Money Missteps to Avoid in Retirement

frank_randallFrank Randall, AIF®, Regional Director, Retirement Plan Services

 “Good decisions come from experience,

and experience comes from bad decisions.”

By the time you feel ready enough to retire, you have likely had your fair share of blunders along the way. Now seasoned with experience, the realization that mistakes are inevitable, and having the ability to recover can make the difference between success and failure.

Here are some of the most common missteps in retirement:

  • Focusing on the wrong factors. Many people decide to retire when they reach a certain age, job fluctuations or business cycles. While these factors may have influence, your emotional readiness, savings, debt, future budget and income plan to sustain your desired lifestyle must also be considered.
  • Overlooking the importance of your Social Security election. Some experts say the difference between a good Social Security benefit election and a poor one could equate to more than $100,000 in income.[1] The biggest decision retirees face concerning Social Security is when to start collecting. Just because you can start receiving benefits at age 62 doesn’t necessarily mean you should. If you delay your election until age 70, you may receive 32% more in payments so it may make sense to delay receipt of benefits as long as you can meet your expense obligations.
  • Underestimating the cost of retirement. Most people estimate retirement expenses to be around 85% of after-tax working income. In reality, however, many retirees experience lifestyle sticker-shock as the realities of retirement. One common problem retirees have when budgeting for retirement expenses is that they overlook items like inflation, future taxes, health care, home and car maintenance, and the financial dependence of their loved ones (e.g., sandwich generation costs).
  • Retiring with too much debt. A simple rule of thumb is to pay off as much debt as possible during your earning years. Otherwise, debt repayment will cause a strain on your retirement savings.
  • Failing to come up with an income strategy. Saving is only part of the retirement planning process. You also have to think about spending and decide where and in what order to tap investments. When thinking about cash flow needs throughout retirement, one must also consider how retirement funds can continue to generate growth. An effective way to solve retirement income needs is to have a liquid cash reserve account tied to your portfolio.  The reserve is tapped to deliver a “paycheck” to help you meet predictable expenses. The cash withdrawn is replenished by investments in dividend- and income-producing securities.
  • Dialing too far back on investment risk. As many workers near retirement, they become fixated on cash needs, thus dialing back risk and becoming more conservative in their investments. Unfortunately, the returns generated by ultra-conservative investments may not keep pace with inflation and future tax liabilities. Because retirement can last upwards of 20 years, retirees must set both preservation and growth investment objectives.
  • Not validating the assumptions made during the retirement planning process. You make certain assumptions about investment performance, expenses, and retirement age when you initially create your projected retirement plan. At least annually, you should reconcile your projections against reality. Are you spending more and earning less than anticipated? If so, you may have to make changes, either to your plan or your lifestyle.
  • Providing financial support to adult children. Over the last decade, the number of adult children who live with their parents has risen 15% to a historic high of 36%. Providing financial support to anyone, particularly an adult child, is stressful. It could strain retirement savings and ultimately could create long-term financial dependency in your child.
  • Going it alone. While your financial mission in retirement may seem straightforward—don’t outlive your money—the decisions you make along the way can be complicated. An experienced financial advisor can give you piece of mind for many reasons. An advisor can help you manage your retirement portfolio to meet your preservation and growth objectives, help you establish an income strategy that is matched to your spending needs, and track your spending versus assumptions. If a crisis arises, a trusted financial advisor will already know your financial history and can help make decisions that are in your best interests. Similarly, it is extremely helpful to have a trusted advisor relationship solidified in the event your cognitive abilities decline and you need help with decisions.

[1] http://www.cbsnews.com/news/a-great-new-tool-for-deciding-when-to-take-social-security/

The views expressed are those of Brinker Capital and are not intended as investment advice or recommendation. For informational purposes only. Holdings are subject to change. Brinker Capital, Inc., a Registered Investment Advisor.

Nix the Mixed Emotions About Retirement

cook_headshotPaul Cook, AIF®, Vice President and Regional Director, Retirement Plan Services

The future holds many uncertainties, leaving us to often have mixed feelings when thinking about retirement. Even if you feel more than ready, on an emotional level, to move to the next phase of your life, you may have some uncertainty about whether you will be able to maintain the lifestyle you wish.

