Quiz can help map your financial future

By Janet Kidd Stewart / Tribune News Service

Americans often feel better about their 401(k) balances than they should, and that’s particularly true today, a new survey shows. A new breed of financial pros aims to better align client perceptions with reality.

Almost half of the survey respondents (47 percent) said they feel somewhat or much more secure financially than they did five years ago, not surprising given the strong financial market performance in recent years.

Survey creator Financial Engines, however, found that most don’t understand Social Security claiming options, very few (even those in their 50s and 60s) know how much health care will cost in retirement, and more than half underestimated how much life insurance they should have.

To take the full quiz, go to financialengines.com/financial-literacy-quiz.

To be fair to the survey-takers, some of the questions were subjective. The “correct” answer on how much life insurance someone needs was 10 times annual income, an old rule-of-thumb that is often discounted by financial advisers who say it’s far better to tally up actual projected expenses that a family would need to carry on without a partner for a period of time or until the spouse reaches retirement age.

But the point is clear: Long-term planning is just a tough thing to get people to do.

Rather than drone on about it with clients, however, some financial advisers are trying a new conversation, focusing more heavily on the here and now. The upshot for individuals: think hard about what you really want an adviser to do and look for one with the payment method that’s best for your situation.

Many fee-based or fee-only advisers charge 1 percent annually of client assets they manage, while a smaller number charge by the hour. These new planners are tweaking the idea of a flat retainer, a model that’s been around for years but hasn’t gotten much traction. Some charge a flat retainer, while some combine a retainer with a percentage of the assets under management, usually less than half of 1 percent.

At a recent gathering in Dallas of the XY Planning Network — an association of advisers working with clients from Generation X and Y (also known as millennials) — members talked about helping clients with much shorter-term goals as a way to set them up for success further down the road to retirement.

“You can’t save for retirement and invest unless you have money left over after expenses,” said Nannette Kamien, founder of Inspiration Financial Planning in Carlsbad, California. A former information technology worker, Kamien switched careers about two years ago to focus on Gen X clients juggling the needs of both aging parents and kids heading to college. “What my clients need is to understand their current spending and how to align their income and their values. I’m focusing on the decisions they are making today.”

She doesn’t directly manage assets but consults clients on whether to buy or rent their homes, how they can save for college expenses, and whether they should take a new job or add to their families, among other tasks, she said.

Another newly independent adviser, Steve Nading, started his Boulder, Colorado, advisory, Outbound Financial, Inc., in February after spending eight years with a big firm. Recently, he counseled a mid-career attorney on ways to save less, not more, because the attorney is fine living a more modest lifestyle in retirement.

“Rather than trying to get clients to build the biggest pile possible, I’m trying to help them think about planning intentionally,” he said. “The attorney has already made more than he and his partner will ever spend, so I’m helping them pare back a bit professionally but still making sure there will be enough down the road. They don’t need to give up a good lifestyle now.”

Another planner in the network, Chloe Moore, started Financial Staples, LLC, an Atlanta-based firm, a year ago. She’s has found errors and opportunities in clients’ tax returns and estate documents that prompt immediate action or refunds and make her unconcerned about software replacing financial advisers any time soon.

“There’s still a lot of financial planning that can’t be automated,” she said.

ABOUT THE WRITER: Janet Kidd Stewart writes The Journey for Tribune Content Agency. Share your journey to or through retirement or pose a question at journey@janetkiddstewart.com.

Talk to us

More in Herald Business Journal

Demolition of the YMCA in downtown continues on Tuesday, April 13, 2021 in Everett, Wa. (Olivia Vanni / The Herald)
Apartments will rise from the site of the former YMCA annex

In all, 260 units are planned for the downtown Everett site. The older brick building will remain.

Signs from the Department of Ecology warning about contamination in the creek that runs through Powder Mill Gulch on Wednesday, March 31, 2021 in Everett, Wa. (Olivia Vanni / The Herald)
State order targets Boeing Everett plant’s polluted history

Records show a dispute over cleanup requirements for chemically tainted water. The company denies there’s a disagreement.

FILE - In this Oct. 1, 2020 file photo, traffic passes the Boeing airplane production plant, in Everett, Wash.  U.S. manufacturers expanded in March 2021 at the fastest pace in 37 years, a sign of strengthening demand as the pandemic wanes and government emergency aid flows through the economy.  (AP Photo/Elaine Thompson, file)
Boeing sees uptick in airplane orders as travel picks up

The company in April delivered 19 Maxes, three 737s for military use and seven larger widebody planes.

FILE- In this Sept. 30, 2020, file photo, a Boeing 737 Max jet, piloted by Federal Aviation Administration (FAA) chief Steve Dickson, prepares to land at Boeing Field following a test flight in Seattle. Boeing says it has informed 16 of its customers that they should address a possible electrical issue in certain 737 Max aircraft before using them further. Boeing said Friday, April 9, 2021, that the recommendation was made “to allow for verification that a sufficient ground path exists for a component of the electrical power system.” (AP Photo/Elaine Thompson, File)
Boeing: possible electrical issue in some 737 Max aircraft

The company said that the new problem was unrelated to the flight-control system.

The 214-foot tall cranes work to unload their first cargo shipments at South Terminal at the Port of Everett on Thursday, April 8, 2021 in Everett, Wa. (Olivia Vanni / The Herald)
Renovated Port of Everett terminal gets first cargo customer

The 655-foot Westwood Columbia is the first ship to call at the newly upgraded South Terminal dock.

Project Roxy is a proposed 2.8 million square foot distribution center that would be built on a 75-acre parcel at the Cascade Industrial Center. The rendering depicts the proposed project at 4620 172nd Street in Arlington from a northwest perspective.
1,000 jobs: Amazon to open distribution center in Arlington

The company is the tenant behind Project Roxy, a $355 million building at the Cascade Industrial Center.

Edmonds grocery store workers may soon earn hazard pay

Some employers are required to increase wages by $4 an hour, the city council voted Tuesday.

Aerospace supplier with Everett site files for bankruptcy

Wichita-based TECT Aerospace filed for Chapter 11 and plans to sell an Everett manufacturing facility.

Washington's Lottery ticket display. (Andrea Brown / The Herald)
Want to get lucky? Washington’s Lottery lists Top 10 stores

One of the luckiest retailers in the state was a Safeway in Everett, as measured by $1,000-plus winners.

What local firms are doing to promote diversity and equity

Here’s how some of Snohomish County’s biggest companies and organizations say they are making a difference.

Garry Clark, the new CEO of Economic Alliance Snohomish County (Kevin Clark / The Herald)
At a tough time, a new CEO leads local economic development

Garry Clark has taken the helm at Economic Alliance Snohomish County, where job one is pandemic recovery.

Kathy Coffey (left) and Courtney Wooten
Leadership Snohomish County offers racial equity conference

The fifth annual day-long Step Up: Moving Racial Equity Forward will be held online on April 30.