How to Safely Dispose of Important Documents and Protect Your Personal Information

It is critical to understand how to properly dispose of important documents to safeguard yourself against identity theft and fraud. According to the Bureau of Justice, 11.7 million people over the age of 16, were victims of identity theft from 2006 to 2008. Compass Retirement Solutions values the privacy and information of everyone and developed a how-to guide to help protect you from becoming a victim.

protect

Shredding physical documents is an effective way to keep others from obtaining your personal information. Simply throwing away bills, letters, notices, or anything else with your private details on it is not enough to protect yourself. Identity thieves have been known to “dumpster dive,” or collect documents from waste cans and recycling bins to gather your information. The more destruction you can cause your important documents, the better.

Documents to Keep vs. Shred

Some information should never be thrown away. Below, you will find a list of which documents you should always keep physical and digital record of:

Keep

  • Birth Certificates
  • Death Certificates
  • Social Security Cards
  • ID Cards and Passports
  • Pension Plan Documents
  • Insurance Policy
  • Bank Statements (keep for a year)
  • Home/Residential Documents (keep for at least six years selling)
  • Wills and Powers of Attorney
  • Car Titles and Loans
  • Marriage and Divorce Documents
  • Business Licenses
  • House Deeds
  • Mortgage Documents
  • Tax Records (keep for seven years)
  • Pay Stubs (keep for a year)
  • Medical Records/Bills (keep at least a year after payment)

Keeping physical copies of anything regarding state or federal matters is never a bad idea. It is usually difficult to get them replaced and you frequently need to have access to these documents.

Shred

Shred anything that has your name, phone number, social security number, address or bank information on it. This might include the following:

  • ATM Receipts
  • Credit Cards and Credit Card Receipts
  • Utility Bills (after three months)
  • Expired Travel Documents like Visas and Passports

Digital vs. Physical Files

Always make sure that you store physical copies of your documents in a safe, preferably fire and water resistant space. Digital copies should be encrypted with a password that only you and trusted sources know.

Shred Event at Compass Retirement Solutions

If you are interested in shredding some of your documents, Compass Retirement Solutions is hosting an event at 10326 Old Olive Street Road in Creve Coeur, MO 63041 on April 29 from 12 p.m. to 2 p.m. Actual shredding can be witnessed on site starting at 1:30 p.m. Come out with your family and friends to protect your identity, enjoy food, drink and music!

If you would like to book an appointment to speak with Marvin Mitchell, CEO of Compass Retirement Solutions, please call 314-373-1598 or email admin@compassretirementsolutions.com.

 

7 Retirement Terms You Need to Know

Don’t let retirement jargon intimidate you! Whether you’re speaking to an adviser, watching the news, reading or listening to the radio, it’s important to understand and comprehend the information you’re hearing. Compass Retirement Solutions has defined 7 terms that you need to know for retirement planning.

retirement

  1. Required Minimum Distribution (RMD) – This is the minimum amount you are required to withdraw from your account each year. Retirement plans generally require you to start taking withdrawals from your account when you reach 70½.
  2. Individual Retirement Account (IRA) – With a traditional IRA, you are allowed contribute a certain amount each year (usually $5,500 or $6,500) and deduct your contributions from income taxes. You pay taxes in the year you withdraw the money.
  3. Roth IRA – Similar to the traditional IRA. However, money invested within the Roth IRA grows tax free and there is no RMD.
  4. 401K – This is a retirement savings plan that allows workers save and invest a portion of their paycheck before taxes are taken out. It is employer dependent. Taxes aren’t paid until the money is withdrawn from the account.
  5. Fixed Index Annuity (FIA) – A fixed index annuity offers guaranteed lifetime income. While providing a principal guarantee, you earn a baseline fixed interest rate over a fixed term and are protected from stock market losses.
  6. Social Security – to provide a degree of economic security for the public, this is a program that uses public funds to supply income for retired individuals.
  7. Mutual Fund – A mix of stock, bond and other security investments kept by investors. Investors share the losses and earnings from shares in mutual funds.

Let us know if there are other terms that you would like to know more about or have added to the dictionary!

If you would like to book an appointment to speak with Marvin Mitchell, CEO of Compass Retirement Solutions, please call 314-373-1598 or email admin@compassretirementsolutions.com.

