Created: February 27, 2023
Modified: February 27, 2023

Money Matters of the Heart

Money Matters of the heart. What are some of the conversations that we need to have when we think about retirement?

Retirement Planning is Emotional

First of all, keep in mind that retirement is a very emotional subject. When we think of retirement planning, some people get very fearful if they haven’t retired yet. There are lot of unknown things to consider. At Johnson Brunetti we have helped literally thousands of people prepare for and go through retirement and we see all kinds of various emotions. While some people feel liberated and excited when they reach retirement, others may experience fear in the face of uncertainty. For some, the prospect of leaving a longtime career and venturing into uncharted territory can be intimidating.

Let’s talk about some of those emotions. Most human beings are motivated by either fear or greed. Typically, retirement can be a frightening prospect as people have varying past experiences and expectations attached to it – they may have seen their parents retire while others were forced to do so.

When you think about it, you have to create a paycheck through your savings, Social Security, and pensions that will last for the rest of your life. The paycheck that you’re going to create will replace the paycheck you’ve received from your employer and it’s important to recognize that emotions are okay when we’re thinking about retirement plans. Emotions are just part of the deal. As you verbalize some of these things with your spouse, your partner, brothers and sisters, or children, you’re going to feel a lot better about your particular situation as you approach retirement.

The “Financial Red Zone”

When it comes to the conversations we have to have, first of all be prepared. Read as much as you can, talk to advisors, but be prepared for what you’re going to go through. The “Financial Red Zone” is a term we use to refer to the treacherous two-year period prior and after retirement, when making expensive mistakes about your money is far too easy. These missteps could impact your estate plan in ways that cannot be reversed. Needless to say, it is extremely important for retirees to take extra caution during this crucial time. There’s a heightened cost of doing the wrong thing within two years before and two years after retirement, so you want to get as prepared as possible.

How to Prepare for Retirement

Consulting qualified professionals, like your financial advisor, accountant, or lawyer, should be a mandatory step when making key financial decisions. Don’t try to navigate the process alone – surround yourself with experienced advisors who can help guide you in the right direction. In this day and age, where many of our clients have engineering and other advanced degrees, it can be tempting to think that simply gathering information is enough. But let me assure you: nothing could be further from the truth. For a successful outcome, it’s important to hold meaningful conversations while factoring in the emotional impact – make sure all elements are managed carefully.

What do I mean when I say, “be prepared”? When I say be prepared, I mean make sure you get all your accounts in order, make sure you know what your 401k balance is, get those statements, your Social Security statements, and any pensions together. Think about whether you’ve lost anything from the past, maybe there’s an old 401k out there that was such a small account you’ve ignored it for a while. You want to make sure that you remember where that is. Maybe you’ve moved and you’re not getting some of your pension statements. You want to get a hold of those things. Be prepared before you get to retirement and get organized.

Align Your Retirement Goals with Your Spouse

You’ve got to talk with either your spouse, your significant other, or that person in your life who’s going to ride this ride with you. If you’re single, widowed or a widower, it’s not essential to involve another individual in your retirement plans, but oftentimes when my wife and I consider our own experience as an example; she is prone to worrying about any possibility, whereas I am typically too optimistic that nothing could possibly go wrong. If we don’t have soul-searching conversations during the planning stages of our retirement, then it could cause tension later down the line at home – something which is no one’s idea of fun!

You want to balance each other’s emotions out. It is of utmost importance that we recognize when somebody else’s needs and feelings differ from our own; it’s okay, but you’ve got to try to meet their needs as well. As my wife, Wendy, and I prepare for retirement, it is essential that we both take part in the conversation. We must be willing to consider one another’s point of view as our four sons have different opinions on this matter. Therefore, firstly get prepared and secondly involve your spouse or significant other; having a discussion with someone who will experience similar circumstances can make all the difference during this journey.

Discuss Retirement Plans With Your Children

Now, how much should you share with your children? Understand that not every detail will be relatable to them. Looking at my own children, they are in their twenties and thirties. It’s likely that many of the issues surrounding retirement might be hard for them to comprehend – such as being financially prepared, along with all of the emotions and complexities associated with this time in life. But, you can let them know your financial situation.

