tap Your Roth IRA Early

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Alamy

You shouldn't always wait until you retire to pull money from your retirement account.

The Roth IRA is a great tool for retirement savings. But here’s something not as well-known: It’s great for developing your career as well.

Many of my young clients in their 20s and 30s struggle to balance current spending, saving for the next 10 years, and stowing away money for retirement. With so many life changes to deal with (weddings, home purchases, children, new jobs), their financial environment is anything but stable. And their retirement will look completely different than it does for today’s retirees.

To my clients, separating themselves from their current cash flow for the next 30 years feels like sentencing their innocent income to a long prison term.

They ask, “Why should we save our hard-earned money for retirement when we have no idea what our financial circumstances will be in 15 years, never mind 30? What if we want to go back to school or pay for additional training to improve our careers? We might also decide to start a business. How can we plan for these potential life changes and still be responsible about our future?”

The answers to those questions are simple. Start investing in a Roth IRA — the earlier you do it, the better.

There is a stigma that says anyone who touches retirement money before retirement is making a mistake, but this is what we call blanket advice: Although it’s safe and may be correct for many people, each situation is different.

The Roth IRA has very unique features that allow it to be used as a flexible tool for specific life stages.

Unlike contributions to a traditional IRA, which are locked up except for certain circumstances, money that you add to a Roth IRA can be removed at any time. Yes, it’s true. The contributions themselves can be taken out of the account and used for anything at all at any time in your life with no penalty. And, like the traditional IRA, you can also take a distribution of the earnings in the account without penalty for certain reasons, one of which is paying for higher education for you or a family member. (Some fine print: You’ll pay a penalty on withdrawing a contribution that was a rollover from a traditional IRA within the past five years. And you’ll have to pay ordinary income taxes on an early Roth IRA withdrawal for higher education.)

Although you shouldn’t pull money from your retirement account for just any reason, sometimes it’s a smart move.

Let’s say you graduate from college and choose a job based on your major. This first job is great and helps you get your feet wet in the professional world. You’re able to gain some valuable real-world experience and support yourself while you enjoy life after school. And this works for a while…until one day, 10 or 15 years into this career, you wake up and begin to question your choices.

You wonder if this career trajectory is truly putting you where you want to be in life. You think about changing careers or starting a business, but you need your income and have no real savings outside of your retirement accounts.

Now, let’s also say that you were tipped off to the magic of a Roth IRA while you were in college and you contributed to the account each year for the past 15 years. You have $75,000 sitting in the account, $66,000 of which are your yearly contributions from 2000 through 2014. It’s for retirement, though, so you can’t touch it, right? Well, this may be the perfect time to do so.

I recently spoke to a someone who did just this. Actually, his wife did it, but he was part of the decisionmaking process.

The wife has been working for years as a massage therapist for the husband’s company. Things were going quite well, but she had other ideas for her future. She wanted to go back to school to get her degree as a Certified Registered Nurse Anesthetist. The challenge was that this education was going to cost $30,000, and they did not have that kind of money saved.

So, they brainstormed the various options, one being to tap into his Roth IRA money. They determined that this would be a good investment for their future. Once the wife became a CRNA, her annual earnings would rise an estimated $20,000 — money they could easily use to recoup the Roth IRA withdrawal (though the 2015 Roth IRA contribution limit is $5,500 for those under 50 years old).

This decision gave them a sense of freedom. The flexibility of the Roth allowed them to choose an unconventional funding option for their future and gave the couple a new level of satisfaction in their lives.

And, that’s what it’s all about. We have one life to live, and it’s our responsibility to make decisions that will help us live happily today, while still maintaining responsibility for tomorrow.

Whether your savings is in a bank account or a retirement account, it’s your money. Although many advisers will tell you otherwise, you need to make decisions based on what is best for you at various stages of your life. The one-size-fits-all rule just doesn’t work when it come to financial planning. There is no need to rule out a possible solution because society says it’s a mistake.

