Financial Planning – the MRI of your retirement

Full Disclosure: I don’t work in the Financial Planning industry but my wife recently changed careers and has become a representative with one of the largest/oldest players in the industry.  The information below comes from the perspective of someone (me) who has seen the big picture of individual finances and all the many ways to take advantage of them for the benefit of a healthy financial future for your family.

What does Financial Planning mean? To most it means socking away money for the future. It means taking some of your income and putting into a 401k, 503b, IRA, etc. It means that money will be used as income when you turn 65 and no longer are working and making an income.  True, but this is only part of it.  The questions you need to ask yourself, how much income do I need when I am retired?  Will I have enough to support my lifestyle?

To others, Financial Planning is much broader.  It is considering all the possible vehicles on the market that can be leveraged to provide the aforementioned income after retirement ALONG WITH thinking about income replacement during your earning years, God forbid, you become sick or injured to provide for the family.  (We don’t want to think about these life events, but it is a reality)

Financial Planning is looking deep into your wants, needs, wishes, lifestyle, how much money you earn, how you want to provide for children and spouse in the event of your passing, and investigating how much money is actually available to you through your benefits from your employer.  Financial Planning is evaluating your situation, your goals, and coming up with a prudent plan to reach those goals.  And… those goals may change throughout your life.  A 25 year old version of you is not the same as a 40 year old version of you.  We can’t predict the future and we often think we are going to be 100% healthy forever.

Do Financial Planners want to sell something and make money?  Yes and No.  Yes, Financial Planning services can come with some cost but simply talking to a representative costs you nothing.   If you choose to invest into a financial vehicle, of course it costs you something.  This is no different than car insurance.  Sidenote: you carry car insurance to cover your loss in the event of an accident and other events related to that car.  You may be paying $100 a month to cover a $25,000 asset (less than that as the car depreciates).  Why would you not carry some sort of life insurance on yourself to cover your lost income upon your passing?  As Ric Edelman (Edelman Financial Services and nationally syndicated radio host, ) puts it, why would you not pay an expert $100-$500 a year who is providing a expertise/service that maximizes your financial portfolio by another $5000 a year (as an example).  Sadly, car insurance is mandatory, but life insurance is not yet EVERYONE would benefit from life insurance (we all die someday).  

Yes, Financial Planners sell many various financial vehicles (life insurance, disability, etc) but they are introducing the public (you the client) to products that often are not available through employers.  Financial Planners are on top of understanding the long term tax advantages of the products vs traditional investment vehicles.    Sooo…. yes, they earn a living by providing a service but it costs you nothing to visit with one and look at your situation.   No, Financial Planners are not wanting to throw a brochure of products in front of you and ask you to sign up (that is not to say there are bad Financial Planners out there who operate this way).  Financial Reps need to evaluate your needs then propose options.   Financial Reps hold to an ethical code to work in the best interest of a client. Financial Reps are working for you (with you) to provide the best set of options for you.  This discussion is a service which costs you nothing.

What should you expect after you have been hounded by a Financial Rep?   This is the phase of the relationship that may seem uncomfortable.  The Rep and you (and your spouse) will sit down and look at incomes, assets, investments, current benefits, debt, etc etc.  Divulging this information to a nearly complete stranger can be less than pleasurable.  Let’s be honest, talking about money is not our favorite topic.  Everyone wants to think they have their finances by the tail, but you often have debt.  You have income.  You have some insurance through work.  Some may be upside down in a car or house.  Everyone employed with benefits feels they have what they need, but often learn there are other options on the private market which exceed what you already have.  The Rep will walk through all these numbers and explore potential gaps (disability, life insurance, etc) or they may see that based on your goals you are on the right track and taking good advantage of what you have.

By sitting down and talking with a Rep costs you nothing.  It allows you to inspect closely your financial goals and the path you are on.  Like the blog title says, it is like getting an MRI of finances for free.  Don’t we wish we could get an actual MRI for free?

What have I learned?   Well, I learned my public education has done me a disservice by not fully educating me on all the facets of real life finance.  Yes, we learned in high school how to balance a checkbook, assets and liabilities, the stock market, but we didn’t get down into the financial realities of life insurance, disability, investment options and how they relate to taxes.  If I had majored in Business or Finance in college, I suspect I would have learned more about that but how many of college grads majored in this?  …the ones that became Financial Reps most likely, but I digress.  Besides, finance is boring until you turn a certain age, stare at a 6 figure account that has your name on it then figure out how to preserve and grow that money into something to enjoy when you retire.

I learned that employer benefits are only a piece of the full picture when planning to retire with a secure income.  Disability insurance through work is the bare minimum.  Life insurance through my employer is a minimal payout.  I learned I need to replace income if I get sick, injured, or pass away.  I absolutely learned that I need to look at supplementing those benefits.

I learned that taxes can eat away at your nest egg quickly when you retire and there are ways to be smarter about that money.  I recently watched a Frontline piece on PBS discussing the 401k and retirement savings (“The Retirement Gamble”).  You can watch online here… .   The episode investigated the numbers and realities of how many of us invest.  It also vilified the investment industry somewhat, but also blamed our own lack of education regarding investing as part of the problem.  For example, we invest into 401k with pre-tax dollars today but we will have to pay taxes on that money when it is withdrawn as income at retirement.  Who knows what that tax rate may be in the future?  33% today may be 44% or higher in 30 years so what’s the point of pre-tax dollars?  Fact, income tax on $100K in 1962 was 75% (under the most charming President, arguably, JFK).  What will the marginal tax rate be in 2050?  Without getting into politics, we need to consider who we elect as our representation and how they view tax policy.  That’s a discussion/debate for another time but the point here is that we don’t know and we are gambling that taxes will be the same.


We also blindly invest our money into vehicles provided by our employers with the assumption of growth for later income, but when looking that numbers closer you often deplete 2/3’ds of potential growth to fees.  Here is the point, get educated on all your options and don’t assume anything.  If you plan now, you can make up for potential lost investment later.

I learned that if I had started putting a small amount of money into a Life policy when I was 25, I would have a HUGE nest egg by my retirement that would be a bonus to what I will have coming from 401k and Social Security.  As we get older, those premiums are larger as you are trying to make up for lost time.

I learned that not all situations are equal and the products available are not suited for everyone.  If you are single, married, have children, or if you have special needs kids or parents who require additional help your goals and plan will be different.  This is where the Financial Rep can help navigate.  If it was as simple as picking a product from a catalog, we would all be doing it.  It’s really not that simple and needs good advice.

In the end, it is your choice.  Be happy living off your social security check or plan ahead and have a few extra dollars to live with more comfort.  You have to gauge your lifestyle and satisfaction.  

I encourage everyone to make/take that call to/from a licensed Financial Representative and sit down with a them and look at your situation.  Get that “MRI”.  Think about what you need and want for planning ahead.  I even encourage you to get a second opinion if you already use a Financial Rep.  It costs you nothing and gives you the peace of mind that your plans are on track.

As the old saying goes, the only sure things in life are death and taxes.  You can possibly avoid some of one of those.