360 Financial Checkup Checklist

[mb196]

A close friend of mine has asked me for a financial checkup to ensure he is on track.  I avoid giving unsolicited advice and I’m super careful the few times I give advice.  This time is different and I’d like to do my best and be as thorough as possible.  Please help me review the enclosed list of items or point me to a better one or a book.

My friend, let’s call him Cugine works for IBM for almost 30 years, owns 4 rentals in addition to his own home.  I place his annual income around 300K.  No debt at all.  Married with 2 kids in public school.

1- Know his average monthly Budget.  Track it using online tool and slice it with Excel or pen paper.
2- insurance:  medical, homeowners, umbrella, disability, life insurance (term, never whole)
3- Savings: emergency fund equals 3 to 6 months of his monthly expenses.  529s.
4- Investments: Brokerage account.  Mutual Index funds.  UtMA and 529s
5- Retirement planning: 401K, pension, Roth and IRAs, FSA.  Understand RmD for each of those.
6- Estate Planning: Trusts, Will, Gifts, Beneficiaries, Succession for management of his rentals, tithing/donations
7- Misc.: Monitor credit reports annually, understand loans and use credit cards wisely.

[fuzzy math]

I would consider plugging that info into something like Personal Capital... so its aggregated for him, it will update and ultimately you're not the one responsible for the recommendations or projections it gives.

[mb196]

Hey FuzzyMath, this isn't a paid appointment so it's not that stringent/formal.  It's just two cousins checking on each other.   Similar to asking a friend for dating advice.

But I do get your point about allowing PersonalCapital to aggregate everything to show him a snapshot.

From what he already asked me over the phone, he wants to understand all those different concepts and see that they are all aligned and not in contradiction.   

One question I do have is about retirement money.  He and his wife are about 55 years old, with expenses of approximately 100K per year which he can easily cover with his IBM pension and his rental income.   He has 2MM in his 401K.  Considering RMDs, should we continue to save in his 401K or save elsewhere?  He wants to leave some money to his children and is looking at that 401K for that.   What would you advice?

[wageslave23]

Hey FuzzyMath, this isn't a paid appointment so it's not that stringent/formal.  It's just two cousins checking on each other.   Similar to asking a friend for dating advice.

But I do get your point about allowing PersonalCapital to aggregate everything to show him a snapshot.

From what he already asked me over the phone, he wants to understand all those different concepts and see that they are all aligned and not in contradiction.   

One question I do have is about retirement money.  He and his wife are about 55 years old, with expenses of approximately 100K per year which he can easily cover with his IBM pension and his rental income.   He has 2MM in his 401K.  Considering RMDs, should we continue to save in his 401K or save elsewhere?  He wants to leave some money to his children and is looking at that 401K for that.   What would you advice?

Regarding estate planning and tax optimization with RMDs, 401k, etc. I would recommend a paid financial planner. As a CPA and investment advisor, I myself don't feel qualified to get too far into the weeds on some of these strategies. A tax attorney and/or certified financial planner would be my next step.

[Dicey]

Someone with this much accumulated wealth should not be a cheapo. They should pay for solid financial advice. Not saying you can't help, but they are at a level where paying for professional guidance (fee-only, please) is the most frugal option.

[Ron Scott]

I’d steer him to the Bogleheads Guide to investing, and …Guide to Retirement books. Those, a good accountant, and a good estate planning attorney.

Re: general advice, I’d recommend eliminating as many of the intermediaries between me and my money as possible. That includes investment advisors and software that accesses my financial accounts.

[mb196]

Dicey, absolutely I will steer him towards professionals.  The objective of this chat (or set of chats) is to make him familiar with all these concepts so that he can ask questions.  It's like walking into a restaurant and someone telling you about the specials.   It allows you to order what you want because the waiter has described it to you in way that you understand it.  Compare that with a person who just walked through the door and knows nothing about the menu.

[RedmondStash]

OP, if he wants to familiarize himself with the concepts, I'd probably start by pointing him at the Bogleheads wiki, and at the MMM articles. And possibly also the JL Collins stock series.

[Finances_With_Purpose]

Hey FuzzyMath, this isn't a paid appointment so it's not that stringent/formal.  It's just two cousins checking on each other.   Similar to asking a friend for dating advice.

But I do get your point about allowing PersonalCapital to aggregate everything to show him a snapshot.

From what he already asked me over the phone, he wants to understand all those different concepts and see that they are all aligned and not in contradiction.   

One question I do have is about retirement money.  He and his wife are about 55 years old, with expenses of approximately 100K per year which he can easily cover with his IBM pension and his rental income.   He has 2MM in his 401K.  Considering RMDs, should we continue to save in his 401K or save elsewhere?  He wants to leave some money to his children and is looking at that 401K for that.   What would you advice?

Regarding estate planning and tax optimization with RMDs, 401k, etc. I would recommend a paid financial planner. As a CPA and investment advisor, I myself don't feel qualified to get too far into the weeds on some of these strategies. A tax attorney and/or certified financial planner would be my next step.

Yes.  I have helped people with this, but you need a tax plan, and a CPA or the like would be the person to get.  But avoid the many who would just use him to make money for themselves.  Accountants have been the best in my book. 

His #1 goal will be to minimize taxes in retirement, so he'll have to make a plan and some educated guesses.  Tax law is complicated, but also, a little planning beats no planning, so whatever he does will likely help.