Many retirees enjoy the rumble of an RV rolling toward the next national park or a cruise with unlimited umbrella drinks. For most of us, retirement falls somewhere between the vision of an endless vacation and a bad dream of whether we'll have enough wealth and the good health to enjoy it.
As a financial adviser with 40 years of experience, I'll restrict my advice to the "enough wealth" end of things. (For the "good health" part, consult your doctor, but I do recommend less junk food, more vegetables and a walk around the neighborhood.)
In our book, Have You Ever Been Bitten by an Elephant: The Definitive Guide for Retiring Well, my son Drew and I discuss the do's and don'ts of achieving the retirement you want and deserve. To help you get started down the right path, here is a quick look at money mistakes to avoid:
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1. Living without a defined-income plan.
One of the biggest mistakes people make is not having a plan. It's never too early to start saving for retirement, but if you are in your 50s and don't have a nest egg, there is still time. There are strategies and new financial products that can benefit your bottom line. This is all about setting goals, defining your risk tolerances, sticking with the plan and possibly sacrificing the 62-inch TV and the $5 coffee-shop latte.
2. Taking too much risk.
When you are young, you can typically afford to take risks with your investments because time is on your side. This is the accumulation phase during which you build your nest egg. After accumulation, the next phases are preservation and distribution, and this is generally when your financial strategy should become more conservative.
Consider adopting the "Rule of 100." It states that you should subtract your age from 100 to determine the approximate percentage of your investible assets you should have at risk. It sounds simple, but this allows a portion of your investments to continue to grow while the remainder, the conservative allocation, is protected from market volatility. Whatever you do, don't consider a Las Vegas "all-in" scenario as you edge closer to retirement—you'll probably end up on the losing end of that bet.
3. Your investments don't match your needs.
There is no such thing as a one-size-fits-all strategy for investments. For a strategy to be viable, it needs to be tailor-made for your retirement goals. Do your homework, seek the advice of a fiduciary or registered financial adviser and seek a second opinion just as you would with a health diagnosis. A get-rich-quick scheme may damage your financial viability. You and the decisions you make are ultimately responsible for your financial health, but there is nothing wrong with seeking reasoned input from professionals.
4. Not having a long-term care plan.
No one wants to talk about illness and the need for long-term care, but it's better to discuss and plan for it while you are able-bodied rather than when the situation may be out of your control. Many options exist, from assisted living to a nursing home or a rehabilitation center. Having the government pick up the tab for your health issues is not a strategy. The expense of long-term care should be factored into your retirement plan.
5. Being unaware of fees.
Let's face it, fees aren't going to go away, but you certainly need to be aware and keep track of where your money is going. From broker commissions to fees in mutual funds, you need to keep tabs on how much you are spending. It may mean renegotiating with your adviser or finding a new one. It may mean buying a mutual fund with a smaller internal expense ratio. Being oblivious to how much you are paying for the privilege to earn (or possibly not earn) on an investment isn't acceptable. Take a close look at the fine print before hitting "I agree" to terms.
6. Talking with neighbors about your finances.
What did our parents always say? "Loose lips sink ships." It also applies to sharing over the backyard fence what is in your bank and retirement accounts. The neighbors' advice may be well-intentioned, but it's likely misguided or possibly self-serving. Swap barbecue tips and stories about your kids—but never talk money.
David Blackston is a registered financial consultant, Investment Adviser Representative and insurance professional who founded the Blackston Financial Advisory Group. He lives in Florida.
Kim MacCormack contributed to this article.
Investment Adviser Representative of, and investment advisory services offered through, Royal Fund Management, LLC an SEC Registered Investment Adviser. The firm only transacts business in states where it is properly registered, or is excluded or exempted from registration requirements. SEC registration does not constitute an endorsement of the firm by the Commission nor does it indicate that the advisor has attained a particular level of skill or ability.
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