The Different Types of Planning

September 2, 2021

THE DIFFERENT TYPES OF PLANNING

John Brennan, Vice President and Senior Trust Officer and Franco Maniaci, Trust Investment Officer at Cape Ann Savings Bank sit down with John Maher to talk about planning. They look at the differences between financial, retirement, and estate planning and explain how each type of planning is important for people's financial wellness.

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Transcription Disclosure: Below is a transcript of the conversation between John Maher, John T. Brennan and Franco Maniaci. Please note, this is an unedited "word for word" rendition of the actual conversation and is not intended to be grammatically correct.

John Maher: Hi I'm John Maher. I'm here today with John Brennan, Vice President and Senior Trust Officer and Franco Maniaci, Trust Investment Officer at Cape Ann Savings Bank in Gloucester, Massachusetts. And today we're talking about the different types of planning. Welcome John and Franco.

John Brennan: Hi, John.

Franco Maniaci: Thanks, John.

What Is Estate Planning?

John Maher: So John, we'll start with you. We're going over the three different types of planning, which are estate planning, retirement planning and financial planning. Let's start with estate planning, what is that?

John Brennan: Estate planning is the process of anticipating and arranging for the passage of assets from yourself when you pass away or even during your life. Estate planning, what it tries to do is eliminate some of the uncertainties that can come up around estate planning, meaning who's going to get what, so nobody fights over your assets once you're gone. Your estate planning can also encompass tax questions, because estates are taxed as their own entities. Estate plans also encompass guardianship of small children or other beneficiaries who are incapable of looking after themselves. And estate planning can also touch on elder law and disability. Certain estate plans such as trusts can both insulate or be leveraged for various challenges that elders face. And then more importantly, trusts can also provide protection for an individual when they're disabled, because it allows for someone to assume control of their property and assets and leverage them for their benefit.

Who Needs Estate Planning?

John Maher: So I think or maybe the average person also might think of estate planning as being something that you really only need if you maybe have a house or even multiple houses, maybe you have millions of dollars in the bank, that it's really only for the wealthy. Can you talk to that a little bit and explain why maybe estate planning is something that everybody should consider?

John Brennan: Sure. I mean, to a certain extent, John, that's true. When somebody is 21 is a state planning their top priority? It's not and even in one of our other podcasts we talk about this is where a young person could really with some good beneficiary forms set up an estate plan. But as you age and if you're a parents and if you have assets in different states, assets of different kinds as in brokers accounts, properties, et cetera, then estate planning becomes more relevant, because there just becomes a myriad of challenges that could be faced if you were to suddenly pass away or become disabled. Our laws are arranged so that individuals have rights and they have freedoms regarding their property and courts are loathe to take those away. So if you get in a situation where there's really no one who can assume the reins for you, if you were to be disabled or challenged or dead, that can involve quite a bit of legal wrangling, which can take time and get expensive. And having something on file prevents that... It sort of works like an insurance policy.

What Is Retirement Planning?

John Maher: Right. So then the next type of planning that we wanted to talk about is retirement planning. Can you go into that a little bit and what that is and what's involved in retirement planning?

John Brennan: Sure. Retirement planning is a broad term, but retirement planning is preparing yourself for post-work life. Most of us really think of that in terms of when you start taking social security, and the classic birthday for that is 65. But retirement planning is planning for financial independence, whether it's forced upon you or whether you choose it when you stop working, either by choice or force. So either way, any kind of planning you do for that era of your life, I would call retirement planning.

Franco Maniaci: Yeah. I would just add that in retirement planning we identify any sources of income, what your expenses may be in retirement. And then we want to manage the assets as well as the risk of investing those assets. A lot of times we meet with clients and while their goals are quite attainable relative to their assets, they may be overly invested in high-risk securities. So sometimes it makes sense to dial back some of that risk in order to ensure the longevity of the assets.

John Maher: Right. So you need to look at what their age is and maybe change things up as they're getting older and getting closer to retirement age when they might need some of that money... maybe start investing in lower risk stocks and things like that. Is that right?

Franco Maniaci: Right. Yes. That's right.

What Is Financial Planning?

John Maher: So then the next thing is financial planning. How does financial planning differ from retirement planning or how is it similar?

Franco Maniaci: Retirement planning is a part of your financial plan. A financial plan is a document that looks at your current situation, economic situation, assesses your long-term goals, and then we develop a strategy to try to achieve those. In either case it really starts with thorough evaluation of your current financial state and what you have for future expectations. Plans can be quite comprehensive. They can be quite simple, but they're always highly individualized, they really are. And John, John will probably agree that every client we meet has... Everyone has their own personal goals so when we create a financial plan they're quite customized, but they reflect the person's personal situation, family situation, their risk tolerance and again what their plan is for their assets.

John Brennan: And to add on to what Franco said and really augmented is that say for instance, one of the things that if you look at our countries from a national perspective, buying a home in Massachusetts is different from buying a home in Indiana, property prices are triple. So a personal financial plan for somebody who's living in Malden or wherever in the Commonwealth is very different from somebody who's living in rural Kentucky for example.

How Do Retirement, Financial, and Estate Planning Connect?

John Maher: Right. Absolutely. So John, can you talk a little bit about how each of these different types of planning, estate planning and retirement planning, financial planning, how they work together and what it is that you can do to help people with all three of those?

John Brennan: I would say at the core of that, John, is basically overall financial health. Okay. That means that income or incoming money meets expenses. All right. If you're running in debt over the long term, it can be a very uncomfortable feeling. So overall what you want to do is you want to have the money you need to obviously meet your essentials and then hopefully a little leftover to meet the extras as well as unexpected challenges that can come via health, the surprises via new roofs, new cars, things like that.

Contact Cape Ann Savings for Help With All Your Planning Needs

John Maher: All right. That's really great information. John and Franco, thanks again for speaking with me today.

John Brennan: You got it.

Franco Maniaci: Thanks for having me. John Maher: And for more information contact Cape Ann Savings Trust & Financial Services at (978) 283-7079 or visit the website at capeannsavings.bank.

Disclosure

Investments purchased through the Cape Ann Savings Trust & Financial Services Department are not FDIC insured, not FDIC guaranteed, not bank guaranteed, and may lose principal value.