———-

Eric Roberge, CFP, is the founder of Beyond Your Hammock, where he works virtually with professionals in their 20s and 30s, helping them use money as a tool to live a life they love. Through personalized coaching, Eric helps clients organize their finances, set goals, and invest for the future.

MONEY financial advice

What I Learned in India About Financial Advice

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Stephen Wilkes—Gallery Stock Mumbai

One thing that crosses international boundaries is how people misunderstand the cost of financial advice.

In the airport shuttle taking us to our hotel in Mumbai, I looked out the window and thought, “We’re not in South Dakota anymore.” At midnight, the streets of India’s largest city seemed as full of people, vendors, and traffic as Times Square at noon.

I had no real comparison, though, for the garbage strewn about, the beggars going from car to car when traffic stopped, the people sleeping on the sidewalks, the ramshackle condition of most buildings, and the roaming packs of stray dogs. The third poorest county in the US — just 60 miles from my home — is no match whatsoever for the real ghettos of Mumbai, where 55% of the city’s 16 million people live.

Given these great dissimilarities in economic status as well as political, religious, and cultural views, I expected to find striking differences between the Indian and U.S. financial adviser communities and their clients. Here I was surprised.

I traveled to Mumbai to meet with a group of Indian financial advisers. The country’s financial regulators are actively encouraging advisers to change from charging only commissions to charging fees. My role was to offer suggestions for making that transition.

After spending several days observing and listening to the struggles of the Indian advisers, I concluded that 95% of the obstacles they face in promulgating client-centered, fiduciary planning are the same as the ones planners face here in the US.

The most frequent complaint I heard was that consumers just won’t pay fees. They would rather pay a high commission they don’t see rather than a low fee they painfully do see. I find the same behavior in US consumers. It seems irrational, but it makes perfect sense when we understand the delusional money script of avoidance that says, “If I don’t see the fee, then I must not pay a fee.”

Just as in the US, Indian advisers struggle to help consumers understand the math behind hidden commissions and visible fees. While most advisers can quickly calculate the amounts, consumers still find it hard to accept the numbers. There is great resistance to writing a check, even when a planning fee is half as much as an unseen fee or commission. In my experience, most consumers have great difficulty emotionally understanding that writing a check for $10,000 for advisory fees on $1 million represents a $15,000 savings on a 2.5% wrap fee they don’t see and for which no check is written.

Another similarity is that those most willing to pay fees for service are the wealthier clients. At first blush one might surmise that of course the wealthy are more open to paying fees because they have more money. That isn’t the case. The fees paid are roughly proportionate. In fact, usually smaller accounts that go fee-only save proportionally more than do larger ones. The difference is that affluent or wealthy clients tend to be business owners or professionals who are familiar with employing fee-for-service consultants, like accountants and attorneys.

The transition to introducing fees is slow, requiring a lot of education on the part of advisers and willingness to listen on the part of consumers. Similar to where the US was in the 1980s, India has only a handful of pioneering fee-only planners. Most advisers wanting to switch from pushing financial products to doing comprehensive financial planning have rolled out a fee-based model first. They hope consumers will eventually embrace the advantages — lower costs and fewer conflicts of interest — inherent in a fee-only compensation model.

In my career, I have watched and participated in financial planning’s growth as a profession in the US. It’s a privilege to be able to see it develop in India as well.

———-

Rick Kahler, ChFC, is president of Kahler Financial Group, a fee-only financial planning firm. His work and research regarding the integration of financial planning and psychology has been featured or cited in scores of broadcast media, periodicals and books. He is a co-author of four books on financial planning and therapy. He is a faculty member at Golden Gate University and the former president of the Financial Therapy Association.

MONEY Financial Planning

Online Financial Planning Is More Popular Than You Think

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Jan Stromme—Getty Images

Who needs to meet a financial adviser face-to-face? Not millennials and Gen Xers, who are often happier Skyping.

Hi, my name is Katie, and I’m a virtual financial planner.

If this sounds like a support group meeting, sometimes I feel like it should be. When I tell other financial planners that I work with clients across the country, they say, “But clients always value the face-to-face meetings that my firms provides.” So I ask them, “What is the average age of those clients?” The answer is usually in the 60s.

I started my own financial planning firm last year because I wanted to focus on clients under 50, in a way that lets me deliver advice without selling financial products. That doesn’t sound too complicated, does it? One of the ways I do this is by offering my services to people not in my immediate location. We either have a phone call while using screen-sharing software like JoinMe, or we use Skype or Google Hangouts to conduct meetings.

Since I’ve been in the industry for 10 years and always previously met with clients in person, I was a little apprehensive about the idea of not meeting clients face-to-face.

You know what? They don’t care. At all.

The clients I work with are well-educated, busy Gen X and Gen Y professionals. They use technology on a daily basis for work and personal reasons. The married couples I work with are usually both working in high-intensity jobs while juggling the demands of a family. Taking time out of their day to drive to a financial planner’s office, have an hour-long meeting, and drive back to their own workspace would easily eat up two to three hours of valuable time.

When we have a call or virtual meeting, we have a set agenda, the appointment is on their work calendar, and we are able to accomplish everything in 30 to 45 minutes. When we do this, my clients don’t need to spend a bunch of time away from the office, get a babysitter, or drive around town.

Another advantage to my clients (and me!) is that I am able to keep my financial planning prices down. Because I don’t keep an office in an expensive part of town, my overhead costs are lower. I can pass that savings along to my clients. I also have a lot of flexibility to conduct business even when I’m out of town for a conference.

What does a planner need in order to work with clients virtually?

  • A phone, and preferably a phone number that isn’t tied to a particular office space.
  • Comfort with screen-sharing tools.
  • Enough organizational skills to have the topic decided on beforehand — and enough flexibility to be able to answer other questions as they arise.
  • Financial planning software that clients can access online, or a secure client vault for sharing documents back and forth.

That’s it!

Clients that fit best in a virtual relationship are those that are comfortable with technology, somewhat self-sufficient, and aware of why this setup benefits them.

I’ve found that members of Gen X and Gen Y actually like working with a financial planner virtually because they are already comfortable with technology, they’re used to communicating this way, and they like the time-saving convenience. As an added benefit, those clients get to choose an adviser because the adviser specializes in their specific situation, not because the adviser happens to live near them.

———-

Katie Brewer, CFP, is the president of Your Richest Life, where she works virtually with Gen X and Gen Y professionals, helping them create and stick to a financial roadmap to live their richest life. Katie is a fee-only planner, a founding member of the XY Planning Network, and a member of the Financial Planning Association. She is also proud to be a Fightin’ Texas Aggie.

MONEY Financial Planning

Why I Want Clients to Get Emotional About Retirement

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Chutima Chaochaiya—Shutterstock

Digging deep into clients' emotions helps one planner uncover what they're really thinking.

I like to delve into clients’ emotions and feelings. People may tell me one thing initially, but upon further questioning may see that their first response wasn’t emotionally true.

One example of that came up in a recent meeting with a couple who were getting ready to retire. Of course, they had worries about what they should do.

They wondered if they should move all their money into conservative investments. They floated the idea of moving everything into an annuity — an option they believed carried no risk.

When I asked them about longevity in their blood lines, I learned they each had at least one parent in their mid-90s. I then explained to them how we are in a low-rate environment and talked about the danger that their annuities would be capped at very low rates of return that likely would not keep pace with inflation or taxes.

That’s where my emotional questioning began. Let me summarize our conversation:

Question: The chance of your living another 30 to 40 years is extremely possible. How do you feel about that?

Answer: That we won’t have enough money.

Q: How does that make you feel?

