Fresh off one of the most successful boat shows in Ft. Lauderdale’s recent memory, it seemed a lot like a class reunion. I got to see many familiar faces and catch up many clients who rarely make it to South Florida.
In all my conversations, it was clear that many captains are concerned about being more in control of their financial futures. I caught up with a client whose story I hope will make yacht captains and crew think about how to plan out their finances.
Several years ago I sat down with a captain and his wife; he was 60, she was 64. She was ready to slow down working so they could travel on their own schedule, but he had just taken over a new vessel.
Once we reviewed all the statements, I identified an inheritance they had in a conservative bond fund. While that was OK for an 80-year-old, it was not good for them. They also paid taxes on this as income and did not need the income. And some of their personal investments were also not tax deferred.
These investments were under three different financial advisers and no one helped them understand what was best for them. Needless to say, once we did a financial analysis on their assets, they wanted to make several changes.
I will never forget the phone call I got from their accountant about a year later. He wanted to clarify the changes I had made to their portfolio, specifically interest expenses. Compared to prior years, they now made $20,000 more in salary and paid less in taxes.
I love phone calls like that. Most people don’t understand that picking the right investments based on how your taxes will be affected can make a huge difference.
Back to the story. Now that we had gotten their financial house in order, we needed to protect it. The captain wanted to work a couple more years as they were borderline OK to retire then. They decided to take out $100,000 in life insurance on each of them. This insurance would carry them a little farther since there was longevity in her family. This would insure that there was plenty of money for the surviving spouse.
The next step was to protect against losing their estate to long-term care (LTC) needs. Initially, they did not want to spend money on this, but I am a big believer in this asset protection. I went as far as painting a graphic picture for them as to what could happen if they didn’t get LTC insurance. The thought of having their daughter or son bathing them or changing their diaper was enough to convince them. I have heard of too many adult children coming back to sue the financial adviser for not making their parents get LTC. When this situation occurs, there is not enough money left over to take care of the surviving spouse, much less leave an inheritance. LTC often takes everything.
Things went well for a couple of years. They were happy with how their investments were doing. They had planned to work maybe one more year then retire.
I will never forget the phone call I got at 10 p.m. on a Friday night. The husband was in intensive care due to an aneurism. They got him to the hospital quickly enough to save his life, but he suffered severe brain damage.
The wife was in a panic as to how they would survive financially. I sat down with her and her grown children to go over their finances. I was able to assure them that no matter what happens, they would be fine financially and they should focus their energy on taking care of the husband and father.
The LTC policy kicked in where health insurance did not so their personal finances were protected from the LTC expense. The captain passed away about 14 months later and the life insurance policy gave the wife’s retirement an added boost.
Aside from being a yacht captain, I could not pick a more rewarding career when I can help clients like this. Some say I have a lot of wisdom for my age. I tell them wisdom is experiencing life through other people’s mistakes and, of course, a few of my own.
I try to pass that experience on to as many clients as I can. Most do not know that 40 percent of working adults between the ages of 18-65 need some form of LTC at some point in their lives. I’m 49 and have LTC coverage. There are ways to get it without costing you extra and now that more people have it, the stand-alone policy prices are more affordable than in years past.
Information in this column is not intended to be specific advice for anyone. You should use the information to help you work with a professional regarding your specific financial goals.
Capt. Mark A. Cline is a chartered senior financial planner. Contact him at +1 954-764-2929 or through www.clinefinancial.net. Comments on this column are welcome at firstname.lastname@example.org.