Paul Ferraresi

In our Western culture, we take many things for granted. We take comfort in the fact that the laws of gravity will not be surreptitiously repealed while we sleep, catapulting us and all we have into the ever-expanding universe as dawn arrives. The sun will rise and set each day. When it comes to retirement planning, we mentally quote Scarlett O’Hara from Gone with the Wind: “I can’t think about that right now. If I do I’ll go crazy. I’ll think about that tomorrow.” In essence, we expect a fair amount of certainty. This shared deception about retirement planning is what keeps our existential crises at bay as well as present retirement planners with their greatest challenge: How to create in clients a realistic sense of urgency without inviting panic. To address this conundrum you might want to revisit some ideas and retool your approaches.

Smarter or wiser. An old saying states that smart people learn by their mistakes. That should bring us some comfort, since we all like to fancy ourselves as smart people! But another saying shares a different pearl of wisdom: wise people learn by the mistakes of others. No wonder we have heard that “experience is a dear teacher and only a fool will learn by it.” As part of the retirement planning process, planners can assist their clients by pointing out the errors of the past so as to guide future directions and decisions so clients will not have to repeat mistakes of the past. What are these mistakes and can we avoid them?

• Living without a spending plan
• Using credit to expand standard of living far beyond income
• Believing that good times will roll on forever

• Save- save for the rainy day, save for the big-ticket purchase, save just to have some extra cash on hand.
• If it doesn’t make sense, then it probably doesn’t make sense.
• Learn more about how money works. Ignorance is not bliss!
• Strive for modest, steady returns on investments.

None of these require advanced education to understand, nor do they imply a high level of sophistication; rather, because they are so self-evident, they may have grown dim in our memories and relegated to a time long past and regarded as ideas that were part of the horse-and-buggy era- certainly not part of the great complex financial system we see today. It just may be that in our sophisticated world, there are more people who can claim the label “smarter” than those who would call themselves “wiser.”

I have worked with couples in their comprehensive financial planning for more than 37 years. It is amazing how “money struggles” emerge and create conflict with our money partner for life.

Men were once the main “bread winners” and many today feel they should have complete decision making authority about the couples’s spending, saving and life goals. Women, typically, are socialized to share decision making, no matter who makes more money.

These conflicts may come about as opposites attract. (Funny I always have seen a spender marry a saver. Rarely, do you see two spenders marry or two savers marry).

Research has found that couples may be polarized in seven behaviors.

Conflict No. 1: Saver vs Spenders
The market meltdown, credit crunch, and job insecurity all give Savers an edge today. However, a more frugal lifestyle will increase Spenders need to soothe or reward themselves for the stress it causes them. As a result spenders in power-struggle relationship may well feel even more judged and controlled. Instead of continuing to sacrifice for a day that may never come, they may rebel and sneak gratification now.

Conclict 2: Worrier vs. Avoider
The financial crisis will intensify the stress modes of these money types, a common couple’s polarization. Right now, many Worriers are cringing at the latest market news and losing sleep to visions of bankruptcy, while Avoiders blithely ignore financial headlines and file their 401(K) statements unread.

Conflict 3: Planner vs. Dreamer
In a Couple whose stored-up resentments typify the power struggle dyamic, Dreamers will fantasize about life where work is no longer central. They may want to travel to exotic places, sell the house and buy an RV or start a whole new direction. Meanwhile, their Planner spouses are trying to calculate a retirement budget, estimate portfolio yield, or, chart their Social Security Options.

Conflict No. 4: Money Monk vs. Money Amasser
This is one of the hardest couples’ oppositions to heal. Money Monks tend to look forward to retirement as an opportunity to simplify life and give it more meaning and purpose, far away from the corrupting influence of money. Their Amasser partners, on the other hand, will be focused (possibly even obsessed) with growing their assets so they can feel more successful, powerful, happy, and secure.

Conflict 5: The Risk Taker vs. The Risk Avoider
In the The Third Age, The Risk Taker (often male) may want to sell everything and buy a boat to sail around the world. The Risk Avoider, by contrast, may prefer to deep her attachment to home, family, and friends rather than radically changing her life.

Conflict 6: Money Merger vs. Money Separatist
When a wife inherits money from a relative she may want to keep some or all of it separate. If her husband has been the primary breadwinner so far and the couple has totally merged the rest of their money, his reaction is likely to be hurt and anger: “All these years when I made most of the money, you were fine sharing it. Now you finally have some money to share, and you want to keep it to yourself?” He may perceive her as selfish and unfair, and fear that she doesn’t trust him or is even planning to leave him.

Conflict No. 7: Polarizing and Different Priorities
Most people are a blend of these money styles. In addition, just about any couple will take the opposite stances on individual priorities. This may be because of their different goals. For example, he wants to go to graduate school and she would rather contribute that money to a Third World Country.

Whatever their polarization, both spouses need to become equal partners for the sake of a successful intimate relationship. Power and decision – making should be shared, no matter who is still working and who isn’t, and no matter who makes or made the most money.

With your 401k /IRA and personal account values being down it seems that no one wants to look up.

The sun will shine again. Trust me. Most people do not want to examine the track they are on for retirement. It is too painful to face the reality. They are acting like an ostrich and putting their head in the sand.

Look…if you are retiring in 10 years, then, whether you take active, positive steps now, or, avoid looking at the situation…you will still hit retirement in 10 years. The train does not stop for you.

I suggest looking at the situation in a healthy approach. I have suggested in this blog a site that is simple, yet effective and I feel it is worth another mention. I have worked with National Life Group and they do an excellent job for all my clients. Their retirement site allows you to do many calculations. Visit their site at: http://experienceretirement.com/.

It is easy to navigate and very helpful. As always, if you have questions or need assistance contact me at (713) 871-5919 or paul@fgmci.com

The segment of the American public that has been oversold and underserved can be defined as the mass affluent. This group has unique characteristics. Do you fit the profile of this group?

The mass affluent are people who:
• Save more than they spend.
• Seek to invest for the future.
• Worry about funding their children’s college education, but in most cases won’t impoverish themselves because they can cover costs through savings strategies, loans or personal income. In addition, many are not opposed to their children paying some part of their education costs.
• Worry about how they will replace their paychecks when retirement approaches, but in most cases will need to be encouraged to spend more money in retirement.
• Desire to leave a legacy to their children, not to charity.
• In retirement, seek to spend between $4,000 and $10,000 per month.
• Will have between $500,000 and $1.5 million in investable assets upon retirement.
• Would never consider calling themselves high-net-worth investors or millionaires.

Consider the following research: Russ Allen Prince and Associates just published a book entitled The Middle Class Millionaire, based on surveying middle-class Americans with investable assets between $1 and $10 million.

The mass-affluent community seeks advice on a wide array of planning issues. While they generally have investable dollars, they also want to explore how their money will affect their lives. However, many of the financial relationships they maintain are built on investment strategies, performance comparisons, technical analyses and tactical repositioning. These people feel the planning element of the relationship is missing, yet they struggle to articulate it, since their current advisor calls the existing narrow relationship financial planning.

Too many of these people visit our office with stories of how they felt like small fish in a big pond. They felt an initial sense of security aligning with a big-name firm, but when it came to having their financial planning needs addressed, the relationship would fall short.

The mass affluent seem to be stuck in a world where they want financial planning advice, yet what they buy is primarily investment advice.