How to Master Your Health After 50

According to the Employee Benefit Research Institute’s Retirement Confidence Survey for 2017, nearly 45 percent of Americans are worried about covering their medical expenses once retired. Improving and maintaining your health, both physically and mentally, can help prevent and decrease medical costs before they happen. Compass Retirement Solutions recognizes the stress that comes with the uncertainties of health during retirement and has compiled a list of helpful habits to keep you at your best.

Health in Retirement

 

1. Walk, Walk, Walk

Walking has countless advantages for health and wellness. Some benefits of walking include:

  • Lower blood sugar – Researchers at George Washington University School of Public Health studied inactive men and women over 60 and found that walking after dinner for fifteen minutes, helped control blood sugar spikes after meals.
  • Decreases in high blood pressure, cholesterol, and diabetes – A study conducted at Lawrence Berkeley National Laboratory, Life Science Division in Berkley, California found that walking briskly can lower all three health factors.
  • Improvements for heart health and circulation – Circulation is important in ensuring that your body and organs are receiving the appropriate nutrients. Walking increases your heart rate, boosting circulation and making your heart pump faster.
  • Positive impacts on your mental state – A study from Stanford has found evidence that walking outside in nature could lead to a lower risk of depression, better memory and more positive thoughts.

CREDIT: STANFORD/YOUTUBE

2. Eat a Healthy Diet

No matter what stage of life, eating healthy is something that all doctors, scholars, fitness professionals and researchers recommend. Try to focus on eating vegetables, fruits and grains high in antioxidants because they help prevent the destruction of cells that contribute to aging. The American Heart Association (AHA) recommends eating fish like, lake trout, herring, tuna and salmon because they are rich in omega-3 fatty acids. Omega-3s are proven to decrease arrhythmia and growth of plaque. They also reduce the risk of memory loss, Alzheimer’s, and dementia. Of course, staying away from junk food, smoking, and excessive alcohol consumption also has immense health benefits.

3. Keep Your Brain and Memory Strong

Staying active, being creative, and giving your brain the rest that it needs will have massive benefits for your mental health. Naps aren’t just for kids; in a German study, evidence showed a 45 to 90-minute nap each day helps remember more information. Something else that isn’t reserved for kids? Classes! Joining a creative class in something you have always had a passion for or even just spending time at home playing music, drawing, reading, writing, and everything in between will help keep your mind sharp.

4. Stay Up to Date on Your Current State

Go to the doctor for regular checkups. Take the time to receive the proper screenings, immunizations, and tests to prevent more complex issues from occurring. Medical appointments with your hearing, vision, medical and dental professional is strongly encouraged.

If you would like to book an appointment to speak with Marvin Mitchell, CEO of Compass Retirement Solutions, please call 314-373-1598 or email admin@compassretirementsolutions.com.

3 Tips to “Spring” Into Retirement with Confidence

With so much uncertainty in the market and changes to retirement rules and regulations, many pre-and current retirees are feeling fearful, apprehensive and even unprepared for the future. This uncertainty should be met with unwavering confidence in your plans and decisions to experience your best years to the fullest potential. Compass Retirement Solutions has developed three tips to help you become more confident before and through retirement.

Man Walking on Beach

Define Goals to Focus on During Retirement

Having goals in place during retirement is a great way to stay focused and confident. Do you want to relax at home? Would you like to travel? How about volunteer at a local library or school? Regardless of what your goals are, focusing on hobbies that you are passionate about and understanding how you would like to spend your free time, will allow you to define a preliminary budget and realize items that are wants compared to needs.

Author of You Can Retire Earlier Than You Think and Chief Investment Strategist for Capital Investment Advisors, Wes Moss, conducted research and discovered that retirees that define goals, or “core pursuits,” are more happy and fulfilled than those that don’t.

Decrease Your Debt

Living without debt will give you the freedom to use the funds you have much more efficiently. Debt is a looming shadow that causes stress, worry, and frustration. As of March 2016, research by Robert Harrow reported on Value Penguin, found that average credit card debt is $6,351 for Americans 65 and over. Cost of living, the Great Recession in 2007, and acting as co-signees for children and grandchildren are only a few of the reasons that debt is higher than it has ever been for retirees.

