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Are you Ready for Life’s Big Changes?

Marriage. Divorce. Remarriage. Retirement. Nothing ever stays the same. Here are three strategies to help you navigate life’s major, often scary and unexpected, turning points.

HEIDI RASMUSSEN HAD AN INKLING that she might not survive the upcoming round of layoffs at the large retail company where she'd worked for 27 years. But when the pink slip arrived—while she was attending a memorial service for her mother-in-law—it still caught her off guard. "I had totally seen myself retiring from that company one day," she recalls. "Suddenly, I knew it was the end of a career." Heidi, who had risen from an entry-level position to the executive ranks at the firm, found herself at a classic crossroads, the kind that forces you to rethink not just what you do but who you are.

After a very short—think hours—period of reflection, she made a somewhat startling decision. She'd throw herself into something completely new, joining forces in a start-up business with her husband, Reid. Today, just a few years after receiving her unexpected news, Heidi and Reid are calling their own shots as owners of a thriving health-care benefits company, living what is for them a dream combination of marriage and business partnership.

That's the thing about life's unexpected turning points—events like layoffs, divorces or illnesses in the family: While they might start off looking like the end of the world as you know it, often they can lead to surprisingly positive outcomes. Even those classic, happy turning points that we usually can control—marrying, buying a first home, starting a family, retiring—can inspire doubt: Am I making the right move? But in the best cases, both the changes we can control and those we can't become catalysts for greater fulfillment.

For more on Heidi Rasmussen's story— and how she bounced back from her lay off, plus tips on how to start your own business—check out
"So Long, Corporate World! Hello, Start-Up!"

Whether life's turning points are moments to be celebrated or endured, they bring us face-to-face with our deepest fears about change. Few people are comfortable with it.

"When life takes a sudden turn, we can find ourselves thinking, 'Is this really what the future is going to look like?' There can be a tendency to avoid, rather than address, the change at hand," notes Michael Liersch, head of Behavioral Finance at Merrill Lynch.

Below, several experts offer suggestions for how you can prepare for and respond to change—emotionally and financially—when it comes your way.

Embrace change
We frequently overlook the effects of change in our daily lives, says Harvard psychologist Ellen Langer. But change is everywhere—all around us—in things as obvious as a nickel increase in the cost of a gallon of milk at the grocery store and as subtle as the whiskers barely visible on the chin of your teenage son. "We think things are stable because we don't notice the day-to-day fluctuations," she says, "but we should be paying attention."

By being aware of your surroundings, you increase your chances of spotting impending life-altering change. Chances are, for instance, that the "sudden" divorce your friend experienced was preceded by years of subtle clues that the relationship was changing. In hindsight, too, people can generally spot at least a few warning signals of an impending layoff.

Noting these small changes as they happen is part of the process of actively noticing the world around you, says Langer, who wrote the bestseller Mindfulness 26 years ago. "When you pay close attention to daily life, you come to see that uncertainty is the rule, not the exception." Her research shows that mindfulness increases our health, our well-being and virtually all aspects of our professional lives. It can help people feel more in control of their lives, as well as better able to take action.

"Changes can be positive because they force us to act. They're an opportunity to stop, reassess, get off the treadmill and ask ourselves what's really important." — Cynthia Hutchins, Director of Financial Gerontology, Bank of America Merrill Lynch

It also helps to realize that you may not be as helpless as you feel when faced with a major turning point, says Cynthia Hutchins, director of Financial Gerontology at Bank of America Merrill Lynch. "Often, we have more control than we assume. In fact, changes can be positive because they force us to act. They're an opportunity to stop, reassess, get off the treadmill and ask ourselves what's really important and then do something about it."

Liersch illustrates this point by recalling a couple in their fifties who were dealing with nearly simultaneous diagnoses of dementia in two of their aging parents. Finding specialists and helping provide caretakers for their parents put a strain on the couple both emotionally and financially. But it also spurred them to examine their own preparations for future health care.

"Most events involve possible losses and gains. But people have a tendency to weigh potential losses more heavily than potential gains." — David Laibson, Chairman of the Economics Department, Harvard University

Focus on what you have to gain
Many of us feel an element of uncertainty as we approach life events we've planned for and eagerly anticipated—major turning points like marriage, the birth of a child or retirement to a dream location. As the big day draws closer, we're likely to find doubts crowding in. It's a phenomenon that behavioral economists refer to as "loss aversion." As David Laibson, chairman of the Economics Department at Harvard University, explains it, "Most events involve possible losses and gains. But people have a tendency to weigh potential losses more heavily than potential gains."

