Conflicