Transcript

Wiser Financial Advisor – Women and Money

Hi everyone, welcome to the Wiser Financial Advisor show with Josh Nelson, where we get real, we get honest and we get clear about the financial world and your money. This is Josh Nelson, founder and CEO of Keystone Financial Services. Let the financial fun begin!

Today, we’ll be talking about women and money, charting the financial course. It’s critical that women know how to save, invest and plan. And of course, it’s important that everybody know how to do that, but it’s important that you know both sides of the equation for men and women, because there are some unique issues applicable to women.

Sarah: During my 20 years, Josh, and during the past 30 years in the world, you might not think it’s shifted, but it really has shifted. Back in 2004, 2005 when I was a personal banker, when couples would come into the bank, it often happened that the husband walked in and sat at the desk and he made all the decisions, signed all the paperwork, and the wife just kind of sat there or she wasn’t there. Same thing happened in this financial planning world 10 years ago; the husband did most of the decision-making. And now in the last five years or so, with most of the new clients that we bring on, we’re really dealing with the wife most of the time. She’s the one that has everything organized. She’s the one that has all the statements. She knows where everything is. And the husband’s kind of like, yeah, whatever she said. So we have really seen a change in just the last 20 years of women taking more of an active role in the financial planning world.

Josh: I’ve seen the same thing, and we do think it’s important, especially when you’re planning together. And of course if you’re married or a significant other, there’s some degree of planning together about your future. So it’s important that both people are involved. There are some reasons for optimism. Women are well-positioned to pursue financial security for themselves and their families. We’ve always believed that, but we think increasingly that women’s economic clout is there. Women make up about half of the workforce now. That wasn’t always the case a few generations ago. And now, women account for more than half of all workers in management, professional and related occupations. It’s not a big surprise to us that women own millions of businesses. Oftentimes they are decision-makers, not just in the household but also among businesses from small businesses all the way up to Fortune 500 companies. And women earn the majority now of all bachelors, masters and doctorate degrees.

Sarah: When I was reviewing all this information, I found that really surprising. I don’t know why but to think that women are earning the majority of those higher education degrees was surprising to me.

Josh: And there are different reasons for that. If you really dig into the studies, in some cases what’s happening is that more men now are not going to college. They’re going straight into the workforce, could be working trades or opening up a small business. A college campus looks very different now than it would have, say, a decade or two or three ago.

Sarah: And I think it’s generational, you know? We were raised by our parents who said, “Women can do what they want to do. You go to college, you do your thing.” My dad would say, “Oh, yeah, that’s how we raised Sarah. You do it, you do it for yourself and you get that degree and you get that career.” So a lot of it is generational, and I’ve heard that there’s going to be a shift again, to more women staying home and taking care of family. So we’ll see if that actually happens.

Josh: Yeah, certainly there are different challenges that come with that as well, challenges that are unique to women. These are generalizations, but women have longer life expectancy, as we’ve seen for a long time. Women always come out in those statistics as living at least a few years longer than men. Women generally earn less income and may have less savings. There are different reasons for that. One of those is that women are more likely to interrupt their careers if they stay home for a while. In some cases, even if it’s a year and certainly five years or 10 years, things are changing so rapidly right now that it makes a big difference.

Sarah: Right. And we’ll dig into that more as we go along.

Josh: Because women on average live about five years longer than men, their retirement dollars will need to stretch further, meaning that it’s essentially more expensive for women. Maybe it’s long term care or some other healthcare needs; maybe it’s home health care and aging in the home. Certainly, married women are likely to have sole responsibility for financial decisions at some point if the husband passes away.

Sarah: Right, and for that reason it’s really important to verify things and stay in tune. If your husband or your spouse is primarily that financial planner, you still need to know what’s going on and to verify benefits. I’m thinking of a personal story. My grandma was 15 years younger than my grandpa. And they didn’t have a financial advisor like Josh and Keystone to plan out that age gap. He had VA benefits and that was primarily their income. He did not realize that when he passed, that benefit was going away. Come to find out, he was about one year shy of hitting the 10 year requirement to have it pass on to a spouse. So she lost all of that income, which was a huge upset in her world. And we, her family, have had to step in to figure out what Grandma’s going to do. So it’s important to verify any benefits that either spouse has and whether those will carry on after that person passes. Is it a reduced benefit or anything like that? Because sometimes you might find out that it’s not the way you expected it to be.