Take time to decrease your debt and stretch your funds in retirement as much as possible so that you can live your best life.

Stay Educated on Retirement

Regardless of where you are in the retirement journey, learning will increase your confidence substantially. Whether you are speaking to an advisor, reading articles and books, or keeping up with the changes surrounding the market and regulations, understanding the opportunities and risks associated with retirement planning will pay off – literally! Learning about maximizing your social security, market performance, or forecasted events will help you feel confident in discussing your retirement and comprehending situations that may occur and require deeper knowledge and understanding of the industry.

Confidence is key in so many facets of life and plays just as important of a role after we leave the workforce. Following even one of the three tips will help you navigate through the retirement journey with the confidence you need.

If you would like to book an appointment to speak with Marvin Mitchell, CEO of Compass Retirement Solutions, please call 314-373-1598 or email admin@compassretirementsolutions.com.

Reactions to Market Corrections

When the market moves in the wrong direction, investors move as well, but how and how much they move can vary greatly.

Some are quick to sell, dumping their investments at the first sign of trouble, while others only batten down the hatches and prepare to hold on while the market pitches and rolls.

Of the reactions traditionally seen, the following five are the most common:

Over-trading
These are the investors—professional or amateur—that think they can outsmart the market by making a lot of trades and making them fast. They shift their money from investment to investment in the hopes that by moving around enough, they can avoid getting hit by the avalanche of a declining market.

Unfortunately, these investors are typically doing more harm than good, and a simple, everyday occurrence is a fantastic illustration of how ineffective this strategy is:

The traffic jam.

Constantly switching lanes in a traffic jam is about as effective as constantly shifting investments—as soon as one lane starts moving another will stop moving. There is no “better” or “faster” lane. It’s a traffic jam, every lane is bad.

Panic
A sudden downturn in the market isn’t a sign of the impending economic apocalypse yet many investors behave as though it is.

That type of mindset always leads to the same outcome—PANIC.

Panic makes investors act foolishly and irrationally. All of a sudden, everyone wants to swap all of their liquid and illiquid assets for cold hard cash, as though cash would actually provide any salvation in the event of a truly apocalyptic economic crash.

While it’s important to pay attention to what’s happening in the market, and absolutely critical for investors to understand what they can afford to lose, going into panic-mode every time the market changes will only do more harm than good.  

Head in the Sand
Far away from panic at the other end of the spectrum, there are the investors who try to ignore every happening in the market to a fault—sometimes even refusing to open monthly or quarterly statements.

Unfortunately, it’s impossible to ignore problems away, and investors who bury their heads in the sand are simply exposing themselves to unnecessary risk.  

Don’t simply “buy and hope” everything will work out alright. Deal with investment obstacles head-on before they become full-blown problems. Flag portfolio weaknesses early on.

Over-confidence
Over-confident investors are no different than over-confident gamblers—they may go on a spectacular run but eventually, the house always wins…Only in this case, the house is the market and not a casino.

Taking an arrogant attitude towards the market is a sure-fire way to get burned and burned badly. Any investor who consistently says “don’t worry about the market, it will come back,” is an investor that should NOT be listened to.

The reality is, the market will NOT always come back—at least not in a hurry—and for investors who rely on their investment-income to keep a roof over their head and food on the table, an over-confident attitude can be nothing short of disaster.    

The Market Timer
Similar to the over-trader, the market timer tried to beat the market, just in a different way—by pulling their money out and sitting it in cash at exactly the right time.

If any investor actually had the ability to do this, not only would they probably never work a day in their life, they’d probably the wealthiest person on the planet—but no such investor exists.

Timing the market with perfection would require more than genius, it would require psychic powers, and psychic powers aren’t real or else everybody on Wall Street would be working for Miss Cleo.  

The reality is, it is impossible to perfectly predict what’s going to happen in the market, so there’s no sense in trying to time investment moves down to the last second. As long as investment moves are only slightly ahead of or slightly behind the curve, everything will work out fine.

