Personal Finance: Plan now to avoid later issues

Dorothy is 91 and horrified by the money gushing out of her life's savings.

At the end of 2007, she had about $207,600. Now it's down to $121,000, and she's afraid it will run out.

Dorothy says she thinks she has bad investments, but she doesn't know. She knows nothing about investing. She is a small client of a broker who deals with much wealthier clients, and she says her broker grows impatient talking with her and is not quick about returning calls.

Because she did not know where to turn, she called me, but asked me to keep her last name out of the newspaper. I have heard from many widows like Dorothy.

Dorothy's problems started about eight years ago. Her husband was dying, and Dorothy suggested he explain their finances to her. He said only: "You'll be fine."

After his death, Dorothy met her husband's broker for the first time. He liked stocks, and Dorothy did not, so she moved to another broker - a woman who took time with her and assured her that the mutual funds she had chosen were not risky.

Two years ago, however, Dorothy's broker left the firm, and Dorothy was handed off to one who had no relationship with her and did not seem to want to bother with her concerns.

Her investments are not terrible. Some might argue - as Deerfield, Ill., financial planner Sue Stevens does - that the broker was too aggressive with Dorothy's investments. Dorothy has about 20 percent of her money in stock mutual funds. Yet that is an amount Diahann Lassus, chairwoman of the National Association of Personal Financial Advisers, finds acceptable given Dorothy's strong health and the possibility she might live 10 more years.

Regardless, Dorothy's problem is bigger than whether she has the right investments, and she needs to understand whether her money has disappeared quickly because she has weak mutual funds or because she is spending too much.

That is a critical question, one that is often confusing for seniors spending down their money, Lassus said. They see the money dwindling and think it is because the investments are bad.

An adult relative might be able to do the math. If not, a certified financial planner or certified public accountant charging an hourly fee for an hour or two of advice could look over the investments, all sources of income, and spending to see whether adjustments are needed. Such help earlier in life would be even better - perhaps leaving more money intact.

So here is what to do.

Get help together. Often in a marriage, one person will do the investing. But both need to be familiar with all financial records, and - if using a financial planner or broker - both should go together, have chemistry with the professional, and understand the investments and the rationale for them. A good broker or financial planner will not be impatient with questions, and clients should ask questions until they receive answers they understand in plain English.

Get help early. Good financial planners tend to like to work with people who have at least $250,000 to invest, and there's a tendency to give the most attention to the wealthiest clients.

Picking a person who caters to people at your income level is smart. Ask planners who their typical clients are.

Realize a broker's limitations. People who are comfortable as do-it-yourselfers can turn to a broker to buy or sell investments for them. But brokers are not financial planners.

Pay attention to the exact words. Some people call themselves financial planners or financial consultants but do not have the same background as a certified financial planner or a certified public accountant with a "personal financial specialist" designation.