And another topic: I think caregiving is a big thing for women, whether it’s aging parents or your own kids. From my own experience, I was driven to focus on career, career, career and then I had a baby three years ago. I thought, “Hmm, I’m gonna miss out on her childhood.” So now I’m balancing career and kids. Some women choose to take a complete step out. Then it’s a challenge when you come back in 5-10 years later. At least in this industry, laws have changed, technology has changed, and you feel like you’re trying to play catch up. So that’s a big challenge that we have to account for in the financial planning world that impacts a lot of things; e.g. Social Security and those lost dollars for retirement.

Josh: And there are other vulnerabilities that end up happening. There could be a job loss. We’ve dealt with a lot of clients over the years that have dealt with unexpected job losses. Divorces, single parenthood, illness, loss of a spouse. Many things can happen that have a massive impact on planning. That’s one of the benefits of working with a financial planner, somebody that can help watch out for and understand the benefits and things that people have at their disposal or that they need to plan for.

Another side of things is that women may invest more conservatively. Studies have shown that on average, women tend to have a lower risk tolerance, which is industry jargon that we use: risk tolerance or risk number. There’s nothing wrong with going more conservative on investing, but it also could impact the size of your retirement plan over the years. You may not grow as much, and so your retirement nest egg may not be as big, right?

Sarah: I know just in our personal situation, I tend to say, “Well, I want that to sit in cash; it needs to be in cash because that’s safe.” And Josh will say, “No, we need to invest that.” So it’s that sense of security. Is it the smartest thing to do? No, risk wise it isn’t, but it’s in cash.

Josh: Yeah, we’re a good balance for each other, right? So there are some compromises that come into this stuff. Oftentimes you end up in a better place. But it’s something to keep in mind, that you need to be looking at appropriate assumptions, as far as what growth rate will you probably get based off of history. Are we accounting for inflation? And certainly no risk, no reward. So if somebody just left all their money in cash forever, we don’t advise that for most people, because it’s going to be hard to keep up with inflation. It’s important to spend the time and educate yourself on different investment options and how those are going to behave during different markets. There’s no one-size-fits-all. Certainly every situation is different; every dynamic is different. Every family is different.

Sarah: And it’s OK to let your spouse do everything. Everybody’s got that dynamic where somebody takes charge, whether it’s husband, wife, whatever. But if that’s happening, stay in tune. Stay in check. At least attend the meetings with your financial advisor, and know where things are.

Josh: Yeah, in some circumstances, maybe one spouse took the lead, whether it’s the wife or the husband, if the other person is just completely left in the dark, maybe even by their own choosing–they might just say, “I’m not interested; I know you’ve got this,” but then if that decision-maker who’s been managing everything passes away, it’s hard to play catch up and get organized and go forward, right?

Sarah: We’ve seen the spectrum on both sides where a spouse passes and the other spouse doesn’t even know how to pay the bills. I mean, doesn’t know how to pay the electric bill and such. And obviously we’ve helped them through that. People have come in here every two weeks for about a year just to get everything figured out. So, at least have the basics. If the other person’s doing it, great, but have a financial advisor that can carry that through or something.

Josh: A lot of the value of working with any Certified Financial Planner (CFP) is going to be to help you get organized and help you get on the same page if you are planning with a spouse or planning with a significant other. Sometimes people get stuck and that conversation with a CFP can facilitate some of those decisions.

From a financial planning perspective, we believe financial planning is for everybody. It doesn’t matter how low or high your income is per year. It doesn’t matter how complicated or uncomplicated your tax situation is, there are things that everybody should be looking at. Whatever your situation, there are things that you can do, and we’re gonna dig into the details on these.

Number one, take control of your money. Have some involvement. You never want to have completely hands-off decision-making. There at least needs to be a high level understanding of the planning. Where is the money and the strategy? Where are the passwords? Where are the credentials to get in? What’s the combination to the safe. It’s important to at least have a high level view of that. Nobody cares about your stuff as much as you do. So make sure you are involved even if you are working with a financial planner. Become a more knowledgeable investor. There may be varying degrees of how much you want to know. We’ve got some clients that are 30,000 feet people; they just want to know, “Alright, what’s the bottom line? What are the results? When can I retire? Am I gonna be OK? Am I going to run out of money?” Those are the big questions that we tend to get.

We’ve got other clients, such as engineers and doctors who want to know all the details. That’s fine too, but make sure you at least understand things from a high level. Never just hand over all decision-making.

