Here Are Five Don'ts to Consider While Making Retirement Planning

It’s valuable to understand what to do to make your post retirement life content. But it’s more valuable to understand what not to do in order to avoid unnecessary mess. Here is a list of five things you should totally avoid while planning for retirement -

1. Don’t choose one of those retirement plan advisors Approaching the right advisor is important if you don’t want to be misguided. Now, this might seem like something easy. But trust us- it’s not easy,chiefly because there are too many out there. So, the best way to zero in on the right advisor is by doing a background check on them. Insurance, Wall Street and banking- these are the three ‘worlds’ from which financial advisors come. But there is no dearth of advisors that don’t belong to any of these three, and their expertise is often dubious. Because retirement is a specialized area, you need to look for someone who has an expertise in it.


2. Don’t assume that a financial advisor that is great at devising wealth creation plans must be an expert in making retirement planning too. Today’s economy is challenging, because of the volatility in the market, growing interest rates and falling bond yields. Other factors like increasing life expectancy of people, inflation and rising health care costs only add to the challenges. And that is why you should always consult a retirement income specialist and not a generalist. Although there are many retirement planning services available these days, you need proper guidance while choosing one.


3. Don’t say ‘no’ to annuities outright! Annuities are a popular concept today. In fact, ‘Annuity’ has become one of the most searched for financial terms on search engines. While half of the results you get when you type this term on a search engine speak in favor of it, half speak against. But annuities are somewhere in the middle, and their effectiveness depends on the investor who has chosen it. Annuities are no more what they used to be once upon a time. They have become flexible and incur low internal costs. Today, there are annuities in place that are extremely favorable for investors.Hence, if you are investing for retirement, make sure you invest a portion of the total investible amount in annuities for good returns.


4. Don’t make the assumption that you can do things on your own. Even seasoned investors who do their research well and pick investment plans judiciously might face troubles getting things right when it comes to planning for retirement. Studies have shown that DIY investors get only 50% of what they are capable of getting from the market, over a long term. Buying and selling stocks at the wrong time, is one of the biggest reasons why DIY investors end up making less money. Financial advisors, on the other hand, know the tricks of the trade, and are better able to maximize profits for their clients.Another downside of taking the DIY investment approach is reverse dollar cost averaging, which is also referred to as sequence of return risk. This can make your retirement plans go haywire if you show even a little carelessness. So, always seek help of an expert financial advisor, who will make your retirement financial planning according to your financial goals and will tell you what the best pension plans are.


5. Don’t forget to consider long-term care risk. With growing age, a person’s health begins to deteriorates, which eats up most of his retirement savings. Yes, people save for medical expenses, but more often than not they overlook long-term care costs. These may include an assisted living facility or a nursing home, relying on in-home nursing etc. Elderly people need long term care, which is often expensive. And that is why when you plan your retirement, it’s important that you take into consideration the aspect of long-term care. Otherwise, you will have a major portion of your portfolio compensating it.

When you look at these five don’ts, you find one thing in common. And that is the fact that you can’t and shouldn’t make your financial planning for retirement high handedly. And while you choose a financial advisor, make sure they have expertise in the field of retirement planning. A reliable advisor will stand by you, throughout the process of planning, and will ensure you maneuver through the complex minefield of retirement planning with ease.