We’ve gone through this recently. Wendy and I sat down with our boys to let them know what’s happening with our money, what our philosophy is with money, if we die with money left over and so on. They don’t necessarily get it like we get it because they don’t have that life experience and that life wisdom, but they do understand where we stand and our philosophy towards money. Again, we’re talking about matters of the heart here, we’re talking about conversations to have as you approach or even as you’re in retirement. You want to make sure again you share that with your family.

Countless times, we have encountered families whose parents passed away without revealing to their loved ones how they felt about money. As financial planners, it is our job to help them wade through the complex process of distributing assets according to their parent’s wishes. More often than not, children are left confused and uncertain as to why one sibling inherited the house while another acquired cars and a cabin in Maine – with no insight into what Mom and Dad wanted for them or each other. They hadn’t had any of those types of conversations and it can cause a real rift in the family. Beyond that, passing down our values is key for instilling essential life lessons in our children. I know from experience, when we reach our 60s and 70s, it can be perplexing to understand why our kids behave in certain ways or approach money differently than we do. Therefore, imparting your core beliefs early on will go a long way towards fostering understanding and unity between generations.

Your Advisors Need to be Advisors

And finally, as I mentioned earlier, your advisors need to know how you feel and what your wishes are. In fact, your advisors need to be advisors. You can have a tax preparer and all they do is take the information that you bring them in March or April of every year and they prepare your taxes. That is not an advisor. An advisor is somebody like my CPA where we talk about the next one year, three years, five years, and they advise me of how to get set up for that. If I don’t begin that conversation, many times my advisor from a tax standpoint will ask me once in a while, but I won’t really be prepared for that conversation. A good advisor is thinking out into the future and they’re being proactive.

You may have a tax preparer. A tax preparer only takes the information that you bring them in March or April of every year, and they prepare your taxes. However, this isn’t the same as having an advisor. My CPA is my advisor, and we make plans for one, three and five years into the future – they advise me of how I can get ready for it all. A good advisor should be planning ahead rather than waiting to be asked; with proactive advice from a financial expert, you can prepared for these conversations concerning finances far in advance. It’s important to have a reliable estate planner on your team of advisors, such as a certified financial advisor or an attorney. But the most important relationship that will provide immense value when managing retirement and creating paychecks for yourself is your relationship with your financial advisor.

What to Discuss with your Financial Advisor

You need to express your feelings and concerns openly with your advisors. If you sense a lack of understanding or dismissal from an advisor, that’s a big problem. Especially if you and your spouse have different feelings about money. It is essential that these conversations take place with advisors so that all parties can better understand one another’s perspectives on the matter.

I’ll give you another example from my personal experience. My wife Wendy and I have consistently saved 20-25% of our income for retirement. Even though neither one of us are planning on retiring soon, this commitment to savings has resulted in more money than we ever expected as we approach retirement age. When discussing estate planning, the ultimate goal is to minimize taxes and create sources of income for your spouse if you pass away or are not able to work anymore. Having conversations about how this can be achieved is necessary in order to create a secure financial future. Even though I’m in this business, Wendy and I have outside financial advisors that we run things by.

During our last meeting with a financial advisor, my wife was not particularly familiar with the topics being discussed and I had to step in and interpret without making her feel inadequate. It is common for financial professionals to use jargon that can be difficult to comprehend, however it is important for them to speak directly with both of us. They need to be taking her emotions and her fears and maybe things that have come from her childhood that are going to carry into retirement and factoring those into a financial plan as well. Establishing a strong relationship with your financial advisor is key, especially when you’re getting ready for retirement. It can be the most essential bond in your life outside of the one with your doctor or medical provider since it often becomes reactive depending on what changes are happening throughout this transformation period.

Communication is Key to a Successful Retirement Plan

In conclusion, we’ve been covering matters of the heart and how to approach them through conversation. Don’t forget that there may be other people in your life beyond those you initially thought of – like siblings for example. I keep talking about my own situation, my brother is very different than me. Unlike me, my brother is a very faith-based person and believes things will work themselves out. I’m more of the type to plan ahead, so it’s important that I have these conversations with my brother when considering retirement. Don’t try to tackle this alone – conversations with your siblings, best friends, or those closest to you can make a world of difference.

It’s essential to have frank, open conversations about matters of the heart; we all experience and feel different things. Blindly proceeding without addressing these feelings can result in a stressful retirement. However, if you take the time to communicate your thoughts and emotions now – hopefully you’ll have a retirement where you won’t have to worry about money. Money will be nothing more than a tool for enjoying day-to-day life in retirement.

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