If you manage your own investments, even if it’s only a portion of a larger portfolio, you should have a plan in place.  All too often we see situations where a loved one passed away unexpectedly and left a messy situation for the spouse to deal with.  The following points, summarized from a Morningstar article, explain what the DIY investor should have ready.

Create a Master Directory:

create a list of all accounts and include account numbers, passwords, etc.  It is very easy for some small account to fall to the wayside and disappear.

Draft a short form Investment Policy Statement:

include these bullet points – from Morningstar:

  • How much you can safely spend each year without running out of money
  • Which accounts to tap for living expenses on an ongoing basis
  • The basics of required minimum distributions and which accounts require them
  • Which accounts to tap as a last resort or that you have earmarked for heirs
  • An outline of the three or four most important financial-planning tasks you handle each quarter and each year (Forget anything that’s in the category of “nice to do”; stick to the basics.)
Automate what you can:

Whenever possible, automate processes.  Make sure RMDs go automatically and directly to the bank account.

Simplify:

This step involves consolidation of accounts with similar registrations and reducing the number of holdings.  Accounts with 30-40 holdings can create a lot of confusion.

Tip: Include these notes in the 25 documents you need before you die.

Read More