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BY WARREN BOROSON
NEWJERSEYNEWSROOM.COM
BOROSON ON MONEY
What would you want to accomplish – if you had only five years more to live?
Or only one year to live?
Those are typical questions that "life planners" ask their clients – life planners being financial planners who take a broad view of their responsibilities. They don't want to just help clients get richer; they want their clients to lead fulfilling lives.
As Carol Anderson, president of Money Quotient, a pioneer in the field, has put it, life planning is financial planning "done right."
One life planner in New Jersey is Michael F. Kay, CPA, CFP, president of Financial Focus in Livingston, a firm that has five professionals on staff."Life planning goes beyond numbers," he says. It's not just about making money and investing money, but about using the money to fulfill your dreams.
Life planners focus on:
- Your wherewithal – how much money you have and may make;
- Your goals in life – traveling, sending your kids or grandkids to college, retiring to a beachhouse next to the ocean, and so forth;
- How to realistically achieve those goals.
One businessman, earning a vast income, Kay reports, eventually chucked it all to become a docent traveling to national parks around the country.
Of course, different people may follow different blisses. People who grew up during the Depression may be frugal to a fault. They save and save – often, to provide for their children. Forget about new cars and posh vacations: The kids must be financially secure. Other people who grew up during the Depression may skip to the opposite pole, becoming profligate because they remember how cruelly they and their parents denied themselves.
If one spouse is frugal, and the other profligate, says Kay, you may see battles royal.
A life planner must listen intently to his or her clients – to ascertain what the clients really want to do with their lives. Also, to uncover their "money scripts" – what ideas govern their behavior. (Such as: Life is about making so much money you'll never go hungry.) And to establish a high level of trust – in order to, perhaps, uncover intimate details about those clients.
Kay, 55, grew up in West Orange, graduated from Adelphi University in Garden City, N.Y. He became a CPA, then – about 10 years ago – a Certified Financial Planner.
To invest his clients' money, he uses Dimensional Fund Advisors, which sponsors quasi-index funds – only "quasi" because DFA tilts toward value stocks and small-company stocks, which (history has shown) tend to outperform.
Kay has enormous confidence in "passive" investing: "It takes subjectivity out of the picture." Those who put their money in index funds tend not to succumb to either of those twin demons, fear and greed. Kay has met some of the academic gurus behind DFA, like Eugene Fama, Burton Malkiel (at Princeton), and Ken French.
I asked: When should someone seek out a financial planner? Many people, Kay replied, seek help when they buy a house or have a child – but they should come in "as soon as possible." Reasons: to get started on a sound investment program, to buy the right insurance and enough of it, to be generally aware of tax consequences.
What sort of financial planners should someone avoid?
"Some people call themselves financial planners," said Kay, "but they're really ‘product' people," out to sell you almost anything that will pay them a big commission.
Back to the initial question: What would I myself do if I were told that I had only a year left to live? My answer: Get a second opinion.
Otherwise, I would write my autobiography – or pay someone to tape my reminiscences. So that my distant relatives, in 2195, would know something about me. Also, I would finish writing the book I'm working on, "Everything You Need to Know About Investing – in 00 Pages."
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Question: My former employer did a matching contribution to my 401(k), then just stopped. Last year the company closed and I rolled over my 401(k) to an IRA account. I just noticed on my last statement that my employer took out the money he put in. My question is: Can my former employer legally take out the money? I had the 401(k) for about 10 years.
Answer from Thomas W. Farrell, CFP, wealth manager, RegentAtlantic Capital, Morristown: That doesn't sound right. You're entitled to those matched contributions. They are meant to encourage your own contributions, and to encourage current employees to stay.
Typically, a match doesn't become permanent – "vest" – for two or three years. But because you had 10 years, you should be 100 percent vested. The longest vesting period I've heard of is six years.
I don't understand why your former employer took back his contributions. I suggest that you get in touch with your former employer and ask for clarification.
It's just possible that the employer did not withdraw the contributions, and that the value of your holdings declined because of the stock market's decline.
If you don't receive a satisfactory response, you might ask a lawyer to write a letter.
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I'll be teaching a beginner's course on investing at the County College of Morris in Randolph on Tuesday, Feb. 23, from 7 to 9 P.M. Cost: $30. To register, phone (973) 328-5183.
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You are invited to send financial questions to This e-mail address is being protected from spambots. You need JavaScript enabled to view it .