A: Afraid and very uncertain.

Q: When you started work and got married, what were the rules?

A: Save money in a retirement account, have children, and make sure they get good education.

Q: What are the rules in retirement?

A: We don’t know of any other than just making your money last.

Q: If all of us are living longer, and you know that certain health care costs and taxes are going up, why would you not want to grow your money? Why would you want to buy this financial product that is not designed to keep pace?

A: That’s just what we were told. And that’s what we thought you did as an adviser.

Q: Well now that you are here, how do you feel about this happening?

A: We are very uncertain and really don’t know what to do!

Q: Has anyone worked with you to put together a plan that is balanced with investments and also has an income component that is adjustable for you?

A: No

Q: If you could become more educated on a balanced plan and how that may help you navigate the next 30 years, how would that make you feel?

A: It would make us feel like we have a chance to succeed.

When clients say that they do not want to lose any money, my response is, “Okay, but how do you feel about not making any money?” They don’t like that idea either.

In today’s marketplace, “no risk” equals minimal return and loss of purchasing power.

It is very important to educate clients on current economic conditions and teach them that calculated risk is worth taking. The average retiree who has a net worth of, say, $500,000 to $1 million either falls prey to annuity salesman or is so shell-shocked from 2009 that he or she only trusts CDs.

There is a real need to educate clients on how rates work and why the market have been the place to be for the past six years. Retirees also need greater clarification on annuities in order to understand their income and growth restrictions.

Asking questions to gauge risk is key to financial success. More importantly, it is key to building a sound relationship between adviser and client.

I always ask my clients, “In the next one to two years, what do I need to make happen to assure you that you have made a good choice in working with me?” These answers vary, but generally speaking, clients want to know that they are staying on the right path and are not falling behind. Keeping in touch with clients and knowing how they feel emotionally is paramount to them feeling good about their adviser.

———-

Matt Jehn, CFP, is managing partner of Royal Oak Financial Group, which offers small businesses and individuals in Columbus and Lancaster, Ohio a complete financial solution through professional accounting, tax and wealth management services. Jehn, who earned a degree in family financial planning from The Ohio State University, enjoys helping his clients grow their businesses by educating them on the meaning behind the numbers.

MONEY

I Don’t Need a Financial Plan, Because the World Will End in Two Years

apocalyptic sky
Michael Turek—Getty Images

If someone believes we're in End Times, how do you convince that person to fix her finances?

As a financial planner, I’ve had a number of clients and potential clients who have felt comfortable enough to express their views about religion, politics, and society in general.

Sometimes their views have coincided with my own, and sometimes they haven’t. I don’t know who said you should never debate religion and politics, but my guess is it was someone who did.

Sometimes, however, these sensitive subjects are unavoidable, like in a conversation I had several years ago with a potential client.

We were in my office having a wonderful talk. This woman was extremely polite. She had a nice smile and a warm disposition. In fact, she could have easily won the award for World’s Best Grandma.

As our conversation moved along, I started explaining the importance of having a financial plan.

She politely allowed me to finish. Then, in a very nice voice, she told me that the reason she did not have a financial plan, nor want one, was because we were in End Times. She said that she believed in the Rapture and that it was near — within the next year or two.

I swallowed hard and thought, How do I respond to this?

At that moment it didn’t matter whether or not I shared her beliefs, because they were hers. I had to respect her and her right to believe.

I don’t remember the exact words I used after hearing her explain why she didn’t believe in financial planning, but I do know that I spoke with extreme caution. My response was along the lines of, “I completely understand what you’re saying, and I’m not disputing your belief. But my role is to help you plan for the what-ifs. In other words, what if your timing is off just a little?”

I knew if I pressed the point, I would be essentially trying to change her views about her belief in the future — a future she proceeded to describe in detail for me.

Our conversation ended cordially.

