From the time I was a child, my father seemed to always have his hand under the hood of a classic car. We owned many different cars, but old Fords were his favorite. We restored a 1934 Ford Three Window Coupe that graced the front cover of Street Rod Magazine in March of 1979. It was a ground up restoration that would turn eyes no matter where we were on the boulevard. We worked on other cars as well; my favorites were Fords from the 30’s, a few Thunderbirds from the 50’s and many early Mustang convertibles. I recently counted 15 early ragtops that we collectively worked on over the years. Today, I have a couple of old classics myself and still enjoy wrenching in the garage and visiting local car shows.
I learned many valuable lessons working on these old rods. The most wonderful by-product was a great relationship with my father. Lying underneath an old car late at night had a way of bringing up all kinds of meaningful conversations. Being the oldest son, I quickly became the gopher. You know “go-for this” and “go-for that!” Consequently, I memorized every tool in the toolbox. I got really good at anticipating what my Dad would need next. Maybe it was a special ratchet extension for that hard to reach spot or just the right wrench for extracting that obscure rusty bolt. There were tools that we rarely used, but when we did need them, they were a lifesaver, like the special wrench to adjust early Ford front drum brakes. Now there is a great tool!
From those years on the cold garage floor I learned that different tools were meant for different purposes. There weren’t good tools or bad tools! They were all helpful and important; each tool was built for a specific purpose. Today, my garage is graced with more tools than I care to admit, all suited to accomplish a unique task. It’s amazing how just the right tool in just the right situation can make a very difficult task so much easier!
What does this have to do with helping pre and post retirees develop meaningful financial strategies? Just like reaching into my toolbox to work on my 1937 Ford, I reach into my financial strategy toolbox to select just the right tool to fix or drive a certain outcome. The key is to execute meaningful strategies, many of which require specific tools (products) to achieve certain aims or results. Sometimes we get so hung up on our opinion of certain tools (stocks, bonds, mutual funds, annuities or insurance products, riders, trusts, wills, etc…) that we forget what we are trying to accomplish. The key is to first understand the desired outcome and then formulate a strategy after deeply considering the whole financial chessboard. A solution is often found by implementing a very specific financial tool positioned in such a way, often with some other complimentary tool, to yield the targeted result.
Our complex world today presents pre and post retirees with a variety of risks. A competent advisor will work to mitigate risks, like inflation or a long-term care event while providing whatever financial outcomes are desired! It might be continued wealth accumulation, wealth transfer or providing guaranteed retirement income or contingency planning of some kind. Answering the question, “What is the money for?” can be helpful in guiding our decisions.
Do we really care what the tool is if it will help us reach our goals? Of course not! For example, if just the right annuity or life insurance product will double our income in retirement, do we care? The key is to focus on what the tool does or what outcome it will provide, not what it is. Being educated is an absolute requirement! I tell all of my clients “Don’t ever do anything you don’t understand.” We must understand the characteristics of each tool in order to implement it properly. At the end of the day, the objective is to get the car back on the road and have it perform as efficiently as possible, isn’t it?
Sometimes we can become so comfortable with a particular tool that we get stuck believing we should use it in all circumstances. The truth is, our lives change as well as our circumstances. Marketable securities can be an effective tool, but I have an 88-year old client whose spouse (13 years younger) will experience a dramatic decline in income at his passing. He insists all of their limited assets should remain at risk in the market. This decision can be devastating if we experience another 2008 market downturn. With the surviving spouse in mind, a different tool with the characteristics of capital preservation and optional lifetime annuitization should be selected.
Building confidence in our financial lives decreases worry and allows us to have enjoyment with those who matter most in our lives. It’s the proverbial late summer afternoon drive down Pacific Coast Highway with the top down listening to the Beach Boys sing, “Good Vibrations.” Focusing on desired outcomes helps us select the right tools from the toolbox making our life’s drive so much more fun. Happy motoring!