50+ Retirement Products – Part 2

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Thankfully, some of the members of the Red Hat Society were appreciative of the advice in my last article. Interestingly, their husbands, motivated by the joy of new toys from my financial principles, are mulling over the formation of the Green Beret Society. To insure the success of both, everyone agrees, the decade before retirement is the time to make sure that everything is in place for retirement. Mistakes made during this period, if not corrected early enough, can devastate the chances of a long and prosperous retirement.

Rollover your 401(k) into an IRA Rollover as soon as possible. Investing in a 401(k) is good because of the employer match and because of the higher amounts that can be invested. But the investment choices in a 401(k) are limited and have high fees. An IRA Rollover account can manage your funds with lower fees and more diversity.

Settle your insurance issues. Insurance may be a purchase of love, but it is usually sold on the basis of fear. Financial wisdom is required to determine the need and sort through the product options. Insurance should only be purchased to cover disasters which might otherwise devastate the family. The more likely you are to have a need, the less it makes sense to buy insurance for it. Regular needs are best covered by planning and saving.

Make sure your financial affairs are in order. There are five documents that you should review with your children every year: a will, a durable medical power of attorney, a financial power of attorney, a directory of basic information, and yearly financial statements. Additionally, you should have your estate planning in order.

Invest for growth and diversify for safety. The decade before retirement is a critical time to balance the goals of safety and return appropriately. Many investors simply continue doing what they have been doing, even though it may not have been appropriate in the past. Conservative investors don’t realize that they have been able to be conservative only because they were frugal in their lifestyle and continued to save a significant portion of their income. Without an income in retirement they will need to be more aggressive. Aggressive investors, on the other hand, need to be avoiding the possibility that wild swings in the market will ruin their chances of success in retirement.

Avoid long term care insurance (LTCI). Some types of insurance are a good idea. But in most situations LTC is better handled by preparing early in life and having sufficient assets to pay as you go out of pocket. If you can pay out of pocket, you can buy whatever care you want. See the complete article on LTCI for more details.

Avoid investing in illiquid assets or investments with loads or high fees. Investing in whole life, limited partnerships, loaded mutual funds, immediate annuities or second homes can all ruin your chances of a long and prosperous retirement. Liquid assets can always be quickly turned into cash, and cash can solve a host of needs that targeted products cannot.

The most heart-breaking moments of financial planning for me are when a couple comes to me because they are ready to retire, but have their investments in all the wrong places. They may have invested in whole-life that they can borrow against but can’t spend. They have back-end loaded mutual funds (B shares) with high expense ratios where they will have to pay a hefty penalty just to sell them. They own shares in a real estate limited partnership generating phantom income they never see but must pay tax on. And they are wondering what they are going to live off of during retirement.

It is tough to make the right decision about the myriad of ever changing financial options. Marketing promises and good friends only cloud the facts. A second opinion from a non-commissioned financial advisor may give you the wisdom you need to avoid a world of disappointment. We would recommend working with a member of NAPFA (National Association of Personal Financial Advisors). Not only does their Code of Ethics prohibit them from selling products, but their membership standards are the highest in the industry in terms of educational and experience required. You can find the NAPFA member nearest you by calling 1-800-366-2732 or by requesting a listing from their website: www.napfa.org.

Photo by David Siglin on Unsplash


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David John Marotta is the Founder and President of Marotta Wealth Management. He played for the State Department chess team at age 11, graduated from Stanford, taught Computer and Information Science, and still loves math and strategy games. Favorite number: e (2.7182818...)