This woman did not become a client, but the experience was a lesson for me. My views about religion are unimportant when it comes to planning for my clients. What’s important is what they believe, and how their beliefs affect their outlook on the future.

As a financial professional, it’s easy to point a finger and judge others for their irrational behaviors and beliefs when it comes to finance. The reality is, however, that we are all subject to moments of irrationality.

Yes, this woman, it turns out, was clearly wrong in her forecast. After all, we’re still waiting for the Rapture.

But she’s not such an outlier. Someone who says he knows which way the stock market will go in the next year or two is not much different from a woman who says she knows the world will end in a year or two.

The difference is I’m not going to engage in a debate with a client about the timing of the world’s end. The ability to predict the markets? Now, that’s something I’m willing to argue about.

———-

Frank Paré is a certified financial planner in private practice in Oakland, California. He and his firm, PF Wealth Management Group, specialize in serving professional women in transition. Frank is currently on the board of the Financial Planning Association and was a recipient of the FPA’s 2011 Heart of Financial Planning award.

MONEY Financial Planning

4 Things You Need to Change Your Career

Want to change your career or launch a new business? A financial planner explains the four things you need.

A few years ago a client, Peter, came to me and said, “I’m doing all the work, but my boss is making all the money. I could do this on my own, my way, and make a whole lot more.”

Peter was an instructor at an acting studio. He was working long hours for someone else, knew the business inside and out, and felt stuck. He wanted a change.

We talked through his dilemma. Peter wanted to know what he needed to do to venture out on his own and start his own acting academy.

Many of us find ourselves daydreaming about making such a bold life change, but few of us do it. So what is stopping us from taking the leap? Why don’t we have the courage to invest in ourselves?

Peter and his wife, Jeannie, sat down with me to chart out a plan. We determined that they needed four major boxes to be checked for Peter’s dream business to have a real shot at success:

  1. Support from the spouse
  2. Cash reserves
  3. A business plan
  4. Courage to take the leap

Let me break these down:

1. Support from the spouse: Peter and Jeannie had to be in full agreement that they were both ready to take on this new adventure together. In the beginning, they would have significant upfront investments in staffing, infrastructure, and signing a lease for the business. Money would be tight.

2. Cash reserves: Peter was concerned. “How much money can we free up for the startup costs?” he asked. We discussed the couple’s financial concerns, reviewed financial goals for their family, and acknowledged the trade-offs and sacrifices they would need to make. We determined a figure they were comfortable investing in their new business. Then we built a business plan around that number.

3. Business plan: It has been said that a goal without a plan is just a wish. Peter and Jeannie needed a written plan in place so that their wish could become a reality. Their business plan would serve as a step-by-step guide to building and growing the acting academy. It included projections for revenues, expenses, marketing strategies, and one-time costs.

Once we wrote the business plan, we had one final step remaining: the step that so many of us don’t have the courage to take. Peter and Jeannie had to trust in themselves, believe in their plan, and…

4. Take the Leap: Regardless of how confident we are, how prepared we feel, and how much support we have, this is a scary step. We have to walk away from our reliable paycheck, go down an unfamiliar road, and head out into the unknown.

I’m happy to share that Peter and Jeannie’s story is one of great success. They faced obstacles and bumps along the way, but Peter persevered and succeeded in accomplishing his goal. He is now running a thriving acting academy with multiple instructors and a growing staff. If you decide to invest in yourself, you will need to take the four steps too.

———-

Joe O’Boyle is a financial adviser with Voya Financial Advisors. Based in Beverly Hills, Calif., O’Boyle provides personalized, full service financial and retirement planning to individual and corporate clients. O’Boyle focuses on the entertainment, legal and medical industries, with a particular interest in educating Gen Xers and Millennials about the benefits of early retirement planning.

MONEY College

How to Decipher a Financial Aid Letter

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Alamy—Alamy

The financial aid letters that colleges send accepted students are often confusing. Here's how to figure out how much a school will really cost.