There’s no estate planning that can be done after you die, so it it’s important to make some of those decisions now and have people communicate before you get to that point. Taking control of your money means you are ultimately responsible, even if it’s by delegating to professionals such as attorneys, trust officers, financial planners, investment advisors, people that you’re trusting on your team. We think it’s good to have a team of people that you trust, but make sure that you still are involved and know that you’ve got veto power, right? It’s your decision. As financial planners, it’s our job to guide you. It’s not our job to make your decisions for you.

Number Two, know your cash flow. We spend a lot of time on cash flow. We like to say, “cash flow” as opposed to the word budgeting, because nobody likes the term “budget.” It usually means “I can’t spend money,” but cash flow means to understand where your money is going. Have some understanding of what’s in the checking account. Know where the money is, how it’s going out and are we spending more than we are making, which is going the other direction of building wealth. Positive cash flow, managing debt, living within your means and then creating an emergency fund is also critical and keeping enough money in cash, usually three to six months’ worth of living expenses. That’s why it’s important to understand at least at a basic level how much you’re spending, so you can calculate how much should be seen in cash.

Sarah: I have heard for self-employed it’s closer to a year or two because it can take a self-employed person a lot longer to turn the business around.

Josh: Yes, or choose to go work for somebody else or start a new business. So if you’re self-employed, I would agree you need more to potentially tide you over. Or if you have a really unstable job situation, or if most of your pay is on commission, things like that. And of course, using the example of the pandemic, many businesses didn’t make it, so that’s why it’s important to have that cash you can live off of for a while if things get really bad. Creating an emergency fund is a foundational thing with financial planning.

Establishing and maintaining good credit might seem like a given, but it’s important to understand your own credit situation. It may not be that you’re over-borrowing or making late payments; it could just be making sure that you’re checking up on your credit score every year at least just to make sure that bad guys didn’t get in there right and apply and there’s no fraud or anything like that on your credit. Stuff like that happens all the time, especially in today’s world. If that ever happens, make sure you let your financial adviser know immediately. Even though it costs some money, we’re big fans of LifeLock and other credit protection agencies that will help you correct your credit. By law, everybody can get a free credit report every year. It’s a good idea to check up on that to make sure it’s all good. The quicker you are to catch fraud or that sort of thing, the more likely it is that you’re going to be able to get your money back or have it wiped off your credit report.

Then there are important foundational things to becoming a more knowledgeable investor. You can hire people like us that can manage investments for you and handle the day-to-day decisions and allocations. But we can’t pick your risk number for you. You do need to understand, at least on the basic level, how your money is being managed and how to protect yourself. There are all kinds of stuff that happen from Ponzi schemes to just very high-risk investments where people didn’t know how much risk they were taking. Maybe they had all their money in one area and that one area went down; it may not have even been a fraud situation. Think about the pandemic. There were some sectors that were disproportionately impacted, such as the hospitality sector. So, understanding how your money is being managed, asking basic questions, and having that high-level understanding are a couple of things to be thinking about.

You might be just starting out. Some things to think about there: getting basic information, take some small steps and learn as you go. It’s OK to go slow, ask questions and move at your own pace. Don’t get stuck, because time is a big, big factor. You want to make sure that you’re taking good, effective steps as early on as possible in your career to invest appropriately and build wealth, so that eventually you won’t have to work if you don’t want to. If you’re more experienced aligning your portfolio with your goals, time horizon and risk tolerance, a good financial planner can help with that.

Sarah: In the more experienced areas, that’s an advisor’s role or should be. Just starting out that may look like being involved in the Dave Ramsey program or reading books. There’s a book called The One Page Financial Planning, which is by Carl Richards. That’s a really good one for somebody just starting out. And then on the experienced side, usually you need some help with that.

Josh: Yeah, we’ve got a lot of engineers as clients, people that are very educated and they hire us anyway simply because it’s something that they’re not as interested in or also they realize that there are probably things they don’t know.

Managing risk is a critical part of investing. You need to understand how much risk you’re taking in your portfolio. Oftentimes if people are disappointed in their results or frustrated, it’s because they didn’t know how much risk they were taking. That’s why we recommend having your eggs in the different baskets as a foundational principle.

Sarah: A few weeks ago, Jeremy made a good point that your risk tolerance is always doing great when the markets are doing great. But the real test of risk tolerance is if you are comfortable when the portfolios start going down. Everything’s happy, happy when it’s going up, but how much risk can you really take when you’re watching that number drop.

