People worry. And studies show that one of their most common worries is about their finances. Will I be able to retire when I want? Will I be able to afford to live the lifestyle I want in retirement? Will I outlive my money? People worry because the answers to these questions can be frightening, especially if someone has not put together a comprehensive financial plan – or, in some cases, even thought about their future yet!
Sure, you may have imaged sitting on the beach in retirement, traveling the world or living comfortably at home spending time with grandkids. But have you thought about how to make that happen? How much money you’d need to maintain your lifestyle when you or your spouse is no longer bringing home a paycheck?
The reality of these questions can destroy your dreams. However, if you are working with a financial advisor who you trust is making the right decisions about your financial future and you have a plan in place, there’s no need to lose sleep over some of these concerns. Life is too short.
Instead, let’s take a look at 5 of the main reasons people worry.
1. Longevity
Longevity is a great thing – people are living longer! However, this also means that your retirement income needs to too. Your investments and savings plans may need to cover you for a longer period of time.
Think about it: If you retire at age 65 and are in good health, reports show that you and/or your spouse may live well into your 90s. This means that your assets will have to produce income, retain their purchasing power and preserve principal for 30 or more years. That’s 30 years of inflation, recessions, rising healthcare costs, stock market ups and downs, fluctuating interest rates, politics … well, 30 years of life.
Has your life expectancy been considered into your retirement plan?
For example, after you retire, you may assume that your days of taking investment risk to produce higher returns are over. But that may not be the case.
Here are two problems that we see happening as people live longer:
- Retirees become too conservative too soon
- Pre-retirees receive bad investment advice in an attempt to improve investment performance
Make sure you talk with a fiduciary, fee-only, independent financial advisor before you retire to make sure you’re still leaving the working world at the right time, and not just the time you wanted to.
2. The Stock Market
The stock market has always left investors unsettled. Many people are just waiting for the next crash or the next big drop. They fear another Great Depression or another stock market crash like what happened with the dot.com bubble.
The truth is, stock market volatility is inevitable. But it doesn’t have to lead to destruction. Nobody has a crystal ball that can predict when the next crash will occur or why. But you can position yourself to weather a drop. Again, working with a well-established financial advisor who has experienced different market situations can help you prepare for the worst.
3. Retirement Horror Stories
Chances are if you watch the news, read the paper or talk to a friend, family member or colleague about retirement and investing, you’ve heard a retirement horror story that may keep you up at night.
- Someone ran out of money later in life and had to sell their home, move in with their children and change their plans.
- Someone didn’t consider estate planning into their financial goals and was left with nothing when a spouse passed away.
- Someone spent all their money supporting their children later in life when they experienced a hardship.
These retirement horror stories can and do happen. But you can plan to avoid them. Like the old saying goes, if you fail to plan, you plan to fail.
When creating a financial plan, it’s important to discuss your expected expenses with a financial advisor, be realistic when it comes to your spending and income and decide how you want to spend your retirement before the time comes.
4. The Decision-Making Process
Unfortunately, bad financial advisors won’t tell you they’re bad. Unscrupulous salespeople won’t tell you that they’re taking advantage of you. Big name firms and brokers don’t normally disclose their quotas and incentives for selling certain products.
So, how do you really know if you’re making the right choice when choosing a financial advisor? Ask about these 6 things:
- Credentials
- Experience
- Method of payment
- Business practices
- Services provided
- Track record
I tell people all the time, a little extra time in the beginning can save you a lot of time, stress and money in the long term.
5. Wall Street Greed
We talk with a lot of people here at Global View, and when we meet some clients for the first time, they’re skeptical. They’ve heard of Bernie Madoff. They’ve heard of salesmen posing as financial advisors. They think they want free services and free advice. Making the wrong decision is one of their most common worries.
We spend a lot of time educating investors about what they should be looking for, what they should be avoiding and how to tell if an advisor really has their clients’ best interests at heart.
For example:
- Is your financial advisor a fiduciary? Will he or she always work in your best interest?
- How is your financial advisor compensated? Are they paid by fees or do they make commissions off of certain products?
- How long has the advisor been working in the financial services industry? What is their experience?
- Does your financial advisor keep you informed with what is happening with your account?
- Do you understand what your financial advisor is telling you? The financial services industry is set up to confuse investors so Wall Street can benefit. Will your advisor spend the time to educate you on what the financial jargon they are using means to you?
If you’re already working with a financial advisor, it’s not too late to ask these questions. If you’re worried about the financial advisor you are currently working with and want to make a change, or if you’re looking for the help of an advisor for the first time, give Global View a test drive. We’ll see if it’s a good fit on both ends. And the first meeting is free.
