5 Things You Don’t Want to Hear From Your Financial Planner

Retirement is just around the corner.  You think you’ve saved enough; but with the recent market drop, you are just not sure. Your retirement accounts have taken drastic blows and now you’re in doubt if you will ever retire. You decide it’s time to sit down with a Certified Financial PlannerTM to see if you are still on track for a successful retirement.

Here are the 5 things that you don’t want to hear:

1. You Will Have to Work Longer.

Unfortunately, this might be the reality of many hopeful “soon to be” retirees. If you have taken a substantial hit in your portfolio, and you hadn’t saved enough to fund your retirement needs, this may be a sad truth that you have to face.

With the rising cost of health care and increasing cost of goods, your nest egg may be depleted where your employment income is the only thing keeping your savings account from dwindling down even further. By working longer, it will allow you to do # 2…

2. You Need to Save More.

If retiring is not happening next week and you still have a few more working years ahead of you, now is the time to sock away as much as you possibly can afford.  What that might mean is eating out less, maybe putting off a vacation here or there, or not remodeling the living room that drastically needs it. All those extra savings will either go to funding retirement vehicles, which are your 401(k)’s or IRAs, or just putting it in your emergency fund and savings account.

3. You Will Have to Live On Less.

Many retirees, or soon to be retirees, assume that their lifestyle will remain the same once retirement comes. In fact, 6 out of 10 workers believe that their standard of living will not change when they reach retirement.  Many of them fail to plan for longevity; meaning that they don’t have a good sense of how much they actually will need for their actual time in their retirement years.

This is a wake-up call to most when realizing that their retirement assets and Social Security, or any pensions, are not sufficient to cover their month to month expenses during retirement. Coming up with a budget and figuring a safe amount to withdraw off your investments to make up the gap between Social Security and/or pensions is a must if you want your nest egg to last you throughout all your retirement years.

4. You Need to Take More Risk.

Many times I have seen retirees that once they hit retirement, they shift their whole retirement portfolio from the stock market into 100% bonds, CDs, and/or money market. If your retirement portfolio never has a chance to grow or appreciate, the portfolio will most likely be eroded away by inflation. Cost of living is constantly rising with no end in sight. A retiree must have a portion of their portfolio in the market to battle inflation, or that hard earned dollar today will have far less purchasing power in the years to come.

5. You Have to Work Longer.

Sorry to bring this up again, but this is usually the one thing that people don’t want to hear.  By this point you have put in several years at your employer and retirement is so close you can taste it. Unfortunately, the reality is that you just haven’t saved enough.  Or maybe you thought you did, but what the market has giveth has now taketh away.  Whatever the reason, your daydreams of sipping Pina Coladas on the beach are just that: daydreams, while you are still sitting at your office desk staring out your window wondering what you could have done differently.

Much of this could have been avoided if you had taken the time to meet with a financial planner in advance.  Often time, people put off planning for retirement until it’s too late. A study showed that 43 percent of workers who did a retirement needs analysis did in fact make changes to their retirement portfolios.  The most common change: Save More.

When reviewing portfolios, I often see subtle changes that could have been made years ago that would have made a huge difference today.  The lesson learned is: Don’t procrastinate.  Review your financial situation annually to make sure you are on track. That way when you do meet with your financial planner regarding the possibility of retirement, you instead hear, “Congratulations, you are now ready to retire.”  Doesn’t that sound better?

About the Author

By , on Nov 19, 2008
Jeff Rose
Jeff Rose is a Certified Financial Planner and co-founder of Alliance Investment Planning Group. He is also the author of Good Financial Cents, a financial planning and investment blog and he is currently working on his first book entitled Soldier of Finance. You can see more about his mission at the same titled blog Soldier of Finance.com.

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Leave Your Comment (7 Comments)

  1. Regardless if you have a good plan or not, your financial planner can’t make much miracle these days 😉

    His role right now is to call you and make sure you understand your investment strategy.

  2. Jonathan says:

    Some interesting thoughts on this subject, although the “You Need To Take More Risk.” wouldn’t necessarily fill me with fear unless of course I was nearing retirement age when I should be limiting my exposure to risk.

  3. JonatsGonats says:

    Dude, the focus should be on what you NEED to DO in order to live successfully. This should be the one and ONLY focus of any financial planner. But then again, some greedy financial planners just only want to suck your money and efforts so that you keep coming back again and again.

  4. Roger says:

    One of the basic principles of retirement planning is to make a decision as to how much income you need to make a comfortable living in your post-retirement years. Make sure you consider certain crucial aspects like inflated medical costs, unscheduled vacations and gifts for friends and family. Of course on the positive side you will also have to reduce costs like children’s education and rent, if by that time you own your home. There are various inflation index calculators available online to calculate the inflation costs.

  5. Aya says:

    The list that we all fear! Retirement has begun to seem like a luxury over the years, if anyone is getting the chance to retire. My hopes are that I’ll like my job so much that pushing off retirement isn’t a bad thing. This might also be coming from the assumption that I probably won’t be able to save up enough. I often have conversations with my friend about how we’d like to end up doing what we like to do even though those are the types of jobs that don’t pay very well…

    • Jeff Rose says:

      @Aya. Don’t fret. It’s funny, but most of my “boomer ” clients don’t really want to retire. Not that they can’t, but there not sure what they would do with themselves. And as far as your friends taking jobs they don’t pay very well, doesn’t mean that they can’t come out ahead. One of my wealthiest retired clients were a school teacher and a lineman at a manufacturing plant. But they made it a point to save as much as they could each paycheck. They are now millionaires and enjoying their retirement (they been on more cruises than the cast of the Love Boat). Just do what you can and it will work out.

      • Aya says:

        @Jeff: I sometimes wonder if times have changed so much that we’re becoming increasingly greedy about the jobs we want to have that we’re just going to have to compensate with not having money for retirement. As long as we’re satisfied with what we’re doing, we might not even have to think so hard about how to get out of it.

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