Josh: Yeah, exactly. Until there’s a pandemic or there’s 9/11 or whatever. Once you’re on that airplane and it gets turbulent, you have to be along for the ride, but that’s when people will get themselves in trouble. That’s why we stress test financially; we go through stress tests with people to show them based on what you own during a bad period of time, it could go down this much, right? So it’s important to know not only the upside but also the downside and whether you can live with that downside or not.

Sarah: Hypothetically is very different than when it’s actually happening. Then you want to readjust.

Josh: Exactly. We spend a lot of time on that with clients. We keep an eye out for investing ideas, we want to stay diversified, but that also means making sure that we’re not close-minded. We want to look out for opportunities and those opportunities might change depending on market conditions and where we are in the economic cycle. We spend a lot of our time rebalancing portfolios. We’re constantly reevaluating and looking at what people own based off of where we are in the economy and considering taxes, fees, inflation. Those things can greatly detract from your long term results. We’re not fans of day trading, but we’re also not fans of “set it and forget it” investing either, where you just invest your money and never look at it again. It’s important to have some balance in a game plan for all the market turbulence. Even if you’re wonderfully diversified, even if you’ve got a really high-risk number, a really high risk tolerance, you could own every stock in the world, but if the entire stock market goes down by 50%, guess what? So will you.

Of course, people make mistakes. It could be that circumstance where you’re at a certain risk level and then later on figure out that level is not you. It’s OK, but don’t get stuck. Don’t use that as an excuse not to do anything. Sometimes it is worth making an adjustment and changing your portfolio, learning from it and moving on. Being risk averse in the right way and then again the wrong way probably is just leaving all your money in cash. Sometimes we see that, and right now it’s a little more palatable because people are earning more interest on money just sitting in the bank. Over the long term, that’s not a great solution for most of us. Inflation is real. We’ve seen inflation be pretty tough the last couple of years. But long term inflation is about 3%.

Know when to get help. Begin, whether that’s with us or some other professional, just make sure whoever you’re working with is a fiduciary with a high standard as far as the level of advice they’re giving. Not every advisor is a fiduciary. If they’re not a fiduciary, they’re not required to work in your best interest. We here at Keystone are a fiduciary at all times, looking out for you and your family.

You need to become an advocate for yourself in the workplace. That’s important for everybody, but studies have shown that men are more likely to negotiate and go back and ask for pay increases or even a better beginning salary, so it makes a big difference. That’s the foundation for all your benefits in a lot of cases: your pensions, your 401K, your stock purchase plans, equity awards, all kinds of things that come with that. So it’s important to be looking at your salary and making sure, whether you’re a man or woman, that it’s competitive with the rest of the industry and your experience and years of service.

Sarah: And it doesn’t hurt to shoot for the moon and come back with, “This is more of what will work for us.”

Josh: Yes, don’t be afraid to do that research in an educated way, so that you’ve already got information to be able to take to them. Speak up on accomplishments, toot your horn, especially if you work for a big company. Sometimes you can get lost, so make sure that you’re standing up for yourself and say, “Hey, I did this.” Those things can make a big difference when it comes to who gets the bonuses, who gets the promotions, who gets the equity awards. And talking about parenting or work from home situations, ask for what you need; don’t be afraid to ask for flexibility.

Sarah: Right. Flexibility is huge. COVID taught us that many of us can do our jobs from home. We can have that flexibility. So hopefully most workplaces adopted that. Right now I have our daughter in the next room. That’s what we had to do today. So it’s putting on a webinar or doing my work at my desk and taking care of her, which is the norm for many parents. Usually it seems like it’s women that more take that charge of kids as a Mom’s role. So, making sure that your workplace supports that is a big benefit. And there are places that do.

Josh: Especially with 3.5 percent unemployment rate right now, we’re finding that a lot of employers are more likely to be flexible, right? If people need to leave for their kids’ program or whatever. We’re also seeing working from home, at least on a partial basis with flexible hours. Part time work is a growth trend I’ll touch on, because in some cases that may work at the end of your career. We’re finding that some clients don’t really want to fully retire, but it could be they want to phase themselves out, semi retire. More employers we’re finding are willing to work with that because they don’t want to lose the person completely because of their experience.

