17
Morningstar FundInvestor
May 2
014
about the basic questions you would ask if you took
over someone’s financial plan without much (or any)
advance preparation. Headings might include:
p
How much you can safely spend each year without
running out of money.
p
Which accounts to tap for living expenses on an
ongoing basis.
p
The basics of required minimum distributions and
which accounts require them.
p
Which accounts to tap as a last resort or that you
have earmarked for heirs.
p
An outline of the three or four most important finan-
cial-planning tasks you handle each quarter and
each year. (Forget anything that’s in the category
of “nice to do”; stick to the basics.)
Automate What You Can
To help ensure none of your usual financial-planning
to-dos fall by the wayside, consider automating the
most important ones. For example, you can make sure
that distributions from your income-producing securi-
ties get spilled directly into your bank account,
thereby providing cash for near-term living expenses.
You can also automate your required minimum distri-
butions from your
IRA
s and
401
(k)s, and use the auto-
payment feature on your online banking platform to
ensure that you don’t miss your most important bills,
such as your health and auto insurance. If you pay
quarterly estimated taxes, and most retirees do, you
can use the Electronic Federal Tax Payment System
to make those payments electronically.
Begin Building Your Team
If your partner has no interest in or aptitude for finan-
cial matters, it’s unrealistic to expect he will know
how to identify an appropriate financial advisor. The
financial-advisory landscape is a jumble of designa-
tions and business models and can be off-putting even
to investment-savvy individuals. As a result, people
without a lot of financial knowledge often choose advi-
sors based on their interpersonal skills rather than
making an objective assessment of the individual’s
financial acumen and whether the business model
is a good fit. Even if your plan is to not hire an advisor
right away, the onus is on you to vet some advisors
for your spouse to ensure their investment approach
is palatable, their fee structure is fair, and that you
can meet the minimum initial investment amount. I’m
a believer in asking for referrals from related profes-
sionals—such as your accountant or your estate-plan-
ning attorney—rather than relying on the friends
and family network for recommendations.
Simplify
Do all of the above steps make your head hurt? If so,
the best way to reduce your succession-planning
workload—and the potential workload of your spouse
—is to streamline your portfolio. You can reduce
the number of moving parts by collapsing multiple
accounts of a given type into a single account at
one firm—for example, merge multiple joint taxable
accounts into a single one and purge your portfolio
of so-called onesies, which are small pools of assets
held here and there. True, there’s no single firm
that’s the absolute best at every investment type, but
a handful of firms (such as
Vanguard
and
T. Rowe
Price Group
TROW
) field solid options in all of the
major asset classes. In addition to streamlining the
number of accounts you hold, it’s also wise to switch
to lower-maintenance options, such as index funds,
and away from higher-maintenance options, such indi-
vidual stocks and bonds, as you get further into
retirement. In so doing, you’ll reduce your own port-
folio-oversight obligations and simplify life for
your spouse if he eventually inherits those duties.
œ
Contact Christine Benz at
Related Links
What Your Spouse Must Know About Investing:
How to Widow- (Or Widower-) Proof Your Portfolio:
Know the Rules on Inherited IRAs:
Essential Documents for Retirees:
A Checklist for Surviving Spouses:
Master Directory:
