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It’s Never Too Late for a Second Look

By Portage County Business Council

By LouAnn Schulfer, AWMA®, AIF®
Accredited Wealth Management AdvisorSM
Accredited Investment Fiduciary®

I met with a lovely couple for the first time recently who asked me to review their current financial situation and importantly, what it would look like upon the death of the first spouse.   Like many married couples, the husband is the older of the two.  The concern is, if he is the first to pass away, a considerable amount of pension income will be lost.  We also discussed social security:  upon the passing of the first spouse, the survivor assumes the highest benefit and the lower benefit goes away.

Fortunately, when they’d selected their pension option 18 years ago, they purchased life insurance on the husband.  The death benefit seemed like a lot of money when the policy was taken out.  When we added up the loss of income to her upon his passing, however, we found that the life insurance policy proceeds would cover about 3 ½ years of lost pension and social security.  My urgent advice to them, if they did nothing else, was to double check the guarantees on the life insurance, making sure the policy does not lapse before the death benefit pays out.  Even when the life insurance pays out, will that be enough?

We had a nice conversation overviewing their lives and their assets.  They have annuities, investments, cash and a home that they had built their lives in.  The annuities had been set up years ago with income riders.  That means they are designed to produce income, yet the couple had not yet turned the income features on.  We discussed how the income amount that they are entitled to had built over the years.  The other investments were put into place for a different purpose, to grow the principal.  They had not yet decided what to do with their cash but were considering investments and asked my opinion.  The home has a mortgage.  We circled back to their priorities, which was to make sure that the wife would be OK if she were to outlive her husband by a considerable number of years.

The retired couple was surprised when my next recommendation was to pay off their mortgage.  They could use cash and any additional income that they could produce to pay off the house.  Eliminating debt does three things:  1)  it is like a guaranteed rate of return in the sense that you are guaranteed to not pay that interest to the mortgage holder anymore, 2)  it is a monthly payment you no longer are obligated to make, 3) debt is a mental and emotional ball-and-chain that when carried by the income of two can be less burdensome but when carried by one, can cause weighty stress.  It would be heartbreaking if that stress were tied to the home they had built their lives in.

It is not ideal to withdraw principal from investments that were designed to produce income, because doing so will often spoil the future income that the annuity (or other income-oriented investment) was intended to provide.  They asked about moving the annuities to new annuities.  In their case, doing so would eliminate the gain on the income rider which would also likely not work to their benefit.   Rather, if future lump sums of money were needed, it may be better to withdraw from cash or other investments.

With a few concise steps, the confidence this couple has in their future can be improved, which goes to show that it is never too late for a second look.

LouAnn Schulfer is co-owner of Schulfer & Associates, LLC Wealth Management and can be reached at (715) 343-9600 or
Securities and advisory services offered through LPL Financial, a Registered Investment Advisor.  Member FINRA/SIPC.
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for an individual.