Again, these are just a few of the unhealthy reactions investors have to negative market swings—they are by no means the only ones. As an investor, if you feel you’re susceptible to falling within one of these categories, it’s extremely important to evaluate your investment portfolio with a professional, ideally a fiduciary with reputable market knowledge. That’s why you need Compass Retirement Solutions.  Talk to us about planning for negative swings in the market so you don’t fall victim to one of these unhealthy behaviors.  Give us a call at 314.373.1598.

Marvin Mitchell Has the Remedy for Every Financial Disease

Financial diseases are dangerous, and those who’ve already into, or are about to enter into, retirement are especially susceptible to contagion.  These diseases are virulent, aggressive, and deadly to financial health…

…But not incurable.

For those looking to vaccinate themselves against financial misfortune, Compass Retirement Solutions is ready and willing to provide treatment.  

“Riskopathy”

The Disease

Retirees afflicted with “riskopathy” see significant volatility in their portfolio, and that volatility almost always leads to other, more serious financial problems. Now, an important distinction should be made here—risk isn’t of and in itself a problem, so long as it’s consumed in measured amounts. The real problem arises when investors who have a history of risky behavior pre-retirement, fail to kick the habit when they approach retirement.

The Cure

The cure for “riskopathy” is as obvious as it is challenging to do for some investors—take less risk. Use the Rule of One Hundred to determine just how much risk is tolerable. To put the Rule of One Hundred into play, take the number one hundred and subtract it by the age of the retiree. For example, if a retiree is seventy years old, no more than 30% of their investment portfolio should be “at risk” in the market. At the age of sixty, no more than 40%. Everything outside the Rule of One Hundred should be tucked away in safe, secure, low-yield investments.

“Old Fogy’s”

The Disease

“Old Fogy’s Disease” is less virulent than “Riskopathy,” but dangerous nonetheless—it is the result of a long lifespan littered with poor financial planning. Those plagued by Old Fogy’s Disease start to run out of money as they continue to age.

The Cure

The only way to combat Old Fogy’s diseases is by creating a guaranteed income stream that is capable of supplementing retirement investments and pensions. With a sustained income stream, money will keep coming in, even if investments fall by the wayside due to changes in the market or economy at large. Guaranteed income streams are particularly advantageous for married couples as they inherently create security for both spouses in the event one or the other passes prematurely.

Inflation-itis

The Disease

Inflation-itis is famous for sneaking up on retirees. Unlike Riskopathy which can devastate a retirement virtually overnight, Inflation-itis is a slow moving cancer. Generally, it will go completely undetected for years, and during that time it will gradually consume retiree buying power. Retirees who keep significant sums of cash in the bank are particularly at-risk where money earns minimal interest. If that money is only earning 1% to 2% interest per year—very typical rates for most retail banks—and inflation is at 3%, retirees are taking a loss of 2% or 1% respectively on that money every year.

The Cure

A cure is simple though it involves risk, and that risk comes in the form of taking that money from the relative safety of the bank, and putting it into something like the stock market, fixed annuities, certain types of bonds, or fixed-index annuities.

“Nursing Home-atosis”

The Disease

Healthcare is expensive, and nursing homes are extremely expensive. That expense is at the root of “nursing home-atosis”. Retirees who are forced to go into an assisted living facility or nursing home can endure a rapid deterioration of their wealth due to exorbitant costs. Remember—the average nursing home costs about $85,000 per year, so it’s important take precautions to avoid this “disease.”

The Cure

There really isn’t a cure for “Nursing Home-atosis,” only vaccines—prevention and protection through strategic investment. A good health insurance, or long-term care plan is the best course of action, though it does require “approval.” If approval proves difficult, contact Compass Retirement Solutions to learn of alternate options.

Uncle Sam Syndrome

The Disease

Of all the diseases in this list, perhaps none is more common nor devastating than Uncle Sam Syndrome.  With Uncle Sam Syndrome, retirees surrender too much money to the federal government—through taxes, fees, penalties, or some combination thereof.

The Cure

The good news surrounding Uncle Sam Syndrome is that it is readily preventable with strategic financial planning. Consider sinking money into tax-friendly investments like property, a Roth IRA, or a Roth IRA conversion. Those are just a few of the ways to make future income streams tax-free.  

