The Many Financial Mistakes You’re Probably Making When Planning for Retirement

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With my background in retirement planning and finance, I have written and published a book on Amazon under the title: The Retirement Puzzle; Fitting the pieces together for financial well-being. Among the topics in the book is how people — in or near retirement — are entirely unaware of the many mistakes they have made, are making, or plan to make regarding the financial security of their retirement. In this article, I will begin to walk you through some critical issues that you must not ignore.

Mistake #1: Failing to properly confront nine enemies of retirement

You have several enemies that can shatter your retirement dreams. If you are in or near retirement, some of your enemies include:

1. A shorter investment time horizon
2. Investment risk
3. The Wall Street propaganda machine
4. Longevity risk
5. Inflation
6. Taxes
7. Inadequate guaranteed lifetime income
8. Health Care and Long-term care expenses
9. Procrastination — not doing anything until it’s too late to act

My book “The Retirement Puzzle” addresses all these issues in detail, and I will briefly address each one over the course of four articles on Medium.

Mistake #2: Listening to and trusting the wrong people

I’m talking about taking advice about your retirement from people who are unqualified to give this critical advice. You must be careful about who you place your trust in. You need to be cautious of who you let into your head.

For example, everyone seems to have a friend or family member who is a self-proclaimed financial genius. Your friend may have done a great job with their retirement, but that doesn’t mean they know the correct answers to your retirement problems and questions.

Another bad decision is to rely on the talking heads from Wall Street who fill the airwaves of T.V. and on the internet. In the Trump era of deception, both sources are notoriously spotty on truth and accuracy. A recent study to spotlight this issue found that 15% of those surveyed felt better consulting the Internet and T.V. for advice rather than asking the proper experts.

You don’t need to be wealthy to sit with a financial planner or retirement specialist. And you can’t put a value on a qualified professional who can smartly integrate all of your assets, income, and expenses into a cohesive retirement plan. That’s why I highly recommend that you turn to a qualified Financial Professional.

But what if you think you already have a financial professional as your trusted advisor? Well, then I would ask: Are you sure that person is qualified to address all the critical retirement issues?

Selecting the wrong advisor (or having no advisor) can mean the difference between financial security and financial ruin. Be careful if your advisor is not on the ball, is poorly qualified, or has more to gain than you do.

To find the great ones, you need to know what to ask before you entrust that advisor with your retirement. In an upcoming article on Medium, I will present twelve significant concerns and some revealing questions to ask a financial professional before you hire that person as an advisor.

Mistake #3: Not understanding how your money is invested

Diversify and reallocate your portfolio

One of the tenets of financial planning is that diversification is king when it comes to your portfolio. Exposure to different types of assets can reduce your overall investment risk — and provide various income streams and returns while also setting you up for growth if you want it.

So, learn and understand the investment choices that offer potential gain but also contain the risk that you could lose part or all of your principle. These investments include stocks, mutual funds, variable annuities, commodities, real estate, and even certain types of bonds and bond funds.

Then learn and understand the investment choices that offer safety and guarantees, including saving accounts, money market accounts, Treasuries, C.D.s, fixed annuities, and fixed index annuities.

Know your risk tolerance

It’s easy to have a high-risk tolerance when you’re employed and getting a steady paycheck. Time is on your side. You can ride out market volatility. You can even benefit from market volatility because you buy lower-priced assets and benefit when they go up in value.

The opposite, however, happens in retirement — and it can be devastating. Regardless of what the market is doing, if you leave your savings heavily invested in the stock market, you may have to withdraw some of that money to provide income. If that happens during an extended market downturn, it could seriously damage your ability to extract revenue from your portfolio for the duration of your retirement.

The best way to deal with this is to reassess your risk tolerance as you enter retirement. Each asset will have benefits and drawbacks that will affect your income streams during retirement.

It’s essential to know your risk tolerance. That is, assessing how comfortable you would be with market downturns, unexpected healthcare costs, or any other expense that might come up in the future. It’s prudent to realize that you must be more careful in retirement because your savings must last for an unknown number of years.

If you’re a more conservative investor, it probably wouldn’t be wise to dominate your portfolio with stocks that could suffer badly during market volatility — such as tech stocks. On the flip side, if you’re a more aggressive investor, then more allocation toward stocks would make sense so that you have a chance at a more significant payday.

As you age, make sure your investments align with your comfort level, amount of allocation, and timing. Don’t go into anything that scares you so much that you lose sleep and decide to sell out of the market at the wrong time. Bad market timing with your investments can be the worst mistake you could ever make.

My rule of thumb is to subtract your age from 100 and use that as a benchmark for how much to keep safe and how much to position in risk-based investments. For example, if you’re 65, that would mean 35% (100 minus 65) of your assets are in the stock market. That provides risk/reward exposure with some of your assets but won’t devastate your retirement distribution plan if the financial market experiences an extended downturn.

Mistake #4: Being duped by the Wall Street propaganda machine

Do you believe Wall Street will take good care of your money? Does anyone think, “Wall Street, they’ve got my back — they have my best interests at heart”?

Wall Street seems to always win in good times and in bad. In the process, they convince us to separate ourselves from our hard-earned money — encouraging us to take it out of the business we know and put it into investments we don’t.

Meanwhile, Wall Street receives the fees we pay it — whether the market goes up or down. And the commissions they receive are creating hits to our investment accounts as well.

There are many issues with the Wall Street propaganda machine that can significantly impact your retirement in a negative way. Here are ten of those issues:

1. The long history of Wall Street’s misdeeds
2. How emotions, not fundamentals, often move the financial markets
3. The impact on the financial markets from technical trading
4. Wall Street’s 22-year roller coaster ride with your money
5. Financial market volatility and its impact on your retirement
6. Wall Street says you’re investing when you’re actually speculating
7. Wall Street’s view of what’s risky versus what’s safe
8. Alternatives for your money that Wall Street doesn’t mention to you
9. Why we flock to Wall Street investments — The Herd Mentality
10. Wall Street’s stranglehold on Employer-Sponsored Retirement Plans

My book “The Retirement Puzzle” addresses these ten issues in detail, and I will briefly address each in upcoming articles on Medium.

Next Up: More Financial Mistakes You’re Probably Making When Planning for Retirement. Stay Tuned

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If this article was of interest to you, then you might like my series of six self-published books designed to present ‘some of what I know so far’ on a wide range of interesting subjects, including human evolution, spirituality, politics, religion, finance, nature, science, ancient anomalies, the cosmos and so much more.

This article is compiled from chapter 9 of my first book in the series titled: “So, here’s some of what I know so far regarding Brain, Body, Budget, Being.”

You can find my books on Amazon by searching “books by Stephen Geist.”

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Also, if you enjoyed this article, please consider joining Medium and listing me as one of your favorite writers (so you will have access to all my work as well as the work of thousands of other excellent writers).