Last week in Roddy Marino’s Eight Signs You Are Ready to Retire, he shared some useful statistics from an Ameriprise Financial survey that address this notion of mixed emotion. Close to 50% of respondents felt they were ready to retire, but admitted that there was still some concern. 21% admitted more bluntly that they felt uncertain or not ready at all. Suffice it to say that a large portion, about 63%, of newly retired boomers said they felt stressed about retirement leading up to the decision.[1]

We’ve talked before about how your physical health can impact your retirement, but let’s take another approach and look at six financial certainties that may help to lower your stress and avoid some of the mixed emotions about retirement.

  1. You will need cash. Throughout your retirement journey, you will need quick access to your money. Typically, you will need enough liquidity to cover two years’ worth of anticipated living expenses.
  1. The quicker you spend, the shorter it will last. Your predictable expenses may total up to, for example, $2,000 a month. But how many years could you go on spending $24,000? The impact of spending on your portfolio becomes clear once you determine a spend-rate. For example, if you had $500,000 in a retirement savings account and withdrew $2,000 a month, the portfolio would last 20-29 years. A $500 reduction in spending, however, could result in 9-15 more years of longevity for the portfolio.
  1. The money not needed to cover expenses must be invested…wisely. While you can’t control the markets, you should feel confident that your investments are managed with skill and integrity. Choose an investment advisor with whom you have a trust and have a high level of confidence.
  1. Eventually, you will run out of cash and need more. One of the tricky parts of managing your money in retirement involves knowing how to create an income stream from your portfolio. You need to figure out which assets to take distributions from, and when. To ensure that each of your assets performs optimally, you must conduct a careful technical analysis and evaluate moving market trends. If you are like most retirees, you could benefit from having an expert perform this service for you so that you can have confidence that you are benefiting from all possible market and tax advantages.
  1. You’ll make more confident decisions if you know how your investment performance and expenses measure against your goals. Throughout your retirement journey, it is helpful to know where you stand against your goals. If your overall goal is to outlive your savings, then you should have a system in place that helps you contextualize your spending and its relative impact on long-term goals.
  1. Markets are volatile. When markets fluctuate, many investors feel like all semblance of control over their financial future is lost. Having a well-diversified portfolio may help to smooth the ride and reduce some of the emotions of investing.

If you approach retirement by developing an income solution that addresses each of these known facts, you can feel as if you are on more solid ground to enjoy your retirement.

The views expressed are those of Brinker Capital and are not intended as investment advice or recommendation. For informational purposes only. Holdings are subject to change. Brinker Capital, Inc., a Registered Investment Advisor.


[1] Ameriprise Study: First Wave of Baby Boomers Say Health and Emotional Preparation are Keys to a Successful Retirement, February 3, 2015

Retire Healthy, Retire Happy

Sue BerginSue Bergin, President, Bergin Communications

Most retirement planning focuses on the nest egg. It involves making sure you have enough saved to live your retirement years the way in which you have dreamed. The laser-like focus on the bottom line, however, could prevent you from paying attention to the single most important predictor of retirement satisfaction. Your health.

According to MassMutual’s Health, Wealth and Happiness in Retirement study, health is typically more important than wealth when it comes to determining the well-being of American’s retirees. Retirees in better health are more likely to feel financially secure, enjoy retirement, feel fulfilled, and are less likely to experience negative emotions.

The study shows that the loss of health is more costly to a retiree’s overall experience than the loss of wealth. Consider these stats:

  • 76% of those with $250,000 or more in assets report having a positive retirement experience, compared to 68% of those with less than half the assets.
  • 80% of those in better health report having a positive experience in retirement, compared to only 59% of those who are in poorer health, regardless of their balance sheet.
  • 73% of retirees in better health report feelings of financial security compared to 51% of retirees in poorer health.
  • Retirees in poorer health were twice as likely to feel anxious about their finances and lack a sense of purpose, and three times more likely to feel lonely.

The bottom line…focus on your health!

To make the most of your retirement, your planning and preparation should focus as much on your health as it does your wealth.

AARP provides these helpful tips to incorporate into your retirement readiness checklist.

  • Seek preventative medical care by scheduling checkups and routine examinations, from annual physicals to teeth cleanings.
  • Work with your health care providers on a plan to improve or maintain your health.
  • Commit (or recommit) to eating healthy, exercising and adequate sleep.
  • Commit to staying mentally sharp with brain games, puzzles and books.
  • Stay in close contact with family and friends. Typically, your friends and family will be the first to notice if your health starts to slip.

For more tips from AARP, see 10 Steps to Get You Ready for Retirement.

The views expressed are those of Brinker Capital and are not intended as investment advice or recommendation. For informational purposes only. Holdings are subject to change. Brinker Capital, Inc., a Registered Investment Advisor.