Visit the Doctor

Preventative care is the best way to address financial health concerns, and there’s no better doctor’s office to visit than that of Compass Retirement Solutions. Led by founder and principle advisor Marvin Mitchell can help anyone plan for a retirement that’s ready to combat any unexpected “financial disease.”  To learn more about our solutions, visit our Solutions page or call 314.373.1598 to schedule a consultation.

Four Dangerous Retirement Assumptions

Planning for retirement is important but it isn’t easy, and making the wrong assumption about what’s best or how a particular strategy will pan out can be extremely risky.  

Why?—because assumptions lead to decisions, and some decisions are simply irreversible. So before making any assumptions about retirement, be sure to evaluate all the potential variables in detail and with an industry expert.   

 

#1 – In the end, a Roth IRA will cost less than a traditional IRA.

Don’t just fall-in-line with conventional wisdom because it pays to do the math.

For young people with their highest earning years ahead of them, a Roth IRA will always make more sense than a traditional IRA. But that conventional wisdom has some murky language. Who are “young people”? Where does that demographic start and where does it end? Honestly, that term should only encompass those in their late teens through late 20s—beyond that (the highest earning years), the tax breaks that come with a Traditional IRA are too important to simply brush aside. Having said that, there are always some cases where it will make sense for a person in their highest earning years to take the immediate tax hit and go with a Roth IRA.

Bottom line?—don’t assume one IRA is automatically better than the other, try to make accurate earning projections, get some good advice, and then choose.  

 

#2 – Delaying social security will yield the most income over time.

This is a fatal assumption to make because every situation is different. For some people, waiting is the undeniably wrong thing to do. For others drawing on social security too early is incredibly dangerous.  Factors like dependency, asset accumulation, and physical health can all influence when and where Social Security should be drawn.

Bottom line?—don’t assume a delay in Social Security is a smart investment, get advice from a trusted financial counselor before making a decision.

 

#3 – The more money in bonds, the safer the portfolio

Now this is one assumption that is 100% TRUE…if the year is 2001.

Unfortunately, it’s not.

The year is 2016 and in 2016, this is not a safe and easy assumption.  Right now, interest rates are lower than ever, which means returns on many new bond purchases are only safe as long as interest rates remain historically low. The moment interest rates start inching upwards, bond holders will bleed money and eat a loss. So is putting money in bonds right now really a safe play?—it’s not so simple to say.

Bottom line?—before sinking significant sums of money into bonds, have any portfolio thoroughly evaluated by a professional with established market knowledge to determine the optimal “safe strategy.”    

 

#4 – Whether it’s the lotto or a retirement package—always take the lump sum.

Not so. When presented with a choice between a lump sum payment or a steady, measured pension, it is extremely important to carefully evaluate the pros and cons of both options. 

Yes, the lump sum traditionally affords retirees with more freedom and flexibility because it’s readily dispensable cash, cash for travel, cash to remodel the house, cash to give to the grandkids…cash for whatever.

Having said that, pension payments are safe, stable, and effortless. A check will arrive at pre-determined, fixed intervals with virtual certainty. For those not interested in having to actively think about the best, most-responsible use of their money, going with a pension is a fantastic fit.

Bottom line?—lump sum payments are only right for the right people, so don’t get pushed into blind acceptance.

 

Consult with a professional, consult with Compass Retirement Solutions

Compass Retirement Solutions enables investors to weigh different potential options and openly see the pros and cons of every possible decision. Compass helps people walk through the market and clearly determine what’s right for their retirement.  

From identifying the optimal time to start drawing those social security checks, to defining the healthy amount of risk within a given portfolio, Compass helps clients cover all the bases in order to facilitate a safe, secure, and happy retirement.

Compass Retirement Solutions also places tremendous emphasis on the mitigation of investment fees, and the strategic avoidance of unnecessary federal, state, and municipal taxes. Long-term strategic planning is the name of the game for Compass, and the income plans they design for clients are specifically built to endure the ill-effects of inflation, failing health, or general economic turmoil for up to forty years of retirement.

Each Compass retirement plan appropriately accounts for posterity, and helps parents put money aside for both their kids and grandkids.

Remember—the key to a healthy and happy retirement is proper preparation and planning. Is professional retirement planning mandatory?—no. But in the event of an economic crash, it’s a retiree’s only seatbelt.