Looking at growth trends in planning for retirement, pretty much every client we talk to, when they first start working with us say, “I wish I would have talked to you guys earlier. I wish I would have started earlier.” And compound interest makes a difference, even using what I think isn’t a very good long term rate of return, only 6%. If your risk number is higher than that, let’s just say that you’re more likely to get a higher return than that over time. But if you start saving early, say when you’re 20, that makes a big difference. At the beginning of your career, that’s one thing that I’d encourage, especially for people who are first starting out. Sign up for the 401K or any other kinds of savings benefit right away.

Sarah: Even just saving $2000 per year from 20 years old, I mean, that’s not a whole lot. I could probably spend that in coffee. And at retirement it’s a half million dollars accumulated over the years.

Josh: Yeah. And again, with higher growth rates, say if you’re able to earn an 8% rate of return or a 10% rate of return over that period of time would be a lot more than that magic formula. On the math, if you earn a 10% rate of return, divide it into 72. That’s every 7.2 years your money would be doubling. So that makes a big difference. A lot of people think that these numbers are out of range to get to millions of dollars. But if you start early, it’s probably money that you’re not gonna miss anyway if it’s just deducted from your paycheck, so save as much as you can. Rule of thumb is that if you started out with about 15% of your pay being pulled aside and put away for the future, 15% is a good starting point. You might find that you can’t swing that right now and that’s fine. Start with something. Start with 1% or 2% of your pay and then gradually move that up over time.

We use the term pay yourself first. That means that money is pulled aside and goes into your retirement plan before you get your hands on it. I think for all of us, if the money hits the checking account, it’s kind of fair game. If it’s in there, it’s probably gonna get spent. So if it’s pulled out before that, before you even see it, you probably won’t even notice. 401K, 403B, 457–all the alphabet super-retirement plans, more than likely your retirement plan at work will be your best first starting point because of matching contributions, so definitely take a look at them. Consider IRAs, as those are individual retirement accounts. There are different types of IRAs, which get beyond the scope of today, but quickly we do really like Roth, especially for people who have a lot of time for those accounts to build up, people just starting out in their careers. That could be a huge advantage because of tax free growth that you can get as opposed to having to pay the taxes later on in a traditional retirement plan. You do want to understand the rules before doing anything with those. The rules on retirement plans are complicated and they change constantly, so that’s where we get a kick out of keeping track of this stuff. The goal again would be to be automated. Ideally, you’ve just got it automatically pulled aside from your checking account into your 401K. You’ve got something pulled out of your paycheck that you’re automatically saving for. Whether you’re saving for college or retirement or paying off the mortgage early, automated savings tend to work the best because if the money is gone, you’re not gonna be thinking about it. It’s already set aside and saving for that gold.

So 15% is a good target for retirement planning. If you’re thinking about retiring early, which could be different for everybody, I would think about 20 percent as a great target. I can tell you from a lot of our clients that have been clients for years and years and are retired, many of them contributed to their 401K and to a stock purchase plan that their employer offered. Many times people would put 10% of their money into the 401K and 10% of their money into stock that built up. That’s why they have what they have today. They did that over a long, long period of time. It wasn’t because they got lucky or got a big inheritance or something like that. It was just starting as early as possible and setting that money aside for yourself, instead of spending it.

In planning for retirement, Social Security is the major source of guaranteed lifetime income. I don’t know about that word guarantee. For those of you who are younger, you might be thinking pretty skeptically about it. Will it go away? Probably not. Will there be changes to it? Probably so. Probably won’t go away, because messing with Social Security is not a winning campaign slogan. So they keep kicking the can down the road, but as it stands right now, I think it’s 2033 or 2034, if there aren’t any changes to the program, every recipient will get a 20% reduction in their benefit, and because about 30% of the population that’s retired right now relies on Social Security and has no savings and no retirement plans, that would put a lot of people into poverty, right?

Sarah: Social Security used to be your retirement plan.

Josh: That along with maybe a company pension, but now most people don’t have pensions. So, a lot of our younger clients are saying, “Don’t even include Social Security as an assumption in my retirement planning.” But you still need to manage it. If you’re there, you’re going to be applying for benefits. It’s still something you’ve got to manage and you want to use these things to your advantage. You definitely don’t want to leave money on the table, and there are a lot of different benefits there. We do whole seminars on Social Security benefits. It provides retirement benefits, disability and survivor benefits, divorce and spousal benefits. Even so, it’s important to look at your individual circumstances to see what you’re eligible for, and it never hurts to check with Social Security directly, especially if you’ve been married before, whether you’ve been divorced or your spouse has passed away, you might have some eligibility from their records. So your benefit is based on the number of years that you’ve worked, but it also could be off a spouse’s work. It also matters what your earnings were.

