Significant transitions
Certain events in life mean you are a different person today, financially, than you were yesterday. Early in my career, I brought on a couple who were a month from retirement. Six months later, the husband died of brain cancer. That led to a complete overhaul of their financial plan. Values and priorities shifted. Income changed. Expenses changed. Lifestyle changed.
That is really the framework. Ask yourself these questions: Have my values and priorities shifted? Have my income and expenses dramatically changed? Do I spend my days doing much different things than I did previously? If so, your plan needs an overhaul. And whether you need to actually get a second opinion depends on whether your advisor focuses on serving who you are today or who you were yesterday.
If you’re downsizing, for example, you probably don’t need to start over with your financial plan. Most planning software will have a primary home relocation that will adjust expenses based on the new place.
However, if you’ve sold a business, gotten divorced, or if your partner has passed away, you are now a different person financially. This likely requires an overhaul and perhaps a new strategy.
You only talk investments
When I first started in the profession, quarterly investment meetings were the norm. Financial planning was in the process of taking center stage, but most advisors still believed their value was mostly based on the investments they put their clients in. So, you’d meet quarterly and discuss any changes to the portfolio. The conversations about life, about how to align your money with what’s truly important? Those stayed at home!
If these sound like the meetings you are still having with your advisor, surprise, you don’t actually need to get a second opinion on your financial plan. You don’t actually have a financial plan. Now is a good time to get started.
No tax talk
This could be for myriad reasons, and from a compliance perspective, some of them may be legitimate. However, when you are pulling money from your nest egg to cover your expenses, every move you make shows up on your tax return and has an impact on the bill you pay.
The advisor above may be eking out a point or two in excess returns while at the same time not realizing that even more of that is being eaten up in taxes by holding a tax inefficient vehicle in a taxable account.
Tax planning is part of financial planning. It is an entire course in the CFP curriculum. Even if your advisor isn’t preparing your return, they should be helping you navigate how to mitigate your lifetime tax bill. This is especially important for those in the income stage of life.
You still can’t answer the big questions
Can I retire? Do I have enough? Will it last? Can I afford to help my adult children? Most prospective clients we see have an advisor. You’d be shocked at how few can answer these questions. And to be fair, the software we all use does not give yes/no answers. However, that is one value of a human advisor. They should be able to look at the numbers, interpret the output, and help you determine whether you’re in a position to turn in those keys, help with that down payment, and hopefully sleep better at night.
This article is provided for informational and educational purposes only and should not be construed as investment, tax, or legal advice, or as a recommendation regarding any particular strategy. Whether a Roth conversion is appropriate depends on an individual’s financial circumstances, tax situation, investment objectives, and applicable law. Tax laws are subject to change and their application may vary. Examples discussed are hypothetical and are intended solely to illustrate general planning concepts. They do not reflect the experience of any specific client or guarantee future results. Consult your financial, tax, and legal advisors before implementing any strategy.