Retirement Planning “Don’ts”

When you consider factors like health care costs, taxes, inflation and market volatility, you realize just how challenging retirement planning really is. And while many spend years learning what to do to save for retirement, it can sometimes be just as helpful to learn what to avoid, because there are plenty of opportunities for missteps along the way. A recent Kiplinger article addressed these potential pitfalls in their clever “to-don’t” retirement planning list.

1. Don’t forget to do your research on advisers.  With so many out there, finding the right adviser for the job can be challenging. Generally speaking, there are three “worlds” that financial planning advisers usually come from: Wall Street, banking and insurance. Some may have backgrounds in more than one, while others will have more limited expertise. You will need to do the necessary research to determine who is a best fit for your needs.
2. Don’t assume the person who got you to retirement can get you through it. Many wrongly assume that the advsier who helped them grow and accumulate their money can effectively help them shift into preserving it and generating income. There are so many economic challenges to face: low interest rates and bond yields, market volatility, longevity, health care costs and inflation. Many advisers simply aren’t equipped to handle retirement planning, if if they have excelled at helping you build wealth. Many strategies that help you save for retirement won’t help you get through retirement. Don’t make this assumption.
3. Don’t automatically pass on annuities.  Despite the harsh reputation annuity products have earned, in large part to misunderstandings, they are increasing in popularity. While “googling” the term annuities might produce 14 million hits, half might be singing their praises while the other half are condemning them. The truth is really dependent on the unique circumstances of the searcher. While annuities aren’t a good fit for every investor, there are enough options available that make them a viable solution for many retirees. Most critics cite lack of flexibility and high fees as the downfall of annuities,  but the insurance industry has made great strides in creating new products that are more favorable to consumers. Many retirement planning investors can benefit from placing some of their income into annuity products, it is wise to shop around and familiarize yourself with all of your options before committing to just one.
4. Don’t assume you can do it alone. Even those who have done all of the research and picked the right investments without an adviser can struggle with the transition into retirement. It is very difficult to remove all emotions when securing our financial futures, and studies have shown that over a 20-year period, DIY investors only get 50% of what they could from the market. Emotions often lead people to buy and sell at the wrong time. Financial advisers know how the market works and can remove emotions from investment decisions.
5. Don’t forget about long-term care risk. As life expectancy lengthens, consider the increase in health care costs in retirement. Many are careful to set aside dollars for medical expenses, be sure not to forget long-term care, which can include in-home nursing, an assisted living facility or a nursing home. This care is very expensive, and odds are, you’ll need it. At the very least, it’s a risk you need to factor into your retirement planning, especially if you have between $350,000 and $2 million in assets. Once your assets exceed the $2 million mark, self-insurance may make more sense.

Written by Rachel Summit

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