Your Money: The Importance of Financial Planning

One of my daily routines is to scan social media for articles on financial planning and investing. I am usually on the lookout for topics that jibe with questions I typically get from clients.

This week, as I’m preparing for a Social Security seminar in Santa Fe, a headline caught my eye: “Retirement Planning Falling on Deaf Ears.” In my experience, that’s almost ridiculously obvious, so it piqued my interest.

You can find the article here: http://wealthmanagement.com/blog/retirement-planning-falling-deaf-ears

The article focused on a survey showing that 58% of investors had no retirement plan. Read that carefully: They are investors, so they have money in the market, which is great. It’s better than stashing the money under the mattress or blowing it all on the roulette wheel at the Bellagio.

But how do they know the money is invested in the right places? I know a lot of people who have upward of $1 million invested in the equity and fixed-income markets, and they believe they are “all set.” Maybe, maybe not.

At that level, most people are working with a CPA who can advise on tax consequences, but there are often unique quirks to a situation that a financial planner can unearth. Is an aggressive plan of investing in highly volatile growth stocks best for you? Or should you slow it down, and allocate more to fixed income? Many people, even those with high net worth, have no real idea. They may have read something in a magazine suggesting an age-based allocation – but that is the lazy “pie chart” approach that doesn’t take individual circumstances into account.

As ridiculous as it may sound, even people with over $1 million in investable assets may not have enough to retire in the way they had envisioned.

But don’t misunderstand: That doesn’t mean it’s a lost cause if you have less than that! I am just making the point that everyone, at every level of net worth, needs to consider how his or her assets will help achieve stated goals.

One thing I hear a lot, when I talk to people about financial planning, is the excuse of, “I don’t have enough.” That statement is often followed by some vague hope that there may be an inheritance out there, someday, if Mom doesn’t live to 103 and use up all the money in her own later years.

To be blunt: Waiting for elderly parents to die is not a retirement plan.

The other troubling part of the “I don’t have enough” assertion is that people speak as if it’s an absolute, not something that they have control over. I recognize the doom and gloom and discouragement that many feel in today’s economy. But I also recognize the ways in which an endless drumbeat of media negativity has convinced people that there is no hope for them to improve the economic conditions of their own households.

Rather than turning a deaf ear to financial planning, how about turning a deaf ear to the nattering nabobs of negativity, to quote Spiro Agnew?

This is a tricky position to take. I’ve seen others who emphasize self-reliance and initiative get smacked down. “How dare you suggest that we can improve our situation in this economy? Do you have your head in the sand? Look around!”

There is certainly an aspect to planning that makes people face some potentially bad news. It’s like going to the doctor. I went for a regular exam in January, and she found something to be concerned about. I ended up having surgery in early March – so there was clearly some “bad news” that was discovered through a check-up. The good part is, I’m doing great now, and as inconvenient and painful as the experience was, I’m glad the condition was found and fixed! It could have worsened if I had simply ignored it.

Financial planning can be similar. You may not like everything you hear, but it’s better to hear about any problems, so you can make some decisions about addressing them.

So this issue of turning a deaf ear is certainly troubling, when so many Baby Boomers face the potential of un- or under-funded retirement.

Editor’s note: Kate Stalter is a financial advisor with New Mexico-based Portfolio LLC. Prior to joining the firm, she was a stock-trading coach and radio host. She is a regular columnist for TheStreet.com’s RealMoney, Forbes.com, and Morningstar Advisor Magazine. Stalter has an MBA from Northwestern University’s Kellogg School of Management. She works with financial planning clients in Los Alamos, Santa Fe, and throughout northern New Mexico.

Direct contact: kate@portfoliollc.com, Twitter: @KateStalter