If you’ve never reached out to a financial advisor for retirement planning—or if you are currently dissatisfied with the professional guidance you’re receiving—the time to contact Compass Retirement Solutions is now.

Compass offers free, comprehensive financial portfolio review for anyone with at least $200,000 in accumulated retirement savings.

To schedule your consultation, contact Marvin Mitchell at 314.373.1598 to determine what makes more financial sense for you.

Seven Financial Areas to Review Annually

Planning for retirement requires a substantial amount of long-term planning. For many people, that means thinking about their financial future in concentrated doses. We might take a hard look at our finances when we make significant decisions such as buying a home, purchasing insurance or paying our taxes, but most of the time we are content to only think about immediate monetary concerns. As a result, it can become easy to lose sight of the bigger picture of our financial health today and tomorrow.

Staying up-to-date on where you are financially and what your future may hold is not as strenuous a pursuit as it may sound. In fact, by assessing seven factors of your financial health just once per year, you will be well-positioned to make adjustments as necessary while also feeling the peace of mind that comes with knowing exactly where you stand.

Annual Financial Review Checklist

Investments
Assess your investment strategy. Is it providing the returns/security necessary to align with your current goals? Take a close look at your portfolio positions and revisit your asset allocation.

Retirement Savings 
Take a look at your overall retirement strategy. Does it (still) make sense? Some steps to consider include:

  • Taking your retired minimum distribution (RMD) from your traditional IRA, if applicable
  • Assessing contributions to IRAs, 401(k)s or other tax-sheltered retirement accounts. Max out contributions if you are able, and consider doing the same with catch-up contributions, if applicable.
  • Consider whether converting from a traditional to a Roth IRA makes sense for you.

Taxes 
There are many steps you can take to better anticipate taxes and minimize what you owe. For example:

  • Search for possible credits and/or deductions before the year comes to a close.
  • Have a qualified tax professional put together a year-end projection that includes Alternative Minimum Tax (AMT).
  • Review factors such as unrealized gains, losses and appreciated property sales.
  • Take a look back at last year to see if there was any loss carry-forwards.
  • If you’ve sold securities, gather cost-basis information.
  • Look for any other transactions that could potentially enhance your circumstances.

Gifts & Contributions
While we may enjoy giving, we are not always the best at tracking it or approaching it strategically. Plan charitable contributions to education accounts, religious institutions or other organizations ahead of time, and make any desired cash gifts to family members. Review and fund trusts as applicable.

Insurance
Look over your policies. Are they up to date? Is your beneficiary information accurate? Review costs, beneficiaries and any/all life changes that could affect your insurance needs, adjusting as necessary.

Life Changes
Did your personal circumstances change drastically this year? For example, did you…

  • Get married or divorced?
  • Move or change jobs?
  • Buy a home or business?
  • Have or adopt a child?
  • Receive an inheritance or significant gift?
  • See a severe illness or ailment affect a family member?
  • Lose a family member?
  • Discover that a parent needs assisted living arrangements?

Any of these factors could affect the way you should be saving, filing taxes and making other financial arrangements, so be sure to log them for discussion with your financial advisor.

Birthday Milestones
Your age can make a big difference when it comes to what you may and may not do without financial penalty. Consider how some of the following birthday milestones could affect your options:

  • If you turned 50 this year, catch-up contributions can now be made to IRAs and certain other qualified plans.
  • If you turned 55 this year and you retired, you may now take distributions from your 401(k) account without penalty.
  • If you turned 59 ½ this year, you may take IRA distributions without penalty.
  • If you turned 62 this year, you are now eligible to apply for Social Security benefits.
  • If you turned 65 this year, you are now eligible to apply for Medicare.
  • If you turned 70 ½ this year, you must now take RMDs from your IRA accounts.

Asking yourself a few questions and documenting your financial history better can do wonders for cementing your financial future. Some of these factors can admittedly be complex to navigate, so make a point to check in with your financial advisor, bringing this information with you to make a meeting as productive as possible. Have questions? Feel free to contact us.

Recognize Risks to Your Family’s Wealth

All too often, family wealth fails to last. One generation builds a business—even a fortune, in some cases—and it is lost in ensuing decades. We see it happen again and again… but why?

