Advisors as Money Detectives

Investing
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By Dan Crimmins

Learn more about Dan on NerdWallet’s Ask an Advisor

A financial advisor’s job is like a detective’s. We probe to see whether your financial assumptions are correct. We want to find the truth beneath the assumptions and document clutter.

Sometimes, our digging uncovers dangerous imbalances in your financial picture. Once we discover these errors, we can help correct them. Here are two examples of people that we helped by solving misunderstandings before any damage occurred.

The pension hole. Mike and Mary had a rude awakening when they met with us to discuss their retirement planning. Mike worked as a teacher for the past 25 years. He had a good yearly pension to look forward to in retirement. I asked what happens if Mike unexpectedly dies prior to retiring.

Mike said that he assumed Mary receives the pension. Therefore, I contacted the school district’s human resources department, and learned that, if Mike dies before retiring, the pension dies with him. Mary is not entitled to it.

This misunderstanding of his pension benefit exposed a big gap in Mike and Mary’s insurance coverage. Mike was significantly underinsured. Once we found the problem, the solution was easy to fix. Mike needed more life insurance coverage then he had through the school, to ensure that Mary and their family are properly covered if the unexpected occurred.

After reviewing their overall financial situation, we established a plan that handled their retirement investment portfolio and helped them prepare for tragedy, as well. This is only one part of the financial plan that we made for Mike and Mary. Until they dug into their retirement income assumptions, this family did not even know the danger they courted.

How much is that payout again Another couple that we helped also dealt with a pension payout.  Many people do not think to review pension plans periodically, but we do this to make sure that you understand your personal plan. Richard was employed at a large corporation for many years and worked his way up to executive vice president before leaving the firm. His pension plan allows him to receive a specific pension amount for the rest of his life, and his wife Liz receives half of his pension when he dies.

At our initial meeting, we raised questions concerning his expected pension payout. How was it set up, really?

Richard contacted his old firm to request the pension documentation. There was a large discrepancy on the monthly amount that Richard was scheduled to receive. It took months and many meetings to fix the error and get the proper amount of pension each month.

Luckily, for Richard, the head of the human resources department eventually corrected the mistake. If we did not tell Richard to get the documentation on his pension, the error may have remained, leaving Richard and Liz with a significant money loss. Reviewing all aspects of Richard and Liz’s financial picture allowed us to insure that all of the different pieces are in order.

Dan Crimmins is founder of Crimmins Wealth Management, LLC and a fee-only independent financial advisor.

 

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