Episode 10: When Procrastination Turns Into Urgency!
May 15, 2021
It can be easy to kick the can down the road with your financial plan. However, it is important to discuss certain situations that can create an immediate sense of urgency with your finances.
- Important steps if you are laid off or are offered a severance package.
- Retirement buyouts and need to know checkpoints.
- Death of a spouse and how to reduce financial stress…and much more!
Isaac Wright: Welcome back to Wright Money Tips. Today we’re going to have a conversation around the fact that it’s pretty easy to procrastinate when it comes to creating or maintaining any aspect of your financial plan. In today’s world, obviously, we all stay pretty busy with what we’re doing.
Unfortunately, what occurs when we procrastinate is sometimes there are going to be moments or there’s going to be a situation where you have to be able to make a decision related to your finances. So, what we’re going to focus on today are several areas that Ricky and I see here at our firm each and every day. But, passing these types of situations on to allow you to understand where we can come in to be of help and assistance on to what I call urgent matters.
But let me take a minute here to introduce Ricky Lafon. Ricky is a certified financial planner and he’s one of our senior advisors here at Financial Dynamics and Associates. He does a tremendous amount here to support the families that we serve.
You know, Ricky, when we talk about the sense of urgency around somebody’s financial plan, these are things where I think sometimes people just get lost in the fact that they feel too overwhelmed to make decisions and they procrastinate.
They’ll say, “Hey, I’ll eventually get to it.” But there always are going to be moments where you can’t kick the can down the road. So, the segment, or let’s call it the lay of the land that we covered today. We picked apart a few topics that make people realize whether or not they have a plan developed, they’re working on it or none of the above, areas where this will kind of bring all that to fruition.
I think the first thing, right now that I think is very legit in today’s world, because we’re seeing so much disruption in today’s workforce is a loss of a job. And sometimes these jobs are jobs where somebody has been working for a company 10, 20, 30 years.
And I’m not talking about getting a nice package per se. Sometimes it’s not. It’s a legitimate loss of your job, maybe potentially a loss of your career, figuring out those next steps. But from a financial planning standpoint, let’s talk a little bit about that. So, if somebody loses their job, talk about some implications around their financial plan, things that you see that you know, we can be of service help with.
Ricky Lafon: Yeah, absolutely. And you already discussed one. I mean, if you get a severance package, every severance package can be structured a little bit different. So, is it to your advantage to take that? Is it to your advantage to look for other work? Every family situation is going to be a little bit different there. But one of the biggest driving factors that we see is health insurance and health benefits.
You know, you’re going to lose those benefits. There may be a Cobra there to help bridge the gap. You may have to go out to the exchange, get an individual policy, which can be expensive and may not cover as much. That can be a driving factor if you choose to retire. But if you don’t have a choice in retiring, that can be a big expense that you may not take into account.
Isaac Wright: So, you know, for those of you out there, if you have a situation where you lose your job, don’t panic. These are things that we’ve seen. And granted, you may be in a position where you’ve already saved a decent amount of money towards your nest egg, you just weren’t ready to retire or all things in between now from also not just the health insurance perspective.
If you are offered a severance package, you do want somebody to help you evaluate that and determine what you’re going to receive before and after taxes. Obviously dependent upon that amount, could have a significant impact on how fast you have to go back to work, or again, to make this a positive whether or not you need to go back to work.
Ricky, anything you want to, let’s call it, when we talk about a loss of a job. Any other aspects of that, because obviously some people get that job notification of being, “Hey, you’re terminated,” without any type of forecasting, if you will. So, anything else you want to share about that? Things that we’ve been able to assist with or at least give people a heads up around?
Ricky Lafon: Absolutely. And I think the biggest thing is not to panic. If you’re working with a financial advisor, like our firm provides, it’s talking about your 401(k). Many people panic, and will start pulling money from their 401(k). They may not withhold the right amount of taxes; they may not realize what penalties may be involved in something like that.
That’s where we step in and say, “Hey, let’s take a step back. Let’s look at this holistically and create the most tax efficient plan for you, both in the short-term and in the long-term.”
Isaac Wright: Yeah. So just wanted to start off with that because we’re seeing more, especially last year, we saw more people that reached out to us with a job loss relative to just COVID and the disruption that we’ve seen. Let’s move on here.
I would call our second urgent situation is on the flip side, you’ve worked for 25, 30 years. Maybe you’re lucky enough to get a buyout offer from the company you’re at. They’re trying to move out old employees to kind of thin the herd, if you will.
So, Ricky, when you get a buyout, let’s talk a little bit about that as an option. Because it’s not necessarily as in your face as a job loss, but you have to know if you get a buyout that obviously the goal there is to try to get you out of the plan or get you out of the company you’re with.
So, what are you on a, let’s say lay of the land wise, what do you want to talk about when it comes to those buyout offers because we see those as well?
Ricky Lafon: Yeah, that’s exactly right. We want to coordinate income. What kind of income are you going to get for what period of time? When can you start your pension benefit?
We’ve even run into scenarios where your pension may have a buyout option as well. So, do you want to take your pension as a true pension? Do you want to take that as a lump sum? And again, that goes back to what your goals are for retirement, what your family situation is, maybe your health situation.
Isaac Wright: Yes. So, when it comes to that lump sum versus taking a pension over a period of, let’s call it the rest of your life, that’s a huge decision. And unfortunately, some people don’t make, let’s call it, any type of progress on what makes the most sense. Quite frankly, and I want to say this is not everybody out there, but in the financial world, it can be incentivizing for an advisor to recommend you to take the lump sum and invest it.
