4 Keys to Smart Financial Planning

The world of finance always has been a busy, noisy place — and right now it’s bordering on cacophony.

Besides all the usual financial decisions that need to be made (Buy! Sell! Save! Stocks! Bonds! Annuities!), every event — real or predicted — seems to turn up the volume … and the worry.

For people who are close to retirement, all this chatter is particularly scary, as they try to protect every dollar they’ve put away. For some, it’s paralyzing; they can’t make a move because it might be a misstep. Others seem to shift with the wind — or, at least, the latest sound bite. The more information they receive, the more they wonder how each bit of news will affect their portfolio.

I get it. I do. But there is a way to take the noise down a notch, and perhaps even the fear.

Plan with a purpose. If you’re trying to get to retirement, or you’re already there and you don’t want to fail, you have to set up your portfolio in a way that makes sense for you. Not your friends or co-workers. Not the guy at your golf club. Not the woman who called into The Suze Orman Show and loved her response. Just you.

Now, I’m not saying that you shouldn’t listen to the people out there giving investing advice. What I’m suggesting is that you do it with a filter, taking into account your retirement horizon, your needs and your family’s needs, your morals and your ethics.

Focus on what you can control. Stock prices and interest rates tend to affect the choices investors make, even though they have no control over them. But what you can manage is your personal risk. Once you’ve moved from the accumulation phase to the preservation/distribution phase of life, your mindset should shift from the return on your money to the return of your money.

It’s like owning real estate and having a renter who pays you on time every month. The value of your property may go up or down, but you’re not going to sell it if you don’t have to — you’re sticking with that consistent rent check.

For most, what the value of an individual stock is on any given day isn’t that important — it’s consistency that counts. With investing, your portfolio should be designed to generate income in your retirement.

Look to the long term. There will always be events that pop up to rattle investors and affect the market, good or bad. With a new president, there could be changes in policy regarding interest rates, the Department of Labor’s fiduciary rule and estate tax laws — just to name a few. Instead of investing in reaction to these events, stick to what feels right.

For example, if during estate planning you bought a big life insurance policy to cover taxes, and the new administration ends up getting rid of the estate tax, was the life insurance unnecessary? Maybe not. It’s still going to provide money to your heirs to cover a lot of expenses.

The same holds true for the market. Let’s say you set up your portfolio to be less susceptible to volatility while your buddy hangs onto a plan that has far more risk. If the market has a good quarter and he brags about his return, it will be tough not to wonder if you should have followed his lead. Don’t. He might not be in the same place in his life. He might have other sources of income to depend on if the market experiences a downturn. (And when the market does take a downturn, you probably won’t hear about his losses.)

Choose an adviser who fits your investing style. If you like to travel at 35 mph, you probably won’t be happy with a driver who goes 55 or faster. The same holds true for your finances. It’s about an investment philosophy and a mutual understanding of what you’re trying to accomplish.

My clients want me to have my finger on the market’s pulse, to make adjustments when necessary — always keeping their risk tolerance in mind — and to keep them informed. That’s the idea of working with a fiduciary.

If your adviser says “it’s only a paper loss” or “it will come back,” you may not be investing with a low-volatility approach. Don’t be afraid to look elsewhere or, at least, to get a second opinion.

Alan Becker is founder, president and chief executive officer of Retirement Solutions Group. He is also the host of the “Retire Right with Alan Becker” radio show. A U.S. Navy veteran, Becker has been in the insurance industry for 18 years.

Kim Franke-Folstad contributed to this article.

Retirement Solutions Group and RSG Investments are independent financial services firms that, in concert, create retirement strategies using a variety of investment and insurance products. Neither the firm nor its representatives may give tax or legal advice. Investment advisory services offered through AE Wealth Management, LLC. Investing involves risk, including the loss of principal. No investment strategy can guarantee a profit or protect against loss in periods of declining values. Any references to protection benefits or lifetime income generally refer to fixed insurance products, never securities or investment products. Insurance and annuity product guarantees are backed by the financial strength and claims-paying ability of the issuing insurance company.