Broker Check


Planning All Alone

| August 13, 2018

Mr. Jones was a self-made man: successful business owner, loving husband, and father to three successful young men with families of their own. A few years ago Mr. Jones sold his business for $3 million, paid a staggering $450,000 in taxes and decided to retire by means of investing the remainder of these assets in rent houses.

Regrettably, Mr. Jones passed away last month due to an unforeseen heart attack. His wife, already consumed by grief, had no experience of knowledge of the real estate industry, much less taking care of rent houses. To compound the situation, 19 out of the 34 houses had become vacant due to the economy and selling them at a fair price certainly wasn’t an option in that environment. Mr. Jones’ life insurance policies were all term policies and had run out a few years before he passed away, when he turned 65. Mr. Jones hadn’t been concerned though - he believed that with the rent houses in place, Mrs. Jones would be taken care of. It was never in his wildest dreams that her income would be cut more than half at any point in time.

Consequently, Mrs. Jones was forced to sell all of the houses at a deep discount. She could no longer afford to hire someone to maintain the properties and, at her age, was in no physical shape to do the work herself. The $3 million retirement, which had once produced a net income of nearly $200,000 a year was now less than $1,300,000 and at best could provide Mrs. Jones a mere $65,000 annually.

The worst part of this story is that it happens frequently. We meet so many families with similar stories when they come through our door. Our only regret is that we didn’t meet them many years before.

In Mr. and Mrs. Jones’ case we could have, at the very least, played devil’s advocate and presented the worst case scenario and they would have had the opportunity to prepare. To hedge these risks, we would have strongly encouraged keeping enough life insurance to supplement Mrs. Jones’ income and lifestyle if relying upon rent houses was really the retirement path they wanted to take. However, we would have strongly encouraged the Jones family not to put all their eggs in one basket. And finally, we would have helped them save thousands upon thousands of dollars in taxes from the sale of the business with a little proactive planning, using the combined knowledge of their attorney, tax professional and us.

When it comes to our health or a question of our health, we don’t even question whether or not to seek the professional help of a doctor. Why, then, do we always question the help of financial professionals when it comes to our financial health?

Is it the money? In the Jones’ case, any financial consulting fees would have been much cheaper.

Is it our pride? A famous proverb proclaims, “Pride comes before a fall.” John Ruskin, writer of many personal explorations of cultural, social and moral issues, stated “In general, pride is at the bottom of all great mistakes.” “Pride is said to be the last vice the good man gets clear of,” is a quote from the legendary Benjamin Franklin.

When it comes to your money, your retirement, your Life plan…get a second opinion. You may be on the right track, but if you are not, don’t you want to know???