Retirement & Responsibility

This article was written by Jeff Smith at www.mynorth.com.

Financial planning and management looms large.

The continuing decline in company pension plans, and the concurrent rise in personal management of retirement accounts like 401Ks and IRAs has obviously shifted financial responsibility to the individual. Early in the trend, when people’s individual accounts didn’t have much value, that personal responsibility was perhaps taken lightly. But now many people have 401Ks with substantial assets, and people are feeling a tremendous responsibility to do the right thing with that resource, says Dennis Prout of Prout Financial Design, in Traverse City.

“I was talking with a client not long ago who explained that the company he worked for was switching plan managers. He had to pick new investments, and it all came down to checking a box,” Prout says. The client really had no idea what to do with what was a fairly substantial sum of money. “He wondered if he should reallocate his funds. He wondered how to plan for possibly needing income from the investments. He just felt an enormous responsibility.”

But Prout says it’s not only those with means who are feeling the responsibility of retirement settling over them. Others, he says, are feeling they are not prepared for retirement. “They feel they should be doing more, but also they have a life to live—that’s what I hear a lot,” he says. “And a certain number won’t even come in to see a financial advisor because they are too embarrassed to discuss their lack of preparedness.”

The weight of responsibility is amplifi ed for the many people today who are single in their mid- to late life. Prout had a meeting recently with a single woman. “She admitted she doesn’t know about this stuff,” Prout says. “Those are diffi cult decisions to make on your own, and I see it more and more often these days.

Prout’s tips to people who are feeling the responsibility of retirement?

1. Have a conversation with an advisor. Discuss the big picture
   questions. What is important to you about money?
2. Discuss what you are hoping to accomplish. For couples, it’s
   important for each of you to say it out loud, make sure the expectations
   are on the same page.
3. Consider longevity. If your family tends to live long, consider
   a plan that invests for greater longevity.
4. Allocate some money for the shorter term, the money that will
   provide the income in the next 10 years—this would be the most
   conservative money. Looking further out, allocate money in 10-year
   increments, with investment strategies to suit.
5. Get your estate planning in order. Do you have a trust? Do
   you have a will? Are they up to date? Do you have a durable power
   of attorney?—Jeff Smith