When colleges start releasing their admissions decisions toward the end of March, it’s easy for applicants and their parents to figure out the end result: You’re in, you’re out, or you’re on the waiting list.

Unfortunately, when those same schools release their financial aid decisions for accepted students, the results aren’t quite so clear.

Over the years that I’ve worked with families as an independent college admissions counselor, I’ve learned that the financial aid letters that arrive in the mail can be terribly confusing. Parents’ sweat turns icy cold as they try to figure out which college offers the best deal. It takes some work to decipher exactly how much help a family is being offered.

The first step for families trying to assess financial aid packages from different schools is to separate “family money” from “other people’s money.” This process helps focus the mind — and the budget — on forms of financial aid that truly reduce the overall cost of a college education.

Each college provides a total Cost of Attendance — the educational equivalent of the manufacturer’s suggested retail price. The COA includes tuition, fees, room, board, a travel allowance, and a bit of spending money that is somewhat randomly determined by the director of financial aid.

Generally, I find these estimates a bit low, so I encourage families to think about these variable expenditures — things like travel, pizza, cell phones, and dorm furnishings — and come up with a more realistic figure. Then I put these figures into a spreadsheet so that we can see how the starting price tags of similar colleges can vary widely.

Then we tally up the “other people’s money” in the financial aid letter — grants and scholarships with no strings attached. OPM reduces the bottom-line cost of a college education.

Throughout the college selection and application process, I like to help my families zero in on those schools that will be most generous. Assuming all has gone well, a good student may receive 50% or more off the price of tuition. That can be a good chunk of change.

Once we’ve subtracted the OPM from the COA, then we look at the part of the financial aid award that’s dressed up as “aid” …but is really just the family’s money in disguise.

This gussied-up aid comes in two forms. First is work-study aid, which is merely an expectation of a kid’s sweat equity in the coming years. Work-study aid is family money that doesn’t yet exist.

Then there are the loans. Generally, I won’t let my clients borrow more than the maximum that the government will lend to the student directly. These are the federal loans that max out at $27,000 for a 4-year undergraduate education.

Armed with all this information, we then create a spreadsheet to line up the different COA prices and subtract the OPM. That helps us arrive at a total cost of the education to the family — including both the immediate costs and the subsequent costs in the form of either future employment or loans that will have to be repaid.

And if we really want to get down and dirty, we can add the cost of interest over the life of those loans to illustrate exactly how much that college education will cost.

Unless the family has front-loaded the process by picking schools that are likely to maximize the grants and scholarships, I’ve found that most families are taken aback by the cost of college.

But with strong planning and a realistic look at the numbers, families can make wiser long-term financial decisions.

For example, a family I worked with a few years back made the painful but smart decision not to send their daughter to Notre Dame, which offered her nothing in scholarship aid, but to choose Loyola University of Maryland, which with a lower COA and hefty scholarship saved the family over $100,000 for her bachelor’s degree.

The family had money left over to buy their daughter a nice used car, cover expenses for a great summer internship in New York, and subsidize a spring-break service trip to New Orleans. And the young woman graduated from college debt-free.

As parents of college-bound seniors suddenly realize this time of year, a college education is not priceless. A cold, hard look at the numbers makes the price very clear, and enables a family to make the most reasonable financial decision possible.

———-

Mark A. Montgomery, Ph.D., is an independent college admissions consultant. He advises families around the country on setting winning strategies for both admissions and financial aid. He also speaks to schools and civic groups nationwide about how to choose, and get into, the right college. His firm, Montgomery Educational Consulting, has offices in Colorado and New Jersey.

MONEY Love and Money

11 Financial Clues That Your Spouse Wants a Divorce

torn dollar bill
Getty Images

Certain changes in financial behavior and conversations about money are sure-fire signs that your spouse is preparing to split up.

