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.

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