The Three Biggest Mistakes in Retirement Planning
Let me share with you the three biggest mistakes in retirement planning from our perspective. So number one, it might be assuming that your Advisor is working in your best interest. So you want to consider who is it that the Advisor works for? Are they working directly for you or are they potentially working for the bank or brokerage house that they’re affiliated with? So one thing at Centennial Wealth Advisory, we’re set up as a registered investment advisory firm and we’re set up as an independent firm. So we don’t work for a company. We have the fiduciary responsibility, ultimately to work for our client’s best interest. And also, how is your Advisor paid? Is it something where if you have money in the market, you know they would make more money just as you would make more money and vice versa and they would not make as much money when the account is not performing as well? Or is it one where perhaps they’re paid a commission? And that’s not always a bad thing. It’s just one to be aware of, of how are they paid and what are those cost? And then along with that, what are the different services that are ultimately being provided as you pay those different fees? So, that leads into number two, not understanding maybe all the different facets of retirement. So my mind right away goes to the taxation on your different assets. When it comes to your income plan, where are you going to draw the money from and what makes the most sense from a tax perspective as far as where you’re going to draw income during your retirement years. A lot of times people make the mistake of pushing off all of their IRAs until the last account that they draw from. And maybe they had some good years where they had lower taxes, but they may then have created a ticking tax time bomb. So income planning, mapping out where you’re going to draw that money from and what the tax implications are of that over time. And also estate planning. Where are your assets going to go when you pass? So all those should be considered. And lastly, not structuring your portfolio properly to handle significant market downturns. So right away I think of 2008 and how the market essentially dropped in half over a period of time there. And how did your portfolio respond to that? And maybe it’s one where in today’s environment you can look back and sort of see based on the portfolio structure, how would your holdings or current investment strategies handle the 2008? And that’s one where again, it comes back to what’s your comfort level with risk and how that may change over time. So you might be getting close to retirement and you might start considering I need to transition some of these assets that have been heavier risk to maybe a little less risky. So those are things to take into consideration. So if you have questions on this, feel free to give us a call. Another great segment there on the three biggest mistakes in retirement planning. And you know one recent case that I came across in the Gaylord office, we had a perspective client come in. And they had just retired. They were from the downstate, Detroit area. They moved up to Gaylord. And they found a different Advisor to start with. And in this initial meeting that this person had with this Advisor, they had wanted to kind of pursue annuities. Well this Advisor didn’t really want them to go into that, those annuity products. Even though that met their risk tolerance. And reluctantly that couple went along with it. And that was about a year ago. Year to date they’re down almost 20% and they weren’t obviously happy with that. So that’s why they came and met with us. After hearing their situation it was a no brainer. Why wouldn’t they want to use that annuity product? And so we researched the different products that were out and found an annuity that met their needs. And boy, you could just feel the weight lifted off of their shoulders because they knew, hey this portion of their assets couldn’t go backwards. It couldn’t lose for them. And they still had some money in the market and they understood the risk associated with that. But just the peace of mind knowing that we’re looking at all those different facets of retirement planning, not just focusing on stocks, bonds and mutual funds, but looking at all the different investment vehicles that are at your disposal. Yeah, I really appreciate that example because you know I was reflecting back to my teaching days. And I had a really simply goal for my students. I said “know stuff.” Like know stuff. Like what does it take to know stuff? It takes a lot of learning. It’s takes figuring out all of the different options that you might have available as you plan to retire or maybe you’re in retirement. You know if you don’t know stuff, well give us a call.