March 31 , 2005

THE CONSEQUENCES OF A FAILURE TO PLAN.............. .................................... Social Security Debate/ Schiavo Case

With the attention of the media focused on the Schiavo case last week, you may have missed the major announcement on the current state of Social Security system that was offered up by Treasury Secretary John Snow. However, before I communicate this major, earth-shattering proclamation, let me offer a few words on the Schiavo tragedy, as our hearts go out to all involved.

As family wealth planners and managers as well as estate planning attorneys, we have had the vast majority of our clients complete Living Wills. However, some clients with either religious objections or general indecisiveness fail to complete any type of directive.  The lessons of the Schiavo case should cause those of you in this category to take some form of action as soon as possible.

Living wills are not only for those who do not wish to be kept alive through medical intervention when there is no hope of recovery. Those who do desire such intervention and wish to “choose life” no matter what, or wish to follow the guidance of a religious advisor, can fill out a document that states precisely that. Either way, you want your family to know exactly what your wishes are, to avoid a potentially disastrous battle such as the one that resulted in the Shiavo case.

So enough said---If you would like us to check if you have a Living Will on file or if you need to complete one, please contact the law office.

What will be the Fate of Social Security?

Last week, Treasury Secretary Snow announced that new numbers published by his accountants indicate that the Social Security surplus will be used up by 2041 rather than the previously reported 2042. This major announcement was met by a huge collective yawn by the general public. In fact, all of the respected pollsters are reporting that support for the President’s Social Security reorganization and privatization plan is slipping.

So what’s up with the populace? Why have the President and his supporters failed to energize the public to support the changing of a system that most experts agree needs ‘some kind of fixing’? I would imagine the answer to that question would point to a number or reasons, including, ones’ political affiliation and levels of trust, understanding, annual income, open mindedness, and inertia.

Why the lack of concern?  

But perhaps another factor is also at work. The year 2042 or 2041 if you will, is just way too far remote for most Americans to contemplate. Our experience, for example, in the Financial Planning area, is that clients are more than ready to focus on today but are not as willing to devote planning time to their futures. For example, everyone wants to see what his or her “return on investments” were for the year 2004. They are usually much less interested in seeing what their assets will potentially look like in the year 2041, given their current asset allocation, and how the current level of inflation will affect that value. They are less interested in seeing how their current level of savings and expenses will project out to retirement age and how the costs of education and other major expenditures could affect their retirement picture.

The key to securing your future; The Lesson of the Social Security debate and the Schiavo family breakdown: Proactive planning is the key…

The Schiavo tragedy, as I stated previously, has focused our attention on the need to have Estate Documents in order. The Social Security Debate should be a wake up call to all Americans, of all income levels, to think about their own ability to maintain their particular lifestyles through retirement. Similar to the way they receive yearly statements summarizing their Social Security total earned wages, deductions and standing, they should have a handle on their overall retirement outlook. As a Certified Financial Planner®, I can assure you that the answer to whether you are on the path to the successful retirement you desire needn’t be a guessing game. Regardless of the status of social security debate you do not have to leave your future finances to chance. Confidence in your family’s future financial security and comfort can be achieved through taking the proactive step of completing a FINANCIAL PLAN® and then following the comprehensive road map you will be provided with.

It never ceases to amaze me, that people will plan in every other area of their lives, but will neglect the one area most vital to their families future security. Would anyone expect to build a solid house by hiring the various subcontractors and letting each just do their thing, with no supervisor and no overall blueprint? Would anyone run a business by simply hiring various department heads, and having them each direct their area, with no overall coordination, or plan and with no overall head or CEO? As a matter of fact, recent articles on the collapse of Enron depict the chaotic situation before the fall, as the result of a complete a breakdown of communication and coordination between the various departments.

As a successful businessperson, or professional, your finances are complex and involve many different components.  You know what your objectives are; maintaining your lifestyle at retirement, maximizing investment returns, meeting education, and other large expenditure needs, providing for your family in the event of death, minimizing your taxes, simplifying all of your financial affairs etc. Working on isolated parts of your financial picture, as opposed to following an overall blueprint or strategy, will not lead to optimal results and will not provide you with the highest probability of meeting your objectives.

There is no such thing as a universal financial plan.  Everyone has a unique set of characteristics and goals. A FINANCIAL PLAN® is a comprehensive analysis completed by the professional financial planners at Frye Financial Center, who will serve in the role of your personal family CFO, or family financial coach.  It all begins with assessing where you stand today, taking in to account all of your income, expenses, insurances, assets, savings ratios, inflation rates, interest rates, education costs, etc. Then we will analyze your objectives as far as desired age of retirement, and income level desired at retirement, as well as the other objectives mentioned in the proceeding paragraph etc. The final plan will be presented as a comprehensive written projection, and report. It will give you insight into whether you are on the path to successfully reaching your stated financial goals, or if not, what you need to do now to get on the right path.

As with everything else, following a plan, or road map will remove the guesswork and lead to a much better result than lack of planning and a lack of organization

The fact of the matter is, 2041 is probably a realistic retirement age for those of you in the 28-38 age group. Those of you in that group should have already begun taking the proactive, proper financial steps to secure a fiscally solvent and bright future, rather than putting things of for a latter date.

For our clients in their 40’s, 50’s and older what’s your excuse? There is still time to plan and to get you on the right track. Don’t leave it all up to chance and don’t wait until it’s too late.

Austin A. Frye, MBA, JD, CFP®

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