Keeping Your Money Safe
By Boyd Casselman
Beverly had a wonderful marriage. For over 40 years, she and her husband were a happy couple and wonderful companions. Then, at the age of 67, George passed away unexpectedly. With the loss of her husband and best friend, Beverly’s life changed—along with all of her retirement dreams and plans.
Financially, Beverly was in good shape. Her income was sufficient for her needs and George had saved and invested well for retirement, accumulating a nest egg of nearly $300,000. Since George had always managed their finances and investments, Beverly now assumed an unfamiliar role as money manager. Wanting to protect her retirement savings, she made an appointment to meet with the financial advisor at her bank.
Can You Trust Your Advisor?
At the appointment, Beverly explained to the bank’s financial advisor that her number one goal was safety—whatever happened, she did not want to lose any of her retirement savings. Like so many other well-meaning investment advisors, the broker at the bank suggested that Beverly invest her retirement savings in a variety of quality mutual funds. Unfortunately, the bank advisor did not tell Beverly that the proposed mutual funds carried a certain amount of investment risk. He did tell Beverly that the expected rate of return on the proposed mutual funds should be 9%, which would provide her with an income of over $2,000 per month. She was thrilled and asked the man if the bank would send her a check each month for whatever interest she had earned on her account. She also reminded him that she did not want to withdraw any of her original principal. He assured her that he would take care of everything and set up her brokerage account. Unfortunately, the financial advisor did not follow her instructions and arranged for a monthly check equaling his estimated and projected interest figures to be sent automatically to Beverly. And so, checks for over $2000 began arriving to Beverly’s home each month like clockwork.
Dark Days
Soon thereafter came Beverly’s second blow. During the next three years, her two best friends also passed away, leaving her feeling completely alone (since her family support was minimal). Beverly slipped into a deep and severe depression. The following ten years were a dark time for Beverly. She limited her trips out of the house. Her home became a clutter of unopened mail. And, not recognizing the need, Beverly failed to file her income tax returns for several years. She simply stopped living the life she once knew and slipped into survival mode and a meager existence.
Beverly’s Nightmare
What happened next is mind-boggling. Upon receiving delinquent tax notices from the IRS and State Tax Commissions, Beverly ventured to her bank to withdraw the money needed to pay her back taxes, levied penalties, and interest. Finding that the advisor she had worked with previously was no longer with the bank, she met with the bank’s new advisor to review her financial status and withdraw enough money to pay her tax bill. She was horrified to find out that her nearly $300,000 had shrunk to a mere $50,000. When Beverly questioned him as to how this could have happened, the advisor informed her that the decline in her account was due to her “prearranged monthly income checks,” coupled with some serious stock market declines in 2000, 2001, and 2002. She was devastated. Her tax bill from the IRS and State Tax Commission totaled over $90,000, and because of an ill-conceived plan by a financial advisor, who did not invest her money “safely” nor follow her instructions to “only send the monthly interest without touching the original principal,” she now found herself in a financial disaster and unable to pay her tax bill. To make matters worse, the new advisor then moved her money into another unsafe investment vehicle—one that carried severe early withdrawal penalties and did not provide Beverly with the immediate liquidity she needed to pay her tax bill. Beverly once again received bad advice from a different advisor at the same bank, and the advisor received a handsome commission.
To solve her tax return problems, Beverly approached a CPA firm to help her file her back tax returns. Knowing full well her financial plight, her new-found tax accountant proceeded to prepare her many past tax returns, charging her the ludicrous fee of $1,000 per tax return. He then referred her to an attorney to help her negotiate with the IRS to reduce her tax obligation. Since Beverly was nervous to drive to the downtown location of the attorney’s office, her CPA offered to have one of their employees drive her to and from the law office. When she arrived, Beverly and her new attorney drove over to the IRS building where the lawyer demanded to see a tax professional to discuss his client’s case. The clerk informed him that he could not simply walk in and demand an audience with someone about a case, but he would have to schedule an appointment for a future date and time. Embarrassed by his obvious inexperience, the attorney simply turned to Beverly, informed her that he would not be able take her case, and delivered her back to his office where the CPA firm’s employee drove her home. A few days later, Beverly received a bill from her tax accountant for the transportation services his company had provided for her.
Finally, Sound Advice!
About a year ago, and after reading an article in a local senior publication, Beverly called Daniel Scarlet and Boyd Casselman for help (of Utah’s Leading Retirement Planning Firm, Scarlet and Casselman. They are both Chartered Financial Consultants and have a combined experience of nearly 20 years). Since then, she has received good advice and counsel, as well as a bona fide referral to an experienced tax attorney. Working with Scarlet and Casselman, in concert with her new legal counsel, Beverly is now involved in real and promising negotiations with the IRS. Neither Scarlet nor Casselman has charged her a penny for their advice and help, and Beverly is now on the road to greater peace of mind. Beverly’s only wish now is that she had met with Scarlet and Casselman years ago before her string of debacles with the bank began.
One of the greatest challenges facing seniors today—especially single seniors--is finding someone who is a trustworthy source for good advice. The typical talented and knowledgeable stock broker does a good job helping his clients save and invest during the “working” or “accumulation phase” of retirement planning – a time when the ups and downs of the market can be a positive scenario for the younger investor. However, these same market fluctuations can and probably will be devastating to the retired investor who has now moved into the “retirement” or “preservation phase” of retirement life. Consequently, the key to appropriate planning during retirement is finding an advisor who understands the difference between pre- and post-retirement investing—someone who understands how the planning “game” has totally changed—someone who works only with seniors—someone who is plugged into the strategies and products that are appropriate for the retired investor.
Most retired people have similar investment goals, the most important and common of which is keeping their money safe. Not one of Scarlet’s and Casselman’s clients have ever lost a penny in the senior-oriented products they recommend and sell—not one. In addition to safety, their senior-oriented investment strategies offer many other benefits that are especially appealing to retirees. So why do retired people continue to invest their savings into risky equities? It’s because they trust their current advisor and are not acquainted with the other investment options available to them. Seniors who currently have retirement funds in the stock market, who worry about the safety of their money, and who are tired of riding the equities rollercoaster should consider speaking with someone who can educate them about the wonderful investment options available to them today.
For more information or to attend an informative seminar about senior-appropriate investments, please contact Boyd Casselman or Daniel Scarlet at 801-544-5583 or toll-free at 1-877-544-5583.