Over 25 years, I’ve worked on the financial aspects of more than 1,300 cases of divorce. Rarely are both spouses in sync when it comes to filing; one spouse is usually laying the groundwork before the other.

In hindsight, most people on the receiving end of the filing have their “aha!” moment. One homemaker told me that her husband began plying her with gifts and vacations; he also launched all kinds of projects to fix up their house so they could sell it and move to a smaller place. It was all totally unsolicited, much appreciated, and done with loving attention.

Six months into all this thoughtful behavior — as the the couple closed on their new vacation timeshare, downsized to a beautiful condo, and planned for their next vacation — he popped the zinger one Saturday morning: “I want a divorce.”

For another client, the signs were a little more obvious: The bank called her husband to let him know that his mortgage was approved — the mortgage he was co-signing with his girlfriend.

Divorce is an emotional, legal, and financial combat zone. There are actually websites devoted to secretly planning for divorce, in order to “win” the best one possible. Divorces can have win-lose, win-win, or lose-lose outcomes. Preparation helps your case. And the earlier you recognize that divorce is imminent, the better you’ll be able to prepare.

Over the years, I have come up with a list of sure-fire financial indicators that your spouse is heading toward divorce. Changes in behavior about money — some subtle, some not — can be tell-tale signs of a split in the offing.

Most of the time, changes in financial behavior accompany classic non-money signs of marital trouble: lack of communication, stress, physical separation, arguments, and isolation. But it helps to be on the lookout for financial signs on their own. And here’s a good list:

Your spouse…

  1. Argues about money.
  2. Seems to be hiding money.
  3. Has no explanation for why money is missing.
  4. Has stopped direct deposits to your joint bank account.
  5. Puts you on a budget and demands an accounting of all of your spending.
  6. Makes large cash withdrawals.
  7. Pays for his/her own credit card bills — or better yet, has his/her mail sent to the office.
  8. Goes on more business trips than usual and has greater travel and entertainment expenses.
  9. Blindsides you with gifts and trips.
  10. Reduces contributions to savings or retirement. Excess cash is now spent or socked away somewhere else.
  11. Takes out loans because it is a “smart” financial decision during times of low interest rates.

Along with these changed behaviors, there’s a whole other set of red flags to look out for: a noticeable turn for the worse in how your spouse talks about his or her earnings, workplace achievements, or business prospects. He or she starts complaining a lot about money — how business is bad, how jobs are at risk, how this year’s bonus is in doubt.

If your spouse is suddenly and remarkably gloomy about his or her ability to make money, this might be premeditated strategy to lower your financial expectations in a divorce. Attorneys even have a name for it: RAIDS, for “recently acquired income deficiency syndrome.”

On the bright side, if you are familiar with your spouse’s business, customers, and performance reviews, it will be hard for your spouse to paint a credible picture of unexpected gloom. So keep your eyes set on financial reality and do your homework if your spouse complains in detail about the following:

  1. His/her earnings potential is at its peak and is at risk.
  2. Bonuses are reduced or nonexistent.
  3. Company layoffs are imminent or overdue.
  4. The employer has declining revenues and sales.
  5. Clients are deserting the company.
  6. His/her sales territory has been cut despite solid job performance.
  7. It’s the economy, stupid!
  8. His/her age is a negative factor in the business, and he/she is at risk of being fired for being too old.
  9. Our family spending is rampant and unsustainable with probable loss of income or job.

If you start hearing these complaints, it’s time to organize your financial wits and get a handle on your financial lifestyle. If you’re surprised to have a spouse who seems to be premeditating divorce, empower yourself and hire a divorce financial planner. A divorce financial planner will cut through your emotional tangles to track your financial issues and provide a foundation for you to advocate your needs, when and if you should hire an attorney.

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Vasileff received the Association of Divorce Financial Planners’ 2013 Pioneering Award for her public advocacy and outstanding leadership in the field of divorce financial planning. Vasileff is president emeritus of the ADFP and is a member of NAPFA, FPA, and IACP. She is president and founder of Divorce and Money Matters, serving clients nationwide from Greenwich, Conn. Her website is http://www.divorcematters.com.

