Many life decisions can be difficult, but when they involve your finances, input from a qualified advisor can help. Here are a few scenarios to illustrate how such input can make a difference.
Caring for a parent
Aila and Mark, a couple in their 50s, are both working full-time. Aila’s mother is a widow who can live at home but needs some personal care and help managing the house. Aila would like to only work part-time so she could help care for her mother during daytime hours, but the couple worries that decreased income will affect their retirement plans. They do have the option of Aila’s mother receiving care from a provincial government program, with private care providing additional support.
The couple ask their advisor for assistance. The advisor provides a financial projection of their nest egg based on Aila working full-time versus part-time, outlining how the difference can affect retirement plans. Now the couple can make a decision based on solid information, rather than guesswork. Alia decides to help care for her mother, comfortable with the retirement planning options her advisor explained.
Investing an inheritance
Shannon receives an inheritance from her father, which she plans to invest. She also receives conflicting suggestions about whether she should invest the lump sum at once or invest smaller amounts periodically. Shannon consults her advisor for guidance.
Shannon’s advisor explains the pros and cons of each method. Generally, time in the market beats trying to time the market, pointing toward investing the entire sum now. But lump-sum investing doesn’t always win out. For example, if the markets suffer an extended down period, investing periodically means you consistently buy low – coming out ahead when markets rebound.
The advisor learns that Shannon’s greatest fear is investing it all at the wrong time, before a market drop. So, Shannon, with her advisor’s support, determines that investing periodically is the best decision.
Making a career decision
Albert had been employed by the same engineering firm for 25 years. But when an international company bought the firm recently, he lost his job. Now he’s deciding between searching for a similar position or going into business for himself as a consultant. He prefers to work as a consultant, but Albert is unsure if his severance package alone would provide enough of a financial cushion during the starting-out period.
Albert meets with his advisor to discuss the situation, and they look for ways to help Albert stay ahead financially. Their list includes Albert and his spouse living on a budget and renting out their vacation property. Albert’s advisor points out that in two years the mortgage will be paid off, and those dollars can go toward living costs and retirement savings. Feeling comfortable about his financial situation, Albert begins his new venture as an engineering consultant.
Changing family plans
Until recently, Martin’s retirement, business succession and estate plans all looked set. Victoria and Ellen, his two daughters, would take over the bakery and inherit the family vacation property. Martin would retain ownership of the business during retirement and withdraw dividends to help provide retirement income. But now both children have decided to pursue other careers, and only Victoria wants the vacation property as Ellen moved out of province.
Martin can’t decide between selling or keeping the bakery during retirement, nor between selling or handing down the vacation property. He tells his advisor about his predicament, and together they arrive at a decision that suits all parties. Victoria will get the vacation property. Ellen will be made beneficiary of an existing permanent life insurance policy originally intended to support the business in the event of Martin’s passing. Martin will sell the business to fund his retirement.
You might not experience one of these exact scenarios, but you may face a financial decision that could easily be added to this list. If you ever do, be sure to ask your advisor for assistance. By showing how different options affect your financial plans, their input could help you make the decision that’s right for you.