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2006 Markets

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There has been a dramatic cooling off in both the international and commodities markets.   A lot of attention is riveted on the recent precipitous downturn in emerging market funds.  These funds have experienced a big rally in the last three years and were ripe for a correction.  The BRIC countries (Brazil, Russia, India and China) experienced net outflows in May.  However, we believe that the long-term outlook for growth in the developing countries is strong.  Their rates of inflation are down and they have dollar reserves.  This is a market sector that requires a long time frame for investing.

Commodity prices have soared since 2001.  Although per capita consumption of commodities in India and China is currently low, it is rising rapidly as these countries industrialize.  The recent sharp correction in gold, copper and other commodities is probably a healthy breather.

Continue to buy regularly as the market turns down.  Be sure that your asset allocation matches your risk tolerance.  Bonds are a good steady base in volatile stock market environments.  Cycles are just a part of investing; the real secret is steady savings in all markets; this will bring you long-term financial security.

A Quote To Bring A Smile To Your Face

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Achieving retirement readiness involves assessing both financial issues and satisfying your other retirement needs. One very important component is how to achieve personal satisfaction when you are no longer working full time. 3.  What am I retiring from?  Am I leaving more than job responsibilities?  What about my social network and activities related to work?

4.  What am I retiring to: volunteering, hobbies, another job, education?

Once you have addressed these questions, you are well on your way to retirement readiness.

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Healthy intergenerational communication about money can  stave off financial disaster for elderly parents and create peace of mind. However, adult children and their parents are often reluctant to discuss finances.

Why Adult Children Do Not Talk

Some adult children are overwhelmed with the possibility of having to support their parents. They may feel if they ignore the possibility, it could go away.  Others do not want to deal with the fact that their parents are aging.

Sometimes a child assumes the more savvy sibling or the sibling who lives closer will deal with Mom and Dad.

Why Parents Do Not Talk 

There are many reasons why parents might keep mum about their finances.  They might be embarrassed because they have not saved enough or they might feel they will need every penny. They might believe that money matters are private. They may believe that children should be successful without help from their parents. Many parents just do not like being told what to do and want to keep control of their money. Finally, some elderly parents do not  discuss money because they are afraid of finding out that their children are greedy for an inheritance.

Open Up Communication

Adult children should try to avoid clumsy approaches to their parents; this could result in defensive responses and rebuffs. 

We have had some luck in our practice with the following approach by a client to his or her parents.  “My financial planner has asked us if we might need to provide support to you later in life.  This question is very important in our financial planning process.  Would you be willing to share this information with our planner or with us?”

If you would rather broach the issue on your own, here are some suggestions.

1.  Take it slowly. 

2.  Try using articles to open up dialog.  Stress how you are looking for reassurance that they are OK.
3.  Stay away from loaded language.  Avoid the word inheritance. You might try asking what kind of legacy your parents want to leave, giving them an opportunity to discuss their values and goals.

3. DO NOT wait for a crisis before you bring up these issues.

4. Keep all your siblings in the communication loop. E-mails are a great tool for this.

5. Speak in terms of your parents’ wishes. After all, it is their money. Do not imply that you expect an inheritance; this conflicts with their need to maintain independence.

The goal is to reassure your parents that everyone is aware of their decisions and desires and that the whole family is on board. This is a challenge but worth the effort.