The media, financial advisers, and baby boomers across the country are all talking about retirement. The definition of retirement is changing in ways that everyone should notice.
- Retirees need to rely on their personal savings as a key component of cash flow in retirement, rather than company pensions.
- Many retirees need advice on how to make sure their savings lasts long enough, and opportunistic financial advisers are ready to help.
I have been working in the financial services industry for nearly ten years, and have spent a lot of time with clients and family members transitioning into retirement. It is important to realize that at the time of retirement, your financial situation is pretty much fixed. To immediately improve your situation, you need to spend less or earn more. To protect your situation, and hopefully improve it over time, you need to be proactive.
There are many trustworthy financial advisers, and a lot of scam artists. Even among the trustworthy advisers, you can find people who lack knowledge of retirement planning. If you are searching for help, Suze Orman offers great tips for choosing an adviser. Walter Updegrave has an excellent column in Money magazine and an online Q&A covering personal finance. Retirees need someone on their side.
Set a Spending Limit
By definition, retirement lasts the rest of your life and financial decisions can have a significant impact on your quality of life. No one wants to give up their decision-making independence, and most people don’t want to become dependent.
One of the best practices to help retirees maintain their independence is to set a spending limit. For example, I have a former client who is retired. She came to me after an adviser sold her expensive mutual funds, annuities with high surrender charges, and a refinanced adjustable rate mortgage. Three strikes with a long-lasting impact on her situation.
As we worked together to create a retirement plan, we included her children in the discussion. To balance her financial independence with the need to make decisions outside her expertise, the family agreed to discuss any decision over $1,000. A few concepts that reinforce the spending limit include:
- If someone offers you a deal that is too good to be true, it is.
- If someone tries to force you into a decision without getting a second opinion, it is a bad choice.
- If the great deal expires when you leave the store/hang up the phone, it is not a great deal.
It is much easier to wait one day to make a large commitment than it is to reverse a completed transaction. Retirees: please don’t be afraid to ask for help. Helpers: remember that it is not easy to ask for help, especially after decades of independent decision making.
