As you approach retirement, you will likely get an earful of advice. But that doesn’t mean it’ll be any good.
Financial retirement advice from non-professionals is often outdated, unfounded, and biased. While well-intentioned, advice from family, friends and co-workers is generally not helpful and potentially damaging to your financial health.
Some classic examples of bad retirement advice include the following statements:
- Social Security will cover you once you retire. While the government program will indeed provide you a fixed monthly income for the rest of your life, it is generally insufficient to cover all your living expenses. In fact, the program was never designed to support people entirely for their retirement expenses. And with an anticipated shortfall in the Social Security fund, monthly payments are likely to be reduced. The permanent reduction will vary depending on your age with younger people expected to take the biggest hit. Regardless, it underscores the need to create additional income sources for retirement.
- Medicare will cover your healthcare expenses. A wonderful program for seniors, Medicare nonetheless does not cover all health related costs. You will still be required to pay for deductibles, co-pays and coinsurance. Hence, most people buy gap insurance for the following costs that are exempt from Medicare coverage: most dental care, long-term care, hearing aids, foot care, and cosmetic surgery, including others.
- Your family will take care of you. Young families today face mounting expenses: education, housing, food, and other living expenses that continue to rise. Assuming your adult children will be able to take care of your needs is not advisable. They may be financially or emotionally unable to do so. Make sure to discuss any family support in advance and clarify financial expectations. Depending on others for your personal needs can lead to significant stress for all parties. In the end, your retirement is your responsibility.
- Get out of the stock market as soon as you retire. The stock market’s typical volatility scares many people away. Unfortunately, such action is shortsighted. While the market does gyrate, it has grown steadily over time and provided tremendous financial security for countless older Americans. While the portion of your stock investments should decrease as you get older, you should remain invested in stable stocks for years after you retire. The key is to diversify and balance your portfolio regularly to reflect your age, risk tolerance and needs. And review your portfolio with your trusted financial advisor annually to rebalance and readjust based on market and personal changes.
- When you retire, do all the things you’ve been waiting for. Retiring can and should be a happy time. But making sure to check off everything from your bucket list is not financially wise. Trips and other purchases are expensive and can destroy your nest egg rapidly. Prioritize your wish list and incorporate the items into your budget without going into debt. Plan to fulfill dreams now that will not jeopardize your financially security in your later years.
Resist the temptation to heed unprofessional advice. Instead, prepare a retirement plan that is flexible and realistic. Create a budget that incorporates current and projected expenses and make sure to save sufficiently for a long retirement. Get professional help by meeting with a trusted financial advisor regularly to help you stay on track and meet your financial and personal goals.
At Silverman Financial, your financial health is our number one goal. We are professionally educated, licensed and experienced in helping thousands of clients create sustainable and secure retirement roadmaps.