Often, it is because families fall prey to serious money blunders, both old and new. Classic mistakes are made, and the effects of changing times are not appropriately factored into decisions. If you know what to look out for, however, you will have a better chance of avoiding financial calamity. Consider how your family can sidestep the following financial traps as you progress into the future.

Procrastination

Failing to plan is always a risk, but so is failing to respond to acknowledged financial weaknesses. Long-term financial success requires foresight and a well-thought-through approach.

Consider the case of a fictional multimillionaire named Alan as an example. Alan gets a call on afternoon from his bank, which considers him a VIP private banking client. Alan is informed that his six-figure savings account lacks a designated beneficiary. Thanking the banker, Alan promises to come in soon to take care of the issue… but never does. With a busy schedule, the detour always seems too inconvenient. 

While Alan knows about this financial weakness, he fails to act upon it. As a result, procrastination costs him when those assets end up subject to probate, costing his heirs in the end. In the meantime, they find out about other lingering details that were not buttoned up with Alan’s other holdings, and they feel the negative financial impact.

Minimal/Absent Estate Planning

Forbes noted that 55% of Americans lack wills, and every year multimillionaires die without them. These are not just rock stars, athletes and actors; they are small business owners and entrepreneurs you might meet every day. Some at least create a living trust, pour-over will or basic will created online, but that is not always enough.

Anyone reliant on a will risks handing the destiny of their wealth over to a probate judge. A wealthy person that has a child with special needs, a family history of Alzheimer’s or Parkinson’s disease, a former spouse or estranged children may need more thorough estate planning. The same is true if he or she wants to endow charities or give grandchildren a strong start in life. If the person is a business owner, there is definitely the need for coordinated estate and succession planning.

A finely crafted estate plan has the potential to perpetuate and enhance family wealth for decades—perhaps generations. Without it, however, heirs may have to deal with probate and painful opportunity costs such as the lost potential for tax-advantaged growth and compounded interest.

Lack of a “Family Office”

In the past, wealthy families sometimes chose to assign financial management to professionals, and family mansions boasted offices where those professionals worked closely with the family. These traditional “family offices” have largely vanished, but the concept of close collaboration with financial professionals is as relevant as ever.

Today, wealth management firms consult with families, provide reports and assist in decision-making in an ongoing relationship. Personal and responsive service is key. When your financial picture becomes too complex to confidently address on your own, tapping a consultant remains advisable.

Technological Flaws

There are some modern concerns to take into consideration that have not always threatened wealth. For example, hackers can hijack email accounts and personal information in order to trick banks, brokerages and financial advisors into allowing unauthorized asset transfers. Also, which social media can help you build a business and personal brand, it can also expose personal information to identity thieves that want to access your assets.

Some businesses and families take precautions such as installing digital and physical security systems, but when they experience problems or find them inconvenient, they turn the systems off. Unscrupulous people, even some you may know or trust, can take advantage of these mistakes.

Failing to Communicate

When a family wants to sustain wealth, they must understand both how to do it and why it is important. Equally importantly, all family members must be on the same page with regard to decision-making. If family communication about wealth tends to be opaque, the mechanics and purposes of the strategy may never be adequately communicated to heirs, and mistakes will be made.

No Decision-Making Process

In the typical high-net-worth family, financial decision-making is vertical and top-down. Parents or grandparents may make decisions in private, and it could be years before heirs learn about or fully understand it. When the heirs become the decision-makers upon the death of elders, the heirs may already be in their 40s, 50s or 60s… and now they have current (and perhaps former) spouses and children that must be factored into family wealth decisions.

Some of this financial planning stress can be alleviated through horizontal decision-making. In this scenario, multiple generations understand and participated in the guidance of family wealth. Estate and succession planning professionals can help ensure that decisions are made with an aware ness of different communications styles, fostering in-depth conversations. Good estate planners know that silence does not necessarily mean agreement, for example, and will coax necessary discussion.

The Bottom Line

There may be abundant risks to financial wealth, but most, if not all of the issues mentioned above can be avoided through smarter planning. Collaborate with financial and legal professionals, and you can avoid many of the challenges that have derailed earlier generations. Most importantly, it is never too soon to begin. Want to discuss these challenges in more detail? Reach out to us any time.