Look All Ways

Howard Rohleder

WHAT HAPPENS WHEN you’re hit by the proverbial beer truck? Will it be easy for others to pick up the pieces—the pieces of your financial life, that is?

To my knowledge, my wife isn’t checking the delivery schedule for the Anheuser-Busch brewery here in Columbus, Ohio. Still, she’s worried about the complexities of our finances. I’ve made a concerted effort since I retired to consolidate and close financial accounts, reduce our investments holdings, and streamline where it makes sense. Here are nine steps I’ve taken:

  • I had two 403(b) accounts that I rolled into a single rollover IRA at Fidelity Investments.
  • I combined two Roth IRAs into one.
  • I had three regular, taxable investment accounts that I’ve consolidated into one.
  • I’ve closed credit and charge card accounts that didn’t offer any notable advantages.
  • I drew up a letter of last instruction, including a checklist with key contacts.
  • Since I no longer have a paycheck to protect, I’ve allowed my disability and term life insurance to lapse.
  • I drained a small 457 deferred compensation account, realizing the taxable income prior to starting Social Security benefits. Social Security will boost my taxable income, and that meant my 457 would have been taxed at a steep rate if I’d waited to empty the account.
  • After I retired, I inherited a tax-deferred annuity. As with my 457 account, I opted to have the full balance paid out prior to starting Social Security.
  • I evaluated our mutual fund holdings to identify funds with overlapping objectives, and then consolidated money into the more promising fund. As part of this process, I reallocated significant sums from actively managed funds to broad market index funds.

Despite my focus on consolidation, I’ve allowed some new accounts to creep in:

  • My former employer offered to buy out my defined benefit pension. I agreed, and had the resulting lump sum rolled over into an IRA at Vanguard Group.
  • After I retired but before we became eligible for Medicare, I bought high-deductible health insurance plans for my wife and me. That allowed us to fund a health savings account.
  • To boost our interest earnings, I opened a high-yield online savings account, which is linked to our checking account at a local bank.
  • To give us another safe way to earn interest, I opened a TreasuryDirect account, which is linked to our online savings account.
  • I inherited a Roth IRA. If that occurred today, I’d have to withdraw the money within 10 years. But since it happened prior to the change in the tax law, I can stretch out the withdrawals over my life expectancy, which currently exceeds 20 years.

If I was focused solely on simplicity and consolidation, I wouldn’t have opened all these accounts. For now, I’m willing to manage them. But as I age, I envision taking further steps toward simplification:

  • Spend down and close the health savings account.
  • Consolidate my Vanguard rollover IRA with my rollover IRA at Fidelity, which is where our other investment accounts also reside.
  • Accelerate the draw down of the inherited Roth IRA by taking more than the annual required minimum distribution.
  • Further reduce our number of credit cards.
  • I’ve always done my own taxes. But I can see hiring an accountant and, in the process, allow the accountant to become familiar with us and our finances.
  • Similar to hiring an accountant, I can see hiring an investment manager to oversee our portfolio.
  • Move to a continuing care retirement community (CCRC). This will greatly reduce monthly bill paying. Most of the bills that come with homeownership are rolled into the CCRC monthly fee.

I find the beer truck scenario useful. It forces us to focus on how our life can end in an instant and what the financial fallout would be. Still, for most of us, the reality will be a slow decline. To counterbalance this decline in our interest and ability to manage our finances, we should strive for a commensurate simplification and consolidation of our financial accounts, while hopefully recognizing the wisdom of bringing in outside help, in the guise of an accountant and investment manager, at the right time.

But will we be able to identify that our cognitive function has declined to the point where we should back away? Rather than waiting until then, we might surrender control as our interest wanes. If tracking our investments and living expenses becomes a chore, maybe it’s time to get some help.

Not long ago, I mentioned the beer truck example to a group I was talking to. A woman asked, “Can’t it be a wine truck? I don’t like beer.” Yes, it can be a wine truck, or any other truck of sufficient size to do the job. Just be sure to look both ways when you cross the street—while also peering into the future.

Howard Rohleder, a former chief executive of a community hospital, retired early after more than 30 years in hospital administration. In retirement, he enjoys serving on several nonprofit boards, exploring walking paths with his wife Susan, and visiting their six grandchildren. A little-known fact: In May 1994, Howard was featured—along with five others—on the cover of Kiplinger’s Personal Finance for an article titled “Secrets of My Investment Success.” Check out his previous articles.

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