The Seven Things: Thanks George

This past month was certainly a sad one in the world of comedy.  Whether you liked or not, George Carlin turned stand-up comedy, along with much of society, on its ears for the better part of 40 years.  He is probably most known for his “Seven words you can’t say on television” act.  I’m inspired to translate that into something more related to Financial Planning.  Here is my list of seven common myths, rules and general thoughts that most likely need to be turned around and evaluated for their application in today’s world:

1.  Subtract your Age from 100 and that is how much you should have in Bonds:  That rule of thumb was a great tool up until around 1985 or so.  The problem with conceivably making your money ’safer’ is that you have jeopardized the time it will last.  The retirement picture in America used to look like this:

Retire at 65 with a Rolex and a fat pension
Spend a little too much early in retirement and then you’re done traveling (since your family all lived with a stone’s throw of your home town)
Social Security was strong and probably replaced a high percentage of your income
You were dead at age 72

These days, there are no pensions, social security is a luxury and we are living well in to our 80’s.  That money has to last. 

2.  Cash Value Life Insurance is the best kind of life insurance to buy (especially if you’re young):  Believe me, I started in the industry with an insurance company.  They are pushing those products down our throats almost as much as your friend that just got in the business.  Building cash value is certainly advantageous.  However, with term insurance rates being very competitive, it is likely that your needs can be met with a very inexpensive term policy.

Most term contracts offer you a conversion feature that allows you to change over to a permanent contract when it may fit into your budget.  The cost of term allows you to obtain the face amount of coverage that will truly help protect your family or business from an unplanned death.  Talk to your financial planner today to get an evaluation done on your current life insurance portfolio.

3.  The Government will take care of me:  This may in fact be the case for some folks.  Ask yourself, do you really want to rely on Uncle Sam to take care of you in your later years?  Social Security is a mystery.  Medicare is NOT paying for any long term care needs.  Save your own money!

4.  My company will make sure I save enough and be there for me:  Pensions are almost extinct.  Benefits are being cut.  Most plans now make you save the money (like a 401k).  The company stock that was such a huge benefit is now down 40% and there is nothing you can do about it.  Remember Enron & Worldcom?  Be smarter than that. Max out your 401(k), (if eligible), get your spending under control and divest yourself from that single stock approach.

5.  My family will take care of me:  If they do, consider yourself lucky.  The geography of the family has changed in the last 20 years.   Your children will move away and I’m talking out of the state…maybe even the time zone.  The days of staying with your brother, sister or children when times get lean are a thing of the past.  Honestly, do you really want to lay that burden on them?  Consider buying some Long Term Care insurance, save some money & talk to a financial planner to make sure you are taking the right steps to be financial independent down the road.

6.  Pay off your house in planning towards financial security:  I’ll be the first to say that it would be nice to not have that monthly mortgage payment looming over my head in retirement.  We meet so many people that are just on the cusp of a comfortable retirement.  The one problem, they have 20-40% of their net worth tied up in a house.  There are limited ways to access that money (borrow against it, sell the house and other strategies).  I realize that some people are very emotional about that house payment.  You should visit with a financial planner to discuss the impact of paying it off versus carrying a mortgage into retirement.

7.  Super Size Me:  OK, this one is a little off the normal track…but I think it is immensely important.  With health insurance costs quickly moving to the top of the “retirement expense” chart, you can make a decision today that will have reap benefits far beyond the financial scope.  Eat healthy and exercise.  What we put in our bodies has become somewhat of a joke.  Obesity rates are skyrocketing.  Heart disease is at catastrophic levels.  Cancer is looming around every corner.

One of the best ways to fight this issue is with diet.  The tangible benefits of a solid diet plan are easy to see.  It’s those benefits down the road that are why this has made it into my top 7.  How much money do you think you will save by not having that heart attack at age 67?  Ask your parents how much they spend every month on prescriptions.

I have made a personal commitment to myself and my family to maintain a healthy lifestyle and I urge you to do the same.