Use a Retirement Planner to Avoid Five Critical Retirement Mistakes

Retirement is a distinct phase of life that everyone aspires to reach. It is the time to enjoy the rewards of a lifetime of hard work, saving, and sacrifice. However, it’s important to know that successful retirements require strategic planning by an expert to avoid critical errors that have dire consequences. That’s where the services of an experienced retirement planner in Woodbridge, CT, can be the difference between winning and losing the race.  

In this article, we’ll share five of the most common retirement planning pitfalls we see investors make and how working with a retirement planner can help you avoid these mistakes as you pursue a secure, comfortable, worry-free retirement.

Mistake #1: Working with the Wrong Advisor

The first critical mistake you can make is engaging with the wrong advisor. The financial service industry has done a good job of obscuring major differences between financial advisors. Anyone can call themselves a financial advisor even if they sell investment products for a commission. Anyone can also claim to be a retirement planner. 

The companies that license these commission representatives know investors are prone to hire the advisors they like the best as opposed to hiring advisors with the best education, experience, certification, and records of complying with industry regulations.

Conducting thorough due diligence when choosing a retirement planner is a critical first step. 

Think of it this way. The closer you are to retirement, the more important it is for you to choose a retirement planner who will look out for your best interests and is a fiduciary. 

You also should consider limiting your selection to a financial advisor who is an Accredited Investment Fiduciary ® (AIF®) in Woodbridge, CT. These professionals have the training and legal obligation to always act in your best interests. The AIF® designation implies the financial professional has undergone rigorous training and is obligated to help you make the right investment decisions. 

Heritage Capital Insights: The financial service industry has different ethical standards for financial advisors. A financial fiduciary is the highest. Make sure the advisor you select is a fiduciary. ​

At Heritage Capital, however, we stand apart. Our top priority is helping our clients achieve their financial goals. We accomplish this by leveraging a unique Active Management Approach that targets exceptional investment returns while staying in synch with our client’s risk tolerance. 

Our independence means we can focus on the needs of our clients and not the needs of a corporate owner. Our only payment method is a fee which means we are paid by our clients and not an employer or third party.   

Mistake #2: Mismanaging Social Security Benefits

Many individuals need help understanding when and how to begin taking their Social Security benefits. This paradox can lead to poor timing decisions, negatively affecting retirement income and/or your tax liabilities.

AIF® retirement planners can provide clarity on this matter. They can analyze your financial situation and recommend the most beneficial time to draw your benefits and optimize your retirement income. 

This decision could impact hundreds of thousands of dollars.

Understanding your financial situation can help you navigate the complex landscape of social security benefits to ensure you take full advantage of what you’re entitled to while determining the best time to begin accessing the benefits. 

Heritage Capital Insights: Many individuals apply for social security benefits at the wrong time, leaving tens or hundreds of thousands of dollars on the table. At Heritage Capital, we help our clients pinpoint the right time to begin exercising their Social Security benefits. 

In our analysis, we also help our clients answer these key questions related to their retirement years:

• Will I have sufficient funds for my retirement lifestyle? 

• What is my prospective monthly budget after retirement? 

• Is there a risk of losing my resources if I exceed my expectations? 

We serve as your financial advocate and partner when crafting a personalized retirement plan. This will include a comprehensive review of your assets, income, anticipated social security benefits, taxes, and rate of return assumptions. We also rigorously test your plan against unexpected challenges and scenarios to safeguard your financial well-being.

3. Underestimating Health Care Costs in Retirement

Healthcare is an expense that will likely increase with age. In particular, the last few years of life. This is not a pleasant topic, but many need to pay more attention to the healthcare costs for both spouses during late retirement years, leading to a substantial strain on retirement assets. 

Further compounding this sensitive issue is the lack of proper insurance coverage, which can result in substantial out-of-pocket expenses.

A Woodbridge retirement planner can assist with the development of a comprehensive retirement income and expense plan that includes current and unexpected healthcare needs. The more you plan, the more secure and comfortable your retirement years will be.

Heritage Capital Insights: Your interactions will be conducted by seasoned professionals with years of applicable expertise at Heritage Capital. Our Chief Investment Officer, Paul Schatz, is widely acknowledged as an expert in the financial services industry and is regularly featured on CNBC, Fox Business, and other financial TV programs.

4. Ignoring the Impact of Inflation

Inflation can erode the purchasing power of your retirement savings over time. Many overlook this factor, leading to a shortfall in their retirement assets and causing unexpected lifestyle adjustments late in life.

Suppose you are 65 and your spouse will require assisted living in 20 years. Now compound the impact of inflation by 5% to see what the inflation-adjusted cost will be like in 20 years. It could be double or triple what it is today.

An experienced retirement planner understands the impact of inflation on your retirement savings. They can help you build a defensive investment strategy that considers inflation and develop a strategy to outpace it. This strategy can include a mix of assets that will likely grow over time, helping your retirement savings maintain their purchasing power.

Heritage Capital Insights: Frequent investment advice when the market plummets is to simply “ride it out.” However, we disagree with this strategy. Although prevalent, it could lead you down a precarious path, compelling you to pull out funds at a time when the value of your savings is at rock bottom. 

This necessitates the acceptance of financial losses and permanently diminishes your available resources for funding future living expenses. Should this happen early into your retirement, it can dramatically impact your future standard of living.

5. Misjudging Risk Levels

Excessive or insufficient risk in your investment portfolio can harm your retirement plan. Taking too much risk can expose your savings to hefty potential losses, while too little risk might mean your investments fail to grow sufficiently to meet your retirement needs and offset inflation. Striking the right balance is crucial, and diversification is the key.

A retirement planner can guide you in assessing your risk tolerance and building a diversified investment portfolio. 

These professionals can help balance a blend of safer investments (bonds) with investments (stocks) that produce higher potential returns, ensuring your portfolio is well-positioned to weather market volatility while still being positioned to produce positive rates of return. This prudent approach to risk can help protect and grow your nest egg, paving the way for a secure, comfortable retirement.

Heritage Capital Insights: An unfortunate number of individuals experience financial losses through interactions with professional financial advisors, which should not have happened. 

The lack of experience of some financial advisors does not get them off the hook for providing services that include diversification to minimize the risk of large losses. This demanding process is achievable when a Heritage professional develops it.

Nonetheless, most financial advisors, much like the investors they work for, predominately invest in capital appreciation. This does work as well in retirement that it did during working years when you had more time to recover for a year or two. Incorporating defensive strategies to minimize the risk of large losses is equally important to safeguard your finances.

Here at Heritage Capital, we stand out by integrating the necessary defensive tactics into our offensive, strategic approaches, thereby ensuring the protection of your wealth. We take personal stewardship of your finances as if they belonged to our own families. Your future matters, and it’s vital that you settle for nothing less than the best.

To learn more about our Active Management Approach, connect with us.