Why People Put Off Their Retirement Planning – And Why That’s a Big Mistake!
by MATT BADER, FINANCIAL PLANNER, PARTNER
It’s true: Retirement planning (in Tennessee, and anywhere, for that matter) can be complicated. It’s not just about getting a good return on your investments, but the goal of comprehensive financial and retirement planning is to ultimately get you to where you want to be, allow you to live the lifestyle you want to live and accomplish the goals you want to reach. That’s not a simple task!
To maximize your financial planning potential, there are tax considerations, investment management strategies and risk management approaches, just to start. Your portfolio strategy and your monthly budget must consistently work together, while balancing a number of other variables. Making ends meet and saving can be difficult enough; planning for retirement on top of that can be downright overwhelming, and therefore, easy to put off. But that can only make your problems worse.
At TrustCore, our financial advisors specialize in helping clients with their retirement planning in Tennessee (and beyond). In our experience, we see 5 common reasons why people put off their retirement planning – and each can be a big mistake.
They’re Overwhelmed: Not Sure Where to Start for Retirement
If you feel overwhelmed when thinking about planning for retirement, you’re not alone. The financial world and your financial life are filled with moving parts, in addition to the slew of investment philosophies, each with their own pros and cons.
When you do come across investment guidance, it can be complicated, overly focused on small details and not fully applicable to your specific situation. Many people have the interest in making smart money moves and planning for retirement, but the mechanisms of the investing world make it difficult. In our experience at TrustCore, today’s investors can understand the why, but have a very difficult time grasping and making sense of the how.
This is where a financial advisor can help!
Not getting an early start unfortunately leaves many investors unprepared in their retirement planning. Some may create portfolios but without an actual strategy. According to reports, more than 60 percent of individuals in their 40s have less than $100,000 in retirement savings, and less than 30 percent of folks in their 60s have less than $50,000.
Not knowing where to start may explain why.
If you feel overwhelmed, understand that there’s no shame in acknowledging your (temporary) lack of financial knowledge. Talk to someone you trust and ask them to walk you through the foundations of retirement and investing. This can be the perfect opportunity to initiate a relationship with a financial advisor. If you’re looking for a financial advisor in the Nashville, TN area, schedule a conversation with the TrustCore team to see how we can help.
Overwhelmed? Schedule a no-obligation conversation to see how TrustCore can help.
They’re Fearful: Too Many Investment Horror Stories Gone Bad
Another common reason that keeps investors from making their retirement strategy a priority is a negative experience, either personally or through a friend or family member. Since the Great Recession, Wall Street has developed a negative reputation, and the combination of bad apples and high-profile fraud cases has created many negative headlines.
Investing in individual stocks also makes people nervous. If you don’t know what you’re doing, but invest heavily in low-quality investments without guidance, you may see the stock market as a “slot machine” or a game of chance.
Yes, there certainly are bad characters and bad investments in the world of money, but this shouldn’t deter you from forming an investment strategy of your own. In truth, for every horror story, there are numerous stories of positive financial advisory relationships and investment strategies working to help people reach their financial goals.
How to Spot a Bad Financial Advisor
Spotting a bad financial advisor is easier than you may think.
For starters, make sure your financial advisor asks questions to truly understand your financial situation and your temperament. It’s important that your budget, financial goals, retirement age, retirement lifestyle and concerns are understood by your financial advisor. Therefore, they should ask questions, and most of all, they should listen!
Next, make sure your financial advisor is clear about his or her fee structure. How much is your management fee? What are the fees (if any) for holding particular investments? Compare this number with the returns you are receiving, and your comfort level with your financial advisor.
Third, at TrustCore, we believe that effective financial advisors should make themselves available if you need help or have questions. You should know where you – and your financial situation – stands, and how to contact your financial advisor if you have a question.
If you’re currently looking for a financial advisor to help you with your retirement planning in Tennessee (or beyond), schedule a no-obligation conversation with our team and get a discussion started.
They’re Overconfident: I Can Do It On My Own
This may not be the case for all investors, but some believe they can fully manage their retirement planning on their own. You may be a skilled saver and investor, but it’s important to keep in mind that your retirement plan also makes use of financial vehicles with special rules and considerations.
For example, a retiree will need to navigate Medicare costs, decide when to receive Social Security and create an estate plan, just to name a few responsibilities, all while maintaining a fully functional portfolio to do so. If you’re a business owner, the list can be even longer! Putting everything together on your own can be extremely difficult, and not necessary, as a financial advisor can help you manage the heavy lifting of your financial plan.
It was reported that 99 percent of Americans don’t work with a financial advisor. Don’t let overconfidence prevent you from maximizing your finances.
They Procrastinate: I Have Time and Will Do It ‘Later’
It’s easy to put off retirement planning when you are far away from your retirement age. Working toward a goal that is 10, 20, or even 30 years away can make the deadline seem less important. But not making your retirement planning a priority early on can add to your financial burden over time.
As a result of compounding, starting early gives you more time to generate interest and potential investment returns. If you have to play catch up, a reasonable savings goal, like 10 percent a paycheck, for example, will need to jump significantly to be worth the same amount if you’re delayed by several years or more. It pays well, very well in fact, if you start early.
They Wear Rose-Colored Glasses: Everything Will Work Out On Its Own
Having positive expectations is usually a helpful, healthy mentality when attempting to reach your goals. However, believing that things will just “work themselves out,” from a financial standpoint, is dangerous to your retirement and finances overall. Taking action almost always beats acting spontaneously or “winging” your finances.
A retirement can span 20, 30 or even 40 years, so your investments, savings, employee-sponsored accounts, pensions, Social Security and other retirement assets, need to work together so you don’t outlive your savings.
Try to see your finances as accurately as possible, with a neutral or cautious viewpoint at times. Ask yourself – and your advisor – the tough questions. What standard of living can I maintain in retirement? What’s my true monthly budget? What’s my financial risk tolerance?
The sooner you ask these questions, the sooner they can be answered and incorporated into your retirement strategy. If you can avoid these barriers to your retirement planning, you’ll be one step closer to reaching your retirement goals.
Important Information and Disclosures
Readers are encouraged to conduct their own independent research. This information is intended to be limited in scope and provide basic educational information on presented topics. Data represented is believed to be from reliable sources.
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The information contained herein is presented with the understanding that the individual authors, presenters or organizers are not rendering financial, legal, accounting or other professional advice or opinions on specific facts or matters, and accordingly assume no liability whatsoever in connection with its use. The foregoing information should not be regarded as offering a complete analysis or opinion on any provision of local, state or federal law. You should not attempt to implement any of the planning strategies set forth in this content without first obtaining competent, professional advice from a qualified individual or firm.