Five rules for planning your retirement

Five rules for planning your retirement

No. 1: It’s OK to be selfish
As much as you may want to help your kids with college expenses; you owe it to yourself to be realistic in this regard. Before you agree help them out, be sure that your own financial future is on sound footing. Remember, lenders will let you borrow money to pay for college, but not for retirement.
I have seen a few cases in our careers in which parents impoverished themselves in retirement to assure that their kids attended some of the most prestigious universities in the country. If you have the financial means to do this, great – but most of us can’t if we hope to retire comfortably.


No. 2: Be careful of ‘free’ advice
Insurance and investment companies have developed a series of proprietary software programs to get you to reveal all of your assets to a salesperson. This is usually done under the guise of retirement planning or Social Security maximization. When you hear the term “proprietary software” you should think “sales gimmick” and proceed with extreme caution.
The most valuable asset any adviser has is his or her time. If someone is spending time with you but not charging, then they have to be figuring out what they can eventually sell you to generate the commissions or fees to justify the time spent. There’s nothing inherently wrong with this approach to business, but I believe you should at least be aware of the tactic. Plus, someone is paying for the salesperson’s time – if it’s not you, then someone else. And if that’s the case you have to ask: Are you paying to cover the “free” time he or she spent with someone else?


No. 3: Diversify.
Diversify. Diversify.
In real estate, the most important factor is location, location, location. In investing, it is diversification. One of the best ways to accomplish this is by constructing your portfolio using transparent, low-cost index funds.
In my opinion, the best vehicles to use to get the diversification of index investing are Exchange Traded Funds (ETFs). One way to effectively diversify would be to use different ETFs for a variety of investment asset classes, such as U.S. stocks, international stocks, bonds, and/or alternative investments (commodities, for example).


No. 4: Think long-term
Remember that many retirees will spend more than 30 years in retirement! It is important not to get caught up in short-term fears that can cause you to miss out on growth opportunities. At the very least, you should make sure you have enough growth potential in the form of stock exposure to counter the long-term risk of inflation.

No. 5: Don’t panic

It’s important to remember that there will always be ominous headlines and scary emails designed to get you to put most of your funds into perceived “safe” investments. Don’t get caught up in these sales pitches.
Keep your eye on your long-term goal and try to ignore the inevitable short-term noise.
Remember that it is never too soon or too late to get serious about retirement planning. Make sure you go in with your eyes wide open and, I advise getting assistance from an experienced, trusted adviser with whom to work.
Your future financial success deserves no less.