 

MONEY Financial Planning

The Real Risks of Retirement

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Walker and Walker/Getty Images

Acknowledging all the financial risks you face in retirement can be an empowering experience.

When you’re planning for retirement, you think about how much money you’ll spend, places you’d like to visit, what health care will cost. But do you think about risk? And do you think about the right risks?

By that, I mean, have you considered any risk other than running out of money?

There are other risks to face.

No generation before today, for one, has ever looked at such a long retirement with largely themselves alone to rely on.

And we’ve seen two market crashes in a decade — 2000 and 2008 — only to raise our heads up and go through a global economic slowdown. Thanks a lot. What’s next?

Some risks you can actually control, however.

You can’t predict where the markets will be be six or 12 months from now. But you can tell yourself you’re going to get a handle on the other things that have as much of an impact on your retirement as your portfolio’s performance.

These are non-market risks that often arise within your own household.

Here’s my list of the special risks faced by current and future retirees:

  • Living a very, very, very long life
  • Having too much of your wealth in your house
  • Not saving enough
  • Having to take care of your parents
  • Having to support your adult children
  • Paying oversized college costs
  • Not having control of your budget
  • Forgetting about inflation
  • Persistently low returns in the markets and low interest rates
  • Ultra-volatile market swings just as you stop working

Oh, and, timing. All of these things could happen around the same time.

A silly little step you can take toward addressing these risks is to drop the word “risks” and substitute “issues.” If these are “issues,” maybe someone can do something about them. Maybe that person is you.

I find that some clients don’t realize that they themselves are the ones who determine that their financial plan won’t work. Hoping that your portfolio grows to the sky so it can support you isn’t really much of a defense against overspending. Overspending is something you control.

Or maybe it’s not you. Having your elderly parents to take care of, to worry about, to help financially, is not exactly a choice.

But when you factor something like caring for an elderly parent into your retirement plan, you can start to walk around this issue, take its measure, and begin to see ways to cope. Or begin to see that you can’t cope with this responsibility. You may have to find other resources — speak to other family members, seek out public programs, look for nonprofit groups that help with such things as respite care.

Coping with the issue can mean raising your hand, saying you can’t really handle it all, and asking for help.

Or it can mean that you did your research and you didn’t find a solution for every conundrum. Coping with the issue can mean you realize it’s a pothole and you’re going to hit it.

Okay, so you might live to be 100 or close to it. Did you set a portion of your portfolio aside for very long-term growth? Or did you consider delaying Social Security benefits until age 70 — and by doing that, pump up your check for the rest of your life, no matter how long?

Or, let’s say you figure you will have to live with low returns for a long while. Have you allocated enough to cash or short-term investments to handle your spending needs? Or did you divide your portfolio into buckets for different purposes? And then did you come up with an income strategy for one bucket so that you don’t have to dip into your other buckets?

When you strategize like this in the face of risk, it’s easier to see the actions you can take, even if you can’t make the risk go away.

As financial planners, we don’t often discuss these non-market risks. The one risk we do talk about with clients all the time is market risk, because we know quite a bit about that. Markets are difficult and ever-changing. While that may seem impenetrable to the client, it doesn’t really intimidate us.

But the real risks to the client’s retirement? Many of them lie out there, beyond investments. They may be outside a financial adviser’s perfectly organized financial plan, but they still exist. And clients have to steer around them.

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Harriet J. Brackey, CFP, is the co-chief investment officer of GSK Wealth Advisors, a South Florida registered investment advisory firm that manages more than $330 million. She does financial planning for clients and manages their portfolios. Before going into the financial services industry, she was an award-winning journalist who covered Wall Street. Her background includes stints at Business Week, USA Today, The Miami Herald and Nightly Business Report.

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