Loss aversion can prevent us from making decisions, even when we know intellectually which choice makes the most sense. Liersch recalls one man who held on to a second home he'd inherited from his father, even though he barely used it and knew that maintaining it was a financial drain. His concerns were that people would think less of him if he sold this link to his father's legacy, and that his family's tradition of gathering at the home would end—even though those gatherings were becoming increasingly rare. "It was easier to do nothing than to take the action he knew he should," Liersch says. "People often stay in negative situations because certainty, even if it's bad, may seem preferable to making change."

One way to overcome loss aversion, says Hutchins, is to evaluate a planned change in the context of your broader life goals. Consider your family, your home, your health, your finances, your working life, the things you'd like to do in your leisure time. On balance, will the anticipated change serve those priorities? If you feel it will, it could be easier for you to embrace the change with confidence, she says.

That process helped one client overcome his fears about his long-planned retirement move to a warmer climate, Hutchins recalls. For years he had anticipated a fresh start, new friends and year-round golf. But as retirement approached, questions filled his mind. What if he'd built up the move into an unrealistic fantasy? What if he didn't like the people in his new community? What if he missed his familiar social circle? Would relocating drain his hard-earned retirement savings?

When the man brought up the idea of canceling the move, his financial advisor walked him through all the careful planning they had done together. "He had saved diligently," says Hutchins. "He had enough to meet his income needs and had even put away money for emergencies." The man had vacationed in the area and knew he liked it. Moreover, he was planning to rent rather than buy a new home, meaning that he could always move back if he didn't want to stay.

"When they looked at the worst-case scenarios, it seemed much more manageable," Hutchins says. The man went ahead with the move and found that his new home more than lived up to his expectations.

Learn from the past
Every approaching life event can be viewed as a teachable moment—a chance to improve upon the way you respond to change. Liersch recommends that for each such experience, you write down one thing you did well and one thing you learned. For example, if you lost a job unexpectedly, maybe you were proud of the way you jumped in to look for a new one—but also learned that you accepted a new job too quickly. As you're thinking about your next career move, you might remind yourself that it pays to carefully consider all your options. You can then apply this information to the turning point you're currently facing. "What you're doing," he says, "is documenting who you'd like to be in those transitional moments." These lessons can apply to any kind of change, not just life's major turning points.

Once you've done that, seek out trusted friends and family members—especially those who have gone through a similar situation—who can help you make informed decisions. This list of people might include your financial advisor, says Hutchins. "If you have someone you trust who understands your dreams and what you're trying to accomplish, that goes a long way toward setting you on the right path."

There are, of course, other practical ways to prepare for any of life's turning points. For starters, Hutchins points out, it's always a good idea to make sure your will, estate plans and other legal documents are updated and in one place. Also, because you never know the financial impact a major life event may have on you, "try to set aside an emergency fund worth at least six months of your current income," she says.

Heidi and Reid Rasmussen were doubly fortunate. Not only did Heidi's layoff help them recognize the built-in support system they had in each other, but their Merrill Lynch Financial Advisor, Kathy Bickhaus, also kept them grounded by helping them see their financial situation in an objective way.

With their advisor's assurance that the financial strategies they'd worked on together over the years could support them as they built their business, they took the leap into the unknown and never looked back. The experience had another positive effect on their lives: It showed them that turning points can point you in a more fulfilling direction, if you let them. As Heidi puts it, "I have no idea what the future's going to be. And that's super exciting."

3 Questions to Ask Your Advisor

  1. How will the big change I'm anticipating affect my overall financial goals?
  2. Are all my documents in one place and easily accessible in case they're needed?
  3. What emergency plans should I have in place if unforeseen events disrupt my income?

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Case studies are intended to illustrate brokerage and banking products and services available at Merrill Lynch and Bank of America. You should not consider these as an endorsement of Merrill Lynch as an investment advisor or as a testimonial about a client's experiences with us as an investment advisor. Case studies do not necessarily represent the experiences of other clients, nor do they indicate future performance. Investment results may vary. The investment strategies discussed are not appropriate for every investor and should be considered given a person's investment objectives, financial situation, time horizon, liquidity requirements and particular needs. Clients should review with their Merrill Lynch financial advisor the terms, conditions and risks involved with specific products and services.

Bank of America Merrill Lynch is a marketing name for the Retirement & Philanthropic Services businesses of Bank of America Corporation. 


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