USAA Financial Planning – Part 1

This entry is only about finance and not environment.

Review is based on services received from January-July 2007.

History:
I have a good relationship with USAA through insurances and investments, and had used their free-for-members financial advising service for general stuff, but we wanted more specific advice. The glaring downside is that we don't meet in person: just phone and e-mail. The good side is that it is $200 for the planning we need at our stage of life. (They have more expensive plans for people nearing retirement and in retirement.) While we were considering paying more for someone locally (who would be available more) it was just too overwhelming to know whom to trust, and we wanted to get advice on re-routing some of our money ASAP with the new year here.

All advice we received, of course, was tailored to our situation and goals, so I don't mean to suggest that what we were told applies to anyone else in any way. Rather, I wanted to share how the procedure works (and personal examples help show that).

Getting Started:
We signed up and filled out their detailed form online where you explain your goals, concerns, a bit about yourself, as well as a very detailed form. They said would take several hours, so I felt really good when it took us less than an hour, because we already track the information they wanted to know (budget, goals, value of cars and possessions, amount in all accounts, etc.). If you have read Smart Couples Finish Rich, the info is very similar to Bach's net worth and budget forms. While I was quick to fill out the form, there were some things in our budget that didn't fit crisply in their form, so I did have to call the advice line two times.

Moving Forward:
After completing the form, we set up a phone appointment with (who we thought was) our advisor for the next week. We found out through a confirmation phone call that we were actually talking with a financial consultant, not the financial planner (FP) himself. I was pretty perturbed by this misunderstanding, because I was anxious to get started with the FP, ASAP.

In the conversation with the consultant, we cleaned up the form we had submitted and asked questions to further solve those "not-crisp" areas. We were asked to send info on all available retirement funds from our respective companies so they could match our risk preference with the options and make recommendations.

During the consultant call we also set up a "meet-and-greet" phone call time with the FP and the "big meeting". Personally, I am not big on meet-and-greets, but some people really like that extra personal touch. My husband did that one on his own and chatted with our FP for about 5 minutes when the call happened.

For the big meeting, I was disappointed that there was a month-ish wait to get an evening appointment for the big meeting (plenty of day times, though), but at least we were moving in the right direction.

Within a few days of the clean-up call, the FP and consultant prepared a preliminary 30+ page document for us based on the info we had previously provided. It addressed current finances/net worth, e-fund, SL repayment plan (our only debt), asset allocation, retirement, goals, and disability and life insurances. (We declined advising on future education, but that is included in the service.)

We were asked to review the entire document before the big meeting. I thought that the document seemed generic/formulaic mainly because the life insurance section was really outrageous considering that we don't have kids or a mortgage, and I feared that the big meeting would just be line-by-line talking about the document, which I didn't really get. (Note: at this point, this document was s only provided online, so we had to print it ourselves if for a hard copy.)

Teleconference 1:
Because of traffic and a power outage, hubby (D.) and I were both stuck on the road, in our respective cars, when the meeting time came about. I called USAA in a panic since we weren't at home to take the call and they got us set up with 3-way calling. (Actually FP asked if we wanted to reschedule, but after that month wait there was no way!)

Instead of going straight to the document, D. and I got to bring up our issues first (yay!). Our big things questions were about over-paying SL vs. investing, doing enough for retirement, saving for a house, and keeping kids on the horizon (passively). FP talked through those issues with us thoroughly before getting back to the more standard stuff in the document (by which time both D. and I had arrived at home).

Since many people sing praises about the value of maxing out their 401Ks, I was concerned about not saving enough for retirement. After a little bit of budget shifting—mostly from no longer overpaying the SL—we were able to get to 15%, pre-match. (15% is the Smart Couples % of success. FP though we were fine with 10%). Though we are still nowhere near the 401K maximum, he encouraged us to focus on our short-term goal of saving for a house rather than adding more to retirement since we are ahead for reaching the target amount he helped us come to.

(Personal Note: His point was that for our goals, we will be able to retire 18 years earlier than we are currently planning at the standard of living (SOL) we determined with him, or we can retire at age 60 with a much higher SOL we are planning for. We in no way take being on track as a license to blow money or to stop living beneath our means. Rather, we can improve our SOL now, by owning a house sooner rather than later, so that the mortgage can be paid by retirement, and thus we can be in our optimal situation in retirement.)

Knowing our estimated "target number" for retirement has been vexing me, and the FP helped me comprehend this better. Trying to figure it out on my own was frustrating and hopeless. Now, it feels great to know that we are on track for our "standard of life" goals in retirement. When we have kids we will have to readjust our monthly contributions for costs and education planning, so I am glad we are ahead for retirement at this stage in our lives.

FP prefaced many things by asking what our goals, values, and current methods are and worked the discussion around our answers. In looking for an advisor, I was concerned about being values-compatible. The FP did a great job with this; he didn't project values other than our own. He did not overly push USAA products at all. He mentioned USAA's Money Market account since we don't have one, but he encouraged us with our current banks (like ING).

Going through the document, he gave an overview of our strengths and weaknesses, and gave us some steps to take before our next meeting (sign wills, find our SS statements, etc.). He also recommended the best retirement funds for our risk profile both within USAA and elsewhere (like my 401k). At the end, the FP did a review of the action items we had come up with (we had six) and allowed more time for questions.

One of these questions was if we are on track for buying a house. I though we might get blown off, since D. was asking very specific questions, but FP had some information on the local real-estate climate here and was able to give us projections on costs, mortgage rates and the best kind for us, timeline, etc.

Next in the process, we will do our next steps, review the revised document, and set up another appointment for a month down the road.

The conversation took a little over an hour.

Within a few minutes of the call's end we received a link to a summary of the next steps. Within a few days of the call, our revised document was posted on the website. It had been updated based on our conversation. (I was happy to see that even the life insurance amount had been changed to aptly meet our lifestyle.)