Do you Have the Right Tools to Navigate Retirement?

(Image credit: Cristian Baitg Schreiweis)

Retirement. What does that word mean to you? If you are like most people, it is the end of a journey. But you would be WRONG! Imagine running a marathon and, after 26.2 long and arduous miles, you are told that you have completed ONLY half the race! That is a stark reality that many retirees are discovering after they leave the workplace and begin the longest vacation of their lives. If you have asked yourself, "Have I prepared well enough for retirement?" or "Do I have enough to retire?" then keep reading.

Don’t Let Hidden Investment Fees Hijack Your Retirement

After listening to all the experts regarding retirement, how can you possibly choose the best mix of financial products to provide a sustainable retirement plan? Mutual funds, indexed annuities, stocks, 401(k)s, Social Security, variable annuities and their many variations are discussed in financial meetings and seminars across the country every day. None of these products matter if they are not a part of a well-defined plan specific to you.

Let's say you are planning a cross-country road trip. Your journey will take you from New York to Los Angeles, and you have a set budget. You grab the atlas, pack your bags, gas up the car and head out for your adventure. Now, will you make it to your destination? Maybe. There are so many variables that could affect the success or the failure of your trip.

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Each year, we see hundreds of wonderful people getting to ready embark on the winding road of retirement. Yet, they are not typically aware of the many twists and turns that await them. Some of the common mistakes we see with their plans are:

1. Not allowing for the potential of an exceptionally long life.

There is a rather high chance that each of us may need some form of long-term care before we die, and it can affect one’s portfolio. Make sure to check out varying ways of helping insure for this risk.

Pensions for many of us are a thing of the past. Those of us who still have one are quite lucky, but as we move through our working years it is critical that we set aside money into an IRA, Roth IRA or other savings vehicle to help supplement income in our retirement. In addition, permanent life insurance also can provide a potential income source that can be highly tax-efficient.

3. Using “financial tools” that are not suited for their specific needs and goals.

We see so many folks who own a variety of financial instruments, but they really don’t know why they own what they own or how these financial products may serve them. If you are concerned about a guaranteed income stream you cannot outlive, it is important to consider financial vehicles that can help protect against market volatility. Possibly a fixed-index annuity would serve that goal better. You need to consider financial vehicles to help you work toward your goals.

4. Not knowing exactly what they currently pay in fees and what these fees could potentially cost them over time.

This gets back to really not knowing or understanding what a person owns. Paying too much in fees can dramatically affect your potential returns. Ask a qualified financial professional for a second opinion, and remember: If you are using a firm that is not held to fiduciary standard, they may have their own interests in mind and not yours.

5. Unknowingly taking on too much risk in their portfolios.

It is critical that both you and your possible partner in life go through a simple exercise called risk analysis. This will give your financial professional a feel for your tolerance to overall market risk. Then have your financial professional provide a full analysis of your holdings to see how much risk your current portfolio has. Compare your risk number to that of your existing portfolio, and if they do not match up, then consider seeking a second opinion to help ensure your current strategy aligns with your goals.

A well-thought-out and detailed financial plan is similar to a GPS in your car. It can provide you with the comfort of knowing exactly where you are going, where to turn, possible roadblocks, etc. You would feel more confident driving cross country when you have a tool like that to rely upon along the way. Likewise, having a financial firm that can provide you with a comprehensive plan that is detailed, transparent and, most important, has your best interests in mind is a vital part of allowing you to retire with confidence.

Fiduciary firms are required to always, and in every way, serve only your best interests. You have worked too hard to begin your journey alone and must be aware of all the best possible routes. You deserve to have the self-assurance and comfort knowing that retirement will be exactly what you intended it to be.

Death of a Spouse: The Under-Discussed Risk in Retirement

Investment advisory services offered through AE Wealth Management, LLC.Investing involves risk, including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss in periods of declining values. Any references to protection benefits, guaranteed income, 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.

Disclaimer

This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.

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Mike "Cy" Cajthaml Jr. is an Investment Adviser Representative; a retirement focused financial professional, and the vice president of Cy Financial. He has 10 years' experience in the financial services industry. As a fiduciary, his first priority is ensuring his clients' best interest. Cy Financial is a comprehensive financial planning firm based in Overland Park, Kansas. Cy is also licensed in Illinois, Wisconsin, Missouri, Minnesota, Michigan, Florida, Arizona and Tennessee.