On a recent Van Wie Financial Hour live radio program, we had a phone call from a listener with an excellent question. The caller was in his 80s and owned a profitable Variable Annuity (VA) that he had moved into cash when the market got rough late last year. His essential question was whether to get back into the market, and if so, when and how to do that.
We generally start our discussion by asking questions. From our line of questioning, we deduced that the caller had no foreseeable use for the money in the annuity. He has children, and they are the named beneficiaries on the account. From there, we determined that his investment priorities were not actually those of a typical person in his or her 80s. In fact, the objective of the account was to provide for his children.
Had the caller’s priorities been determined to be those of a typical 80-something, we would have advised an investment plan that was oriented toward income and preservation of capital. However, knowing that this money was most likely going to help fund the later years of his children, we suggested a somewhat more aggressive investment plan.
Without the luxury of a long and detailed discussion, we suggested dividing the money in the VA into a 1/3, 1/3, 1/3 allocation among Target Retirement Funds with varying target dates. This plan is simple, well-diversified, and carries enough market risk that the possibility of growth is solid.
When advising older investors, it is essential to discover the true objectives of their investments. Things are not always exactly what they seem on the surface. The purpose of having a thorough Discovery (an element of the overall Personal Financial Planning process) is to individualize financial advice. This is not possible on a short phone call, so our goal on the radio is to tell people what can be done, rather than what to do. There is only so much that can be done on a limited telephone call.
If your situation is in any way non-standard (and whose isn’t?), it may benefit you to have a thorough and confidential discussion in our office. We offer a free conversational meeting in our office just for the asking. We call that process “Suitability,” the purpose of which is to determine if we all believe there may be value in establishing an ongoing relationship.
Van Wie Financial is fee-only. For a reason.
