This the final article in a four-part series on common retirement planning mistakes and how to avoid them.
Over the last three articles (part 1 here, part 2 here, part 2 here), we have visited three common misconceptions about retirement planning:
- Retirement strategies are just for the wealthy
- Putting away a consistent amount of money every month is enough, and
- All financial professionals are exactly the same
If you don’t remember the details of those articles, I urge you to find them and read them again. Email me and I’ll send you a transcript. It’s important stuff. Hopefully, though, having read the articles you now realize that having a strategy for retirement is vital for everyone no matter what their asset level or income situation is, that putting money away consistently is a good start but not a plan unto itself and that different types of financial advisors have differing standards by which they must operate. In many ways, this last fact, the differing standards, is extremely important because only fiduciaries (ie investment advisers) are required to do what is in their clients’ best interest rather than what could benefit them personally or benefit their firms.
Even with all of the education you have received in these articles, you may still be hesitant to sit down with an investment adviser because of the fourth misconception. If you are afraid that having a retirement strategy actually locks you into a pre-determined lifestyle thus preventing you from having the flexibility to change things when you want, you are actually operating out of a misconception.
It is true that not having a plan may give you the flexibility to make decisions in your retirement on the fly. These decisions might include whether you want to work at Walmart or McDonald’s and which child you are going to move in with because you cannot support yourself. That may sound harsh and there’s not inherently anything wrong with these decisions in and of themselves per se’, but these are not the type of retirement goals we hear from clients very often. In fact, it’s what most of them want to avoid. Unfortunately, however, this could be a painful reality for those with a poorly constructed or even non-existent retirement strategy.
A successful retirement strategy has two phases, accumulation and preservation/distribution, both of which are incredibly important as we discussed in the second article of this series. Even if you are at the end of the accumulation phase and have never planned, that doesn’t mean it’s too late to implement a plan. We have clients who have done so 5-10 years or more into retirement. No, that’s not the most optimal route, but still better than nothing as you still need a strategy to distribute your savings. This may include what types of strategies are needed for your income needs and what types are needed for continued growth to fight inflation and meet future income needs. A strategy that seeks tax efficiency and finds the right balance of risk protection in the remaining assets may help to improve your retirement lifestyle and possibly provide an answer for the very thing that was preventing you from seeing a professional —the fear of inflexibility.
A well thought out strategy actually provides you more options in retirement whether it’s travel, helping grandkids or simply donating to a charity you are passionate about. The key is, though, it will be your choice. It will not just be something you settle for because you don’t have a strategy. Even having a basic game plan laid out is important as you can layer-in room for the unexpected. Will you have six grandkids instead of two? Will you live to 105? One never knows such things so it’s important to talk to someone who has walked many of these unexpected paths with their clients before you.
As I wrote in the very first article, there are five primary planning areas: tax planning, healthcare/insurance planning, estate/legacy planning, investment planning and income planning. To ignore or fail to coordinate these five key areas is to take a chance with your future. Sure, there are no guarantees and you should run away from anyone who tells you there are, but it is guaranteed that if you fail to plan, you are really planning to fail.
We would love to help you make the unexpected not quite so, well, unexpected. So visit our website, give us a call or attend one of our live events. Better yet, come in for a visit. We’d love to make a new friend. After all, not having a strategy is really not a strategy at all.