They may not necessarily be in your best interest. So, keep this in mind, as I say this, I want people to realize that when it comes down to whether or not you take a pension over a period of years, for the rest of your life and maybe whether or not that also supports your spouse versus a lump sum option, you have to be able to look at that as far as whether or not the income from the pension can be somewhat matriculated from the lump sum.
And you may have other income sources. Ricky, you’re correct that you may have other assets. You may have a life expectancy you’re concerned with. So there’s other variables in play. But if you do, and if you are fortunate enough to get an early retirement or severance package related to retiring early, let us know, because I think that’s a big question that sometimes people come in that we’ve seen. That have had concerns that don’t really ever get answered.
The third thing that I want to talk about as far as urgent situation is, and this is not a nice thing to have happen, but a death of a spouse. Ricky, let me just open-endedly start off with when a death of a spouse occurs. Just talk to me about this. Where do you go?
Ricky Lafon: Yeah, this is by far the most emotional situation that we handle first and foremost. You know, you have to take a step back and say, “Do I have some liquid assets to take care of, final expenses, the surviving spouses expenses? Can you take an inventory of what you have?”
And that’s what we assist with is helping people take that inventory and making sure that there’s liquidity built in first and foremost. If we can establish that, the surviving spouse can take a step back and go through that grieving process. If you don’t go through the grieving process, you’re not going to make good financial, sound decisions.
Isaac Wright: Yeah. You know, I will say too, that the decisions around losing a spouse, you never want to be rushed. Now the reality is you’re going to have to make certain decisions. Most of those decisions are going to be around, you know, personal matters if you will. But financially speaking, and with what Ricky just said, if you have at least enough money in your emergency accounts to cover final expenses, maybe cover, you know, three to six months-worth of emergency money to take care of bills, at least it gives you a little bit of a breather. You still will have other investment and insurance and all types of other decisions.
But I would say that one of the things that we’ve had positive feedback on is creating an implementation plan for that surviving spouse. Now I’ve been doing this for 20 years. Ricky has been doing this for quite some time as well. And it is par for the course for us to kind of cover some of those tough moments.
So, you know, listen, we never want to have anything happen to any loved one in our family. But whether you’re in your forties or sixties or eighties, I mean, the reality is, make sure that you have somebody that knows who you are, and that can also effectuate some of these things from a standpoint of priorities of what needs to be done first, second, third, and so forth for a loss of a spouse. Ricky, anything you want to talk about outside of that when it comes to a death of a spouse?
Ricky Lafon: Yeah. Think sort of the last step that we need to do is take a step back and say for the surviving spouse, after we go through that grieving process, let’s evaluate the needs and wants of the lifestyle that the surviving spouse wants to live. Then we can go into phase two and create sort of a new retirement plan for that surviving spouse to make sure that we stay on pace.
Isaac Wright: Awesome. Well, last thing I want to talk about today, because again, these are all urgent situations that no matter where you fall in the spectrum of your financial plan, these all come to fruition where you have to make decisions upfront. Maybe sometimes not necessarily when you’re ready, but definitely helps you realize the importance of having a financial plan.
The last thing I want to talk about here are market losses. Specifically, as you start really accelerating towards that final step in your retirement. So, you’re getting real close to retirement. You’re trying to make sure that nest egg is there, but unfortunately you have a market correction. We saw a huge one last March and granted, who’d ever thought that we would have had to come back so quick.
But let’s talk about this because it made people, even in that short amount of time, realize, “Hey, maybe I am not where I need to be in terms of having my money in a position that do I need to even be worried about taking this much risk? What game am I trying to play?”
So, you know, when we talk about this, a lot of times I’m going to just cut out here real quick from Ricky, is to say a lot of times when we talk about this, sometimes people again are chasing the game of trying to maximize the amount of money in their nest egg, where maybe they’ve already won the game.
They don’t realize it because what’s the end game of the money. The end game of the money is to be able to create the lifestyle, maximize your lifestyle, to whatever degree that means. And most of you out there today did not necessarily want to have a fleet of Lamborghinis. You’re just trying to live well, enjoy yourself.
Ricky, that’s probably by far, I would say has been, at least for the families we serve or kind of like the next-door neighbors that are friendly in nature, that they want the best for themselves and their spouse and their family and friends. But let me just let you pick up off of that.
Ricky Lafon: You’re exactly right. What’s the end game there and really what that gets to the pain point of is how much money do you want at risk? How much money do you need at risk to accomplish your retirement goals? And really that comes with being proactive, getting with a financial planner, talking about these things, talking about inflation, talking about the economy, talking about health and when you want to retire and what you want to accomplish in retirement.
And actually, all of these points that we’ve talked about today, come back to being proactive. If a person can do that and establish their emergency fund, get their heads straight as to when they want to retire, talk about health issues, bring up these things and be proactive with a financial planner, you can have most of these issues addressed for you and that anxiety level comes down when we start talking about retirement.
Isaac Wright: Well, hope everybody took a lot of what we said today, as far as just key aspects of what we see every day. But I’ll mark my words, you’ll see at some point. And if not, you have already seen some of these that we’ve covered on the program today. But, you know, having a financial advisor, having a financial planner again, whether it’s us or anyone else, find somebody that really relationship wise knows who you are and can establish what I would call that ongoing dialogue. And when these type of situations happen, as far as these urgencies, they become a little less stressful because you’ve already made headway towards your goals.
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Ricky, I think always, it’s nice to be able to sit down, just kind of lay out some of the things that we cover week-in and week-out, what we see day in and day out. For all of our listeners, I want to say thank you all for tuning in and we look forward to talking to you again.