You’ve worked hard throughout your life, you’ve saved and invested for the future, and now you’re nearing the retirement stage of your life. You are now deciding to do what with your retirement funds? As strange as this question may sound, it is a common question. It probably runs across the mind of many financial planners at one time or another, when they hear or see what their clients intend to do with their retirement money.
Naturally, no one is perfect with money and many of us have made a silly mistake or two (… or three) with it, but when it comes to the money we’ve worked hard to save for our final years, we should definitely tread carefully when it comes to how we decide to use or spend it. Granted, spending money is inevitable, but a good retirement plan will have future wants and needs incorporated into their wealth management and growth plan.
We’re going to go over some of the worst financial mistakes many people make before or as they enter their golden years.
A Large Retirement Purchase
Does this sound familiar? Not everyone plans to do this, but all too many people decide to treat themselves to a large purchase when they retire. Some people like to buy cars, houses, beach front properties, or go on a trip around the world. Large retirement purchases are not necessarily wrong, but when a financial planner has worked hard alongside you to help you reach your retirement goals and suddenly hears your new plans for a large retirement purchase not originally factored in to your plan, don’t expect them to applaud you. Granted, if you had factored in extra money to cover extra purchases, both large and small, that is an entirely different matter.
Just one unnecessary major purchase could cause you financial problems at a later time because now your entire retirement fund (and plan) has been thrown out of whack due to this large unplanned purchase. This happens all too often and purchases such as these could be planned for and achieved without sacrificing your current fund or other necessary future plans.
Falling for Poor Investment Advice
You’re sitting at dinner with some friends or possibly past colleagues and you’re all laughing and enjoying each other’s company. Then, suddenly, a past colleague at the dinner table gives you the best retirement investment advice you’ve ever heard in less than 10 minutes. It must be working because he drives a nice car and seems to be doing well, so it seems legitimate.
The next thing you decide to do is make a phone call to your bank so you can make arrangements to withdraw the money right away since time is money and you don’t want to lose out on quadrupling your fund within a matter of days or weeks. You withdraw your funds, diligently do as your former colleague recommended, and then nothing happens except for you losing all of your money.
This happens too often to too many people.
Many people attend “free” seminars and end up handing over everything they’ve got in a matter of hours because they truly believe the scheme being presented will be life-altering. While some new ideas and strategies may actually work, it is important to approach this situation as you would deep and dark waters—with caution. Too many people lose their retirement funds after being sold on false hopes – so before making any quick decisions with your money, be sure to talk with your advisor or planner and have them look into it further to verify its validity.
Too Many Eggs in One Basket
When a company’s stock performs well, we all want to take advantage of it. Particularly if the stock has consistently performed well over time. Some people dump all of their money into one thing that does well and they don’t want to move it. The danger with this investment strategy is that it is not nearly diversified enough and can pose a huge risk to the investor.
Learning from the past on this one would be wise, as we’ve seen time and time again, people have invested everything they had into an amazing company or product because the initial performance and returns were great, but one big company mistake caused the entire company to get shutdown. Now there’s no stock to buy or sell, no money, and everyone’s money is now gone forever.
Again, if this a strategy you have been considering, then it would be best to talk with your financial advisor about the risk factors, while remaining open to other possibilities in order to help protect any wealth you’ve gained. It may be emotional because some investors are emotionally attached and faithful to their investment choice, but first and foremost, it is important to protect what you’ve got.
Ignoring Market Timing
If investing in property is part of your strategy, then market timing is absolutely essential. Destructive investment choices will only lead to disaster at a later time, which is why paying attention to important things such as market timing when buying or selling is important. Too many investors make the mistake of not keeping themselves in tune with market changes and often cause themselves to lose everything.
Do you need help avoiding these financial planning mistakes?
If you’re looking at investing in some property or investing in general, you should first sit down with a licensed and experienced financial advisor to see what your options are and to help you make more informed financial decisions. To schedule your free two-hour consult with a financial planner on the Sunshine Coast, give the team at Ethica Private Wealth Specialists a call on (07) 5443 5577 or book a free assessment time here.