How Financial Planning Keeps the Future Free of the Past
After almost 40 years of telling everyone I am allergic to penicillin, I am now no longer allergic to penicillin.
And, no, I wasn’t given the drug accidentally. No anaphylactic shock. No epinephrine injections.
Here’s what happened: My primary care doctor asked me about the symptoms I had as a teenager when my doctor back then said, “No more penicillin drugs for you.”
Given my symptoms as best as I could remember them, the length of time since then, changing perceptions in the medical field about what is an allergy, and the fact that apparently one can outgrow even a drug allergy, my doctor was skeptical about my allergy.
And given the “super bugs” out there, she wanted the penicillin family of drugs back in my antibiotic arsenal should I need it. She wanted me to see an allergist for a “penicillin challenge.”
I had already maxed out my deductible, so why not?
I sat in the allergist’s office for three hours as the nurse slowly increased my exposure to penicillin, from skin pricks all the way through a full oral dose, with shots of epinephrine at the ready.
After three hours sitting on my phone in the treatment room, catching up with the news and with friends, I was declared safe to leave and no longer allergic to penicillin.
Good to know. An old but valuable tool is back in my arsenal.
Like medicine, the Financial World Changes, Reinvents, and Reverts
This ordeal made me think of what kinds of things I’m telling my clients to consider that are perhaps “oldies but goodies.”
What sorts of things might you want in your financial planning arsenal?
1. Cash.
This is probably obvious these days, as most folks are fully aware that you can actually make money from cash these days (for a good long time, there was no place to make any money and keep it accessible).
Cash – or let me say, something highly liquid and highly accessible – is ideal for reserve accounts and rainy day funds. People were starting to rely more heavily on their investment accounts when cash wasn’t making any money. It’s worth it to keep some money in cold, hard cash.
2. SBLOCs.
Security-backed lines of credit are credit lines that your investment institution offers against your investments. They are incredibly useful to have to manage cash-flow, reduce capital gains taxes, and preserve investment portfolio returns.
They can be put in place in a matter of days, typically. Generally, they are only available on non-retirement accounts, and typically, you can only access up to 60% of the available balance.
Yes, a margin call is a risk, but in most cases, you’re not going to be using the line for that long. But they typically don’t show up on a credit report, and in many cases, you do not even need to make payments on them.
3. HELOCs.
Home equity lines of credit are like SBLOCs, but they are collateralized against your real estate. They serve a similar role as an SBLOC with many of the same benefits. However, they typically take much longer to put into place, they will show up on a credit report, and minimum monthly payments are almost always required.
You may have taken out a HELOC years ago and never used it. You should call your lending institution and find out how much time is left on the revolving period (that time when you can borrow against it), what the payoff period would be on any balance at that time, and whether you can extend or renew it.
Rates on these are generally variable, so if rates are coming down, your HELOC rate is as well.
4. Annuities.
There is no other word that I can say in my office that causes clients to shut their minds. These days, I think it’s worth it to open your mind. Annuities and life insurance (and the salespeople that go along with them) have a well-earned poor reputation, and people have learned to avoid the conversation.
The best part about this story about not being allergic to penicillin: When the doctor, years ago, told me “no more penicillin drugs for you,” my mother told my sister that she should not take penicillin drugs either.
When I walked out of the allergist’s office, I texted her and said, “Hey, you’re no longer allergic to penicillin!” Of course, she’ll have to figure this out for herself, but we had a good laugh.
Annuities are like this. People have said things or done things one way for so long that they never really question why they’re doing it, much like that often-shared story about how a granddaughter hacks off the end of a roast before cooking it because grandma did it 50 years ago, simply because her pan was too small.
The same goes for annuities. There are regularly good products out there, and there are lots of good people in that business. Some have commissions and some don’t. And sometimes getting a commissionable product actually saves you money.
Annuities can provide an income stream that you could never outlive, which is highly attractive to many people. Among other products, these days it’s worth checking out registered index-linked annuities (RILAs) and qualified longevity annuity contracts (QLACs).
And, as always, you want to work with your financial professional and your tax professional about whether any product or strategy would work for you.
Your Family Benefits Too
All these oldies are goodies that promote financial well-being and support your family and your transfer of wealth over time.
Much like my sister, who may now not be allergic to penicillin, my experience gets to benefit hers.
All these tools above, when in your arsenal, can increase your wealth, potentially lower your taxes, and preserve investment returns. That benefits you and your family.
If you want to talk about any of these strategies, please reach out.
Jessica Lanning, CFP®
Email: [email protected]
Phone: (415) 354-5699
LinkedIn: linkedin.com/in/jessicalanning
YouTube Channel: Lanning Financial on YouTube
Lanning Financial Inc. is a registered investment adviser. Information presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies. Investments involve risk and unless otherwise stated, are not guaranteed. Be sure to first consult with a qualified financial adviser and/or tax professional before implementing any strategy discussed herein. Past performance is not indicative of future performance.