Go to ssa.gov. and create an account. At the very least you want to do that much. Create your own profile. So it’s important that you look at your own record and make sure it’s accurate. Sometimes we’ve heard that people screw up or maybe a former employer screwed up their reporting or withholding or something like that. It also matters if you’ve worked for any entity like a railroad or if you’ve been a teacher that didn’t pay into Social Security. There are other things that you would be eligible for that could impact your benefits. One thing to be aware of is that the earlier you start collecting Social Security, the less you get per month. The longer you wait, the more you get up until age 70; it never goes up after that point. So you definitely want to apply for benefits if you haven’t already by the time you hit 70.

Sarah: Right. And do you typically find that it’s better to pull from 401K and IRA’s from age 62 to 69 and let that Social Security grow?

Josh: We get that question a lot actually. And we have an analysis tool that can run those numbers for you because the answer is so individual. It’s based off your earnings history, how old you are, how long you think you’re gonna live, whether you’ve been married. It could be that you would get more money because you’ve been married.

Other things to think about when you’re retirement planning is that the time factor is critical. Start to estimate what you think you’re going to be spending in dealing with any shortfall in retirement. It’s not our job to make your decisions for you, but to show you the numbers and to work the math, play “What if?” and let you make the decisions. They say that the number one fear of retirees is running out of money sometime in their retirement. And sadly, a lot of people do. It does happen, but if you address any shortfall now, you’re better off. In other words, if we spend this amount, then we’re going to run out of money by the time we’re 79. Alright, maybe we want to deal with that, right? Maybe it means I’m going to work longer or we’re not going to spend as much money. Or maybe I’m going to change how my money is invested. Clearly, you want to deal with that as soon as possible, because if we’re dealing with a 30 year old right now, we’ve got a lot of time to plan right for any kind of shortfall in their retirement versus if you’re on the eve of retirement, then there are fewer levers that you’re going to be able to pull. We like to show you your number so you can make good decisions and at least have confidence that you’ve got a plan that’s workable.

Protecting your income and assets gets to insurance. It’s important to think about life insurance, disability insurance, your home and auto, health insurance, long term care insurance if you’ve got it, and then it could be that that you’re the beneficiary of a trust or have some other benefits that you need to account for, if e.g. you’ve got a special needs child or some other factors that apply. And certainly if you own a business or think you’re gonna inherit a business, or a ranch or anything unique like that, just be aware of that and incorporate it into your plans.

Which brings us to our last planning area: creating an estate plan. You want to get a good plan in place for both yourself and anybody who’s going to be depending on your incomes or your knowledge, or if you own a business that that you’ve been running, have all that planned out so that people are taken care of in the end.

Sarah: Yeah, I would say the estate planning world seems to be the most forgotten and it has the biggest impact when it is, because there’s really not a whole lot you can do after somebody’s passed away. But people always kind of go, “Well, that’s for old people,” or something like that. It’s the most forgotten, but the highest impact when it’s forgotten.

Josh: Using your grandma’s example, that’s part of estate planning—understanding what happens to different income streams when somebody passes away. You need to map out assets and things and be thoughtful about it. You can’t control everything, right? You certainly can’t control the government and rules changing and all that stuff, but at least having awareness of it will help you do what you can.

Sarah: Right. We have a family member that currently is trying to get her dad to take his paper stock certificates and do something with them. From our experience, you have to get that done before he passes away. He’s in his late 90s and although he’s healthy, anything can happen. From our experience, it is terrible to deal with paper stocks after somebody has passed. It can be a month or two-month process. Your financial advisor can put those in a brokerage account. That way, they don’t have to be sold because he doesn’t want them sold. They’re sentimental to him. But that’s an example of things that have to be done before somebody passes or it can create a nightmare.

Josh: And the estate plan usually deals with a couple of different things, such as incapacitation, which is not the same as death. Sometimes it’s incapacitation. There you’re thinking about things like a living will, an end of life directive, healthcare proxy, DNR order or Power of Attorney, living trust. These are all things that need to be taken care of before you’re incapacitated. Otherwise, you’re going to a judge, right? Or your families are going to a judge to try to get somebody to put these things into place.

