Broker Check

COVID-19, A Second Wave of Thinking

| September 25, 2020

Many of you read my COVID playbook in April when I talked about the personal financial planning objectives that you should have had at the forefront of your consciousness, even before the global pandemic.  As the severity of the virus spread throughout the world, we saw an increase in client’s willingness and desire to make sure their planning was buttoned up.  Unfortunately, life events and experiences have a way of transitioning our thinking, but if we use the uncertain environment to take some inventory, it will only serve our families better.

Ideally you have reviewed and updated insurance coverages, beneficiary designations, legal documents, evaluated spending levels, and built up emergency reserves for life’s unknowns if you took anything from the COVID playbook.  The title of this commentary is A Second Wave of Thinking, because as we continue to be watchful for the possibility of a second wave of the virus transmission, and monitor the medical community’s race for a vaccine, I want you to take your thinking in a different direction.

Through recent client conversations, we have come to realize that how one defines wealth varies greatly.  Furthermore, how one feels about intergenerational wealth transfer could not be more divided.  For instance, we have clients who feel as though a perfect financial plan is one where there is $1 left in the bank account at death without any bills to be paid by their heirs and it was a life well lived.  For these clients, our planning is tailored to provide an analysis of what spending levels should be to attain that goal, albeit with no certainty surrounding mortality, inflation, investment growth rates, and long-term health needs.  For that reason, you will often find our plans to be extremely conservative to allow for less than favorable circumstances. 

Other clients desire to create substantial wealth that can be passed to the next generation or wish to leave the world a better place through charitable initiatives. Our planning process is and always will be customized to meet and adhere to our client’s goals and preferences.  The takeaway for you is to take a moment to reflect and ask yourself what is important to you?  And then take it a step further and ask yourself whether the plan you have put in place is likely to accomplish your stated goals. 

We have long advocated that our clients bring their adult children into the conversation about family wealth, but we also understand there are reasons why that too often is not the preferred decision.  Additionally, for those clients with younger adult children who are hopefully on the path to prosperity, what better guidance can you give them at such an early stage of life than to introduce them to basic financial principles?

So here is what I propose to you after reading this.  Whether you are single or married, I want you to individually write down your goals and prioritize them in order of importance and then assign a timeframe for when you want those goals to be realized (how far into the future).  They could look something like this:

  • To retire comfortably with an annual spending goal of $120,000/year (5 years)
  • To purchase a family vacation home so that in retirement we have a gathering place for the kids and grandchildren (10 years)
  • To leave our house of worship or favorite charity a substantial bequest (at death, presumably 30 years from now)
  • To leave our kids $1,000,000 in today’s dollars, predicated they meet certain levels of scholastic and professional accomplish at various attained ages (30 years)

For those of you with younger children and a long work career in front of you, your goals may sound like this:

  • To make sure my family will be taken care in the event of an untimely death or disability (now)
  • To fund the future educational expenses of my children so that are not inundated with student loans (10-16 years from now)
  • To retire comfortably with an annual spending goal of $200,000/year (in 25 years)
  • To establish a consistent plan of charitable giving and involve the family in those decisions (20 years)

Once you take the time to go through this exercise, give us a call and let’s make sure your goals are attainable, documented, and there is a plan in place to benchmark progress.  And we will leave it to you if we need more chairs in the conference room to accommodate any important guests!  Thanks for the opportunity to be your partners in life’s journey.