When Mary and Paul came to me seeking a financial plan for retirement, they had a combined total of $40,000 saved in their respective employer-sponsored retirement plans (a combination of (403(b), 457, 401(k) assets). During our discovery meeting, I learned that the couple did not have a savings account, had an average balance of $400 in their joint checking account between paychecks, and had nothing set aside for their son’s college education. While their combined, gross take-home pay is $110,000, they have nearly $170,000 in debt, between credit cards, student loans, private loans from family members, and their home mortgage. They’re one financial crisis away from trying to cash in their employer retirement account balances, penalties included.
How is it ethical for me, as a CERTIFIED FINANCIAL PLANNER™ (CFP®) professional, to talk to Mary and Paul about retirement income planning, knowing the near-term risks they face? It isn’t. Retirement planning is not part of the conversation at this time. This is where I need to act on my training as a financial coach to help Mary and Paul first lay a foundation for financial stability, before working on their longer-term goals. That means helping them develop a monthly spending plan, fund a savings account to help them avoid cashing in or borrowing from their retirement plan assets, and put a spending plan in place to pay down their debt. In time, the coaching will lead to comprehensive financial planning, as Mary and Paul improve their financial skills, accumulate savings outside of their employer retirement plans, and take other positive steps toward their goals.
Without access to financial coaching, couples like Mary and Paul miss a critical opportunity to build the skills and foundation necessary to pursue financial well-being now, and in retirement. This is why I’m so passionate about the power of financial coaching!