Sarah: One common misconception that I hear a lot is people say, ”I have Power of Attorney.” But people don’t realize that Power of Attorney ceases at death. As soon as that person dies, that Power of Attorney means nothing. And Power of Attorney is thrown around like, “I have complete control over what’s going to happen,”—but not necessarily.

Josh: Yes, Last Will And Testament is the official term for a will that applies after death, not to be confused with the Living Will, which is an end of life directive. Your Last Will and Testament is more or less your letter to the probate court judge to say, “Here’s what I want to have happen.” One thing not to ignore here is that sometimes people think it’s just about money, but it also can deal with your personal possessions. And it’s the place that you would name who’s going to take care of your minor children. If you’ve got a child that’s not adult, that’s where you would say they’re supposed to be taken care of by this family member, or that family member is supposed to help them manage their money until they reach legal age. You might say, “Well, I’m only 32 or whatever and I’ve got a long time until I die.” Well, yeah. But you may not make it, #1. And #2, it’s not just about the money; it’s also about caregiving.

Sarah: And let’s say husband and wife passed away together, naturally you would think about grandparents or aunts and uncles stepping in. But it’s a legal process. I’ve actually known families where both parents have passed away and the kids are technically a ward of the state, and grandparents now have to deal with the legal battle of trying to get those kids back, even though they’re the next of kin. You would think, well, duh, that should just happen. It doesn’t. So you want to designate that.

Josh: Yeah, years ago we saw two sets of grandparents fighting over which set was going to care for the grandchildren. They were having to go to court and experience the emotional turmoil that puts on the family. So this isn’t just about the money, it’s also about emotions and the x factor with stock certificates and all these things. If you don’t have a will, that means you follow your State, which has what’s called an intestacy law. That means that they’ve got a plan for you if you die without a will, and you may not like that plan.

Sarah: Right. Another misconception is, if you designate beneficiaries on your accounts, people think those supersede what you’ve written in your will, e.g. “I wrote this will up, and so yeah, I might have an account over here that has so and so listed as the beneficiary, but….” They believe the will would take over and direct everything. That’s not the case. The designations you’ve made on your 401K or your life insurance, or anything else, is going to be taken into account. So make sure they match up.

Josh: And of course on all this stuff, consult with your estate planning attorney. We’re not legal advisors, but we are financial planners and we’ve seen a lot of situations where things are completely unintentional, cases where people get disinherited or the wrong family members get the money because somebody thought, “Well, I changed the will.” As financial planners, we can certainly help uncover that stuff. Caring for aging parents happens a ton. We’re seeing many of our clients dealing with that. Sometimes it’s not even the physical care, but helping them pay their bills and deal with their stuff; helping them move out of the home that they’ve been in for 50 years and dealing with their possessions. And losing a spouse has a big, big financial impact on people’s lives as well as an emotional one.

Ultimately, it’s about you. Financial planning is for everybody, but there are some unique issues that do come into play with our female clients and hopefully this has helped uncover some of those things. This probably didn’t make you an expert on any of these topic areas, but that’s OK, it’s a starting point at least. This is us making the complex simple and this is a great shareable piece as well. We can send it to you in a nice PDF.

It’s also on our website. We created it so people would have some idea of the main things that we help people with and what differentiates a comprehensive financial plan for you when you work with a fiduciary versus somebody who is more of a broker or insurance agent or something like that.

Sarah: And if we’re not the ones helping, we’ve formatted it with the check boxes that at some point need to be discussed. It might not be now, it might be 20 years from now, but at some point all these boxes need to get checked. So it’s kind of a nice handout you can take with you and check the boxes.

Josh: We’ve got a great team of shining faces up here that love serving you and your family. We love the relationship part of this business and certainly want to be able to help you in any way we can.

You can e-mail us directly if you have follow-up questions. Either we’ll reply back to you or we can hop on the phone. Our emails are as follows: josh@keystonefinancial.com or Jeremy@keystonefinancial.com or sarah@keystonefinancial.com or you can go to communications@keystonefinancial.com . Thank you very much and God bless.

The opinions voiced on the Wiser Financial Advisor show with host Josh Nelson are for general information only, and are not intended to provide specific advice or recommendations for any individual. To determine what may be appropriate for you, consult your attorney, accountant, financial or tax advisor prior to investing. Investment advisory services offered through Keystone Financial Services, an SEC registered investment advisor.