On a recent edition of the Financial Sense Newshour’s Lifetime Planning podcast, Financial Sense Wealth Management's Lead Wealth Advisors Becki Sutton, CFA, CFP ® and Aaron Wiegman, CFP ® discussed what it means to plan for your loved ones. They told listeners who they should be including in their plans and why establishing them now could end up saving money down the road.
For audio, see Don’t Forget to Plan for Your Loved Ones.
Plan for Life's What Ifs
So, what does planning for your loved ones mean and who should you be considering? Wiegman said financial planning and financial advising can often feel goal oriented and focused only on investments and accumulation. Those are important aspects of a financial plan, but he said, it’s equally important to plan for life’s what ifs.
“What if something bad happens, what if the catastrophic event does take place?” Wiegman explained, “It’s not one of those things you like thinking about, but it’s a necessary thing that we need to make sure you have a plan for.” He said financial planning should really be more of a blend between how you can save for your goals and how you’re preparing for the unknown.
Not having a plan for those what ifs not only negatively affects you but it often has a direct and negative impact on your loved ones. Sutton explained why it’s important to expand your horizons of who to include in your financial plan. “Obviously you’ll want to include spouses and children, but you should also think about your parents, your siblings even your pets,” she said. Casting a wider net of who you include not only helps you but those who matter most to you.
Create a Plan that Grows With You
After you’ve identified who’s in your plan, Wiegman said where you are in your financial journey will greatly impact what that plan looks like. Younger families might be considering college and retirement planning. Those who’ve already retired might be more focused on making their savings last through retirement and passing their assets on to the next generation as efficiently as possible.
No matter where you are in your financial journey, Sutton and Wiegman agreed that long-term care should always be factored in—Sutton even said it can be a “catastrophic” event if you’re not prepared. She explained, “you want to make sure you’ve got a plan for long-term care for yourself, and also for your parents, because their care could end up falling on you.”
Plan to Protect Your Income
Wiegman explained for most working people their biggest asset is the fact that they’re earning an income. “You’re basically a money printing machine for those working years,” he said. And if that machine stops, “we have to figure out where that money is going to be coming from.” Sutton explained in more detail, “If you have a mortgage, is your spouse going to be able to continue to pay it with the assets you have and with his or her income?” Another question to consider too, is how you’ll protect your income if you get sick or hurt and how you and your family will pay for those bills.
Planning doesn’t end with protecting your income. It’s also important to consider what type of coverage you have. If you got into a car accident, Wiegman said, you’d want to make sure you have the right kind of property and casualty insurance as well as the right liability insurance in place. These are all things your financial planner can help you determine, and he said, make sure “you’re protecting the assets that you worked so hard to build.”
Start Planning Early and Think Long-term
Another big question mark for people has to do with life insurance. If you have group insurance at work, do you need to own something outside of that? A financial planner is able to get a holistic view of what you’re working with and help you make the best decisions for you and your loved ones. They can also help you with things like wills, trusts, healthcare directives and setting up powers of attorney.
Sutton shared that she currently has a client whose wife is in her early 70s and has dementia. The couple never set up a power of attorney or a trust and now it’s too late. “It’s not that we can’t set something up to control the assets appropriately now but it’s a much more difficult process. Doing it ahead of time is always the best way,” Sutton said.
Getting a plan can certainly feel overwhelming but the most important thing is to begin. Contact an advisor and start these conversations so that you can feel secure in knowing you have a plan for you and your loved ones. Sutton said she understands that it can be hard to get started and can be expensive, but she said, “it’s going to cost you a whole lot more money if you don’t have a good plan in place.”
Click here to listen to the full podcast.