Life Expectancy Matters – And, why good questions are so important.

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In the practice of financial planning there are more important questions than those solely about money.  If we are going to create a solid financial and investment plan we need to know everything there is to know about our clients besides how much money they earn or have in the bank.  Three of the most important questions we ask new clients in our discovery process are:

  1. Do you have any past or present serious medical conditions
  2. How long did your parents live?
  3. How long do you think you will live?  (it’s interesting to see how people are wired)

For ones honest answers to these questions can form the basis for what we do for a client – for how we help them reach their goals.  Let me give you some examples:

  • The answers can help determine social security filing strategy
  • The answers can help determine what pension option to choose when you retire
  • The answers can help determine how long your money needs to last
  • The answers can help outline what you are able to spend in retirement
  • The answers can help direct questions about long-term medical care planning
  • The answers can help determine the amount of risk you can/should take with your investments
  • The answers can direct a sound withdrawal strategy
  • And, the answers can help how you will pass your assets to your heirs

One little wrinkle in this discussion is that some don’t really like to face the reality of their fragility.  It’s similar to how clients tend to grossly underestimate their spending.  But, if we can all get real and be honest, some good planning can ensue.  Here’s a true story – A few years back we had a client who was retiring and they were needing to choose a pension option.  The client sounded indestructible.  But, his spouse suggested otherwise and revealed medical issues.  It changed the course of the discussion and she received a check for over a million dollars after he died six months later.  And, that money has since gone to their children.  None of this would have happened without thinking about life expectancy and facing reality.

So while this is not a recipe for how to handle social security, or create a financial plan, or choose a pension option etc, it a plea to make sure your advisor is asking the right questions so they can do a great job for you rather than them simply trying to pick-up another account to manage.

For your life is not an account.  It’s a living, breathing being that has emotions, goals, dreams and a desire to do what’s right for themselves and their family.  For that is what good financial planning is all about.

Source: BFM Burbon Financial Management

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