Directly from the Financial Planners: Two Types of Advice You Could Ignore

• Author: Jeffrey Simmons
• Posted: 2024-06-04

Directly from the Financial Planners: Two Types of Advice You Could Ignore

You may have visited a financial planner recently online or in person. More than likely, they are delighted to tell you how to invest your money for the highest returns faithfully. On average, you will hear two types of advice for financial planning.

The first vital type of information the financial planner will probably tell you is that you need a revocable trust. While this blanket advice would be perfect for many people, it may not be right for your finances. That is why the emphasis is upon "personal finance." What is acceptable for your next-door neighbor may not be sufficient for your family.
 

Information Era

Living in the Information Era has its perks. Everything you need to know and understand, in most cases, is just a good click away. Online publications, Google, and YouTube can answer your most pressing questions.

Now, the downside to accessing the Super Information Highway, not all information on the Internet is vital, necessary, or correct.

The main job of a financial advisor is to give clients advice about money. This expertise is not only gained online but through study under influential teachers and finance gurus.

However, sometimes, the financial planner may advise you to choose options that are against the established norms. For example, you may not really need that revocable trust.
 

Revocable Trust

Because everyone's situation is different, there is no one-size-fits all. Your financial planner must look at your total financial picture to make a proper assessment. The items your financial planner would like to evaluate include:
 

• Age to retirement


• Bank accounts


• Pensions


• Retirement accounts


• Physical property


• Real property


• Risk tolerance


• Budget


• Taxes


• Income


• Goals


 

So, the main question is: Do you really need a revocable trust? To establish a trust, it will take a considerable financial commitment which could end up costing you several thousands of dollars.

Many inquirers like this option because at death, all your assets, debts, and inheritances for your beneficiaries would be kept private from the prying public. You will have an administrator that can make changes to your estate as the economy grows and changes.

On the other hand, if you have considerable assets and do not have a trust or a will, a judge will administer your estate and divide your property according to state law.

Suze Orman, a big personality on MSNBC, is a big advocate for the revocable trust because it lets you avoid probate court. You and your family would have more control over your estate if perhaps, you became incapacitated.

There is nothing wrong with a revocable trust, but it may be unnecessary for your financial success. Having your family probate your estate may be less expensive than contacting an attorney to establish a trust.
 

Making a Will

If your current budget is tight and you cannot afford a trust, consider writing a simple will. You can write a holographic will or have a legal expert draw one up for you. This would make dividing your assets in court much more effortless.

With payable upon death accounts, certain types of assets would not have to pass through probate court. Your beneficiaries would have access to these accounts with proper identification. These types of assets include bank accounts, insurance policies, IRAs, and retirement accounts.

If you are concerned about your estate in case you become incapacitated, then think about appointing a durable power of attorney. Your appointee would make life and death decisions for you in the case of a medical emergency due to an illness or accident. The designee would make financial decisions on your behalf when there is a decline in mental functioning.
 

Targeted Investment Funds

The next type of advice you may have heard from a financial planner is to invest in target-date funds for your retirement. However, depending upon how close you are to retirement, these funds may not work for you.

A 40-year-old has an IRA or a 401(K) plan, and he is 25 years from his retirement date. As a selection, he can automatically invest in a Vanguard Target Retirement 2045 fund. Now, the target-date fund would have an allocation mix of equities and bonds. The risk factor could be 50%.

However, the 40-year-old may not want a target-date fund with an equity risk factor of 50%; instead, he may want to boost his equity risk to 70% and choose the Vanguard Target Retirement 2055 fund.

The same would go for a 50-year-old who has not saved much for retirement but needs the highest return possible. Take an interest in your financial stock before you establish a set-it-and-forget-it retirement investment strategy. Know exactly what you want so you can generate your preferred investment yield.