(Disclaimer: As a recently retired financial services representative, I feel obligated to stress that the opinions; observations and factoids contained herein are the opinions of a private individual….not appointed with any vendor of financial services, and not offering said opinions and/or observations out of any motivation other than the sharing of personal experience with financial risk management)
Is your desired retirement date within the next ten years?
Do you measure “recovery” by the number of foreclosures on your street?
Wondering what will be in the next senate bill and what your senator will think of it when he or she does finally read it?
You are not alone.
As a “baby-boomer”, you have the privilege, (deserved or not) …of observing housing and banking ‘bubbles’ as a member of the largest population “bubble” in centuries. Your sheer number poses an impending economic tsunami in the increasingly turbulent waters of the world economy.
What to do? Unless you are ready to put in the hours necessary to “day-trade”, you need to speak with some sort of “financial services representative”.
As unpleasant as this sounds, it is necessary. Like your doctor; dentist, or attorney, you need someone to protect your ‘portfolio’ (such as it is) with preventative maintenance.
Let’s cover some groundwork:
1) You must make the decision to act. No one is going to take you by the hand and review your portfolio until you decide that it just might be prudent to review your risk tolerance; your time horizon for retirement; your desired lifestyle in retirement; and your legacy goals. Social Security and Medicare are but supplements to your sustenance in your ‘golden’ years. The ‘safety net’ afforded by these increasingly stretched government resources definitely cannot be regarded as the “hammock” of your long dreamed-of retirement.
2) You must acquaint yourself with your ‘portfolio’. In my practice; it was sobering indeed to note that, most people in fact are unfamiliar with their protection portfolio…..and therefore unclear as to what exactly they might have to work with toward retirement planning. You need to speak with your human resources people at your job to cover a myriad of topics:
Life Insurance: Is it convertible to your own coverage if you are terminated or leave the company? Is your privately owned insurance enough to cover your mortgage; debts; education; and survivor needs of your family?
Disability Insurance: If you are unable to work for other than a work-related injury or illness, a) what is the ‘waiting period’ before short-term disability coverage ‘kicks in”?…b) What percentage of your average pay is paid? 60%? (It is definitely not 100%)…c) What duration of time does your fractional disability income last?…d) What is the ‘waiting period’ ; amount and duration of long-term disability coverage (if any).
Medical Coverage: Know what is covered and what is not, and what the maximum payout is.
401K: Know what amount the employer matches. What funds are you in? How is the performance compared to the overall market? Does it match your risk tolerance? Do you know what your risk tolerance is?
Budget/Savings: Streamline your budget by comparing your income and your cash outflow. As to outflow……categorize expenditures of income as ‘necessary’ versus ‘discretionary’… (many people are surprised to note that lots more cash than they realized was going to lottery tickets; premium cable channels; tobacco; unlimited cellphone allowances; etc.)
***Save enough cash to pay for at least 6 to 9 months of your monthly living expenses… This ‘buffer’ is not only common sense and prudence, but it will convince your financial adviser you are committed to reviewing his/her advice.
Now, you can call an adviser for an appointment, or finally accede to allowing one to come over from among the half-dozen or so ‘cold’ calls you probably receive monthly, (which is due simply to demography… your membership in “the bubble”.)
Just as your doctor or lawyer was ‘new’ to you the first time you met, your financial adviser is ‘new’ . From this writer’s experience, it may be helpful for you to realize that:
1) The ‘good‘: Licensing; continuing education; ethical standards; training; etc., are covered at both the state and federal governmental levels to an extent which can equal or exceed standards required of physicians or attorneys. You can quickly review the age; experience; license status and disciplinary record of any such representative before you even meet…..State departments of insurance; FINRA/SIPC , etc., all have websites which monitor these people down to a regular review of their traffic records; credit histories; and the proper verbiage on their business cards.
2) The ‘bad‘: Since the Madoff debacle; our learned representatives and senators have reacted with the ‘Frank-Todd’ Act; a plethora of new agencies and regulatory bodies; heightened continuing education requirements; and more rigorous oversight of everything a representative does, down to each and every e-mail sent or received. The unfortunate result is that your financial representative or adviser has taken the ‘brunt’ of legislative reaction to the crimes of ‘Bernie’ and the acquiescence of those who had regular and ample opportunity to expose his time-worn ‘Ponzi’ antics. That this field has become more demanding is borne out by the depressing statistics…most new reps do not last more than 2 years. And, those who are able to stay in the field due to their marketing prowess or their alacrity at appointment setting, simply cannot afford to deal with clients who are not business owners or professionals. The regulatory environment, in its’ ‘knee-jerk’ reaction to the Madoff episode, has simply increased both the cost of doing business for these ‘frontline ‘soldiers in the field, and increased the risk perceived by these ‘soldiers’ of regulatory discipline; fines; and penalties for things so minute as the lack of a proper disclaimer at the bottom of an e-mail. (In my experience, these were updated as often as every two months.)
So, it is a committed individual you will be meeting with. Just don’t be alarmed if he arrives looking like this:
So….If you can make the decision to act, and can actually talk with some general knowledge of what is actually in your portfolio, you will have done a service to yourself and your family simply by doing your job…..so the adviser can do his job.