Thrifty Thinking: Avoiding Pre-Retirement Mistakes

The roadmap to retirement planning can be filled with potholes, detours, missed exits and major accidents. There’s no fail-safe GPS; a complicated and unstable economy makes it more difficult to plot a sound financial course than it was for previous generations.   

Volatile stocks, disappearing pensions and the uncertainty of government-backed programs such as Social Security and Medicare give pre-retirees a host of crucial nest-egg variables to weigh and balance. Mistakes can be costly. The average life expectancy is significantly longer than decades ago, and some retirees may need funds to sustain them for 30-plus years.

With so much up in the air, it’s generally best to keep your feet on the ground.  Today, people over the age of 50 face economic conditions much different than previous American retirees,” Paul says. “If we know there is a possibility of a money shortage in our older years, then more than ever it makes sense to conserve what we have while accumulating as much as possible without risk.” says Richard W. Paul (www.rwpaul.com), president of Richard W. Paul & Associates, a financial advisory firm in Michigan, and author of “The Baby Boomers’ Retirement Survival Guide.”

Paul lists four big financial mistakes pre-retirees make:   

• Carrying too much risk. Many investors have short memories, almost suffering from amnesia about the devastating 2008 financial crisis. They’ve allowed their equity allocation to drift to a greater percentage outside their comfort zone.
• Hoarding cash. Many people don’t know where to put their money, so they let it sit in cash because of their market fear. What most don’t realize is that this money is being devalued due to inflation, Paul notes.
• Having tunnel vision with stocks and bonds.  Annuities can be a solid alternative or supplement. With pensions almost as outdated as rotary phones, annuities have come more into play for retirement planning.
• Inadequately addressing healthcare. Whether it’s through insurance or setting aside money specifically for healthcare, many don’t sufficiently plan for this crucial retirement necessity.

About Richard W. Paul

Richard W. Paul is the president of Richard Paul & Associates, LLC (www.rwpaul.com) and the author of “The Baby Boomers' Retirement Survival Guide: How to Navigate Through the Turbulent Times Ahead.” He is a Certified Financial Planner^TM professional, Registered Financial Consultant, Investment Adviser Representative and an insurance professional holding life and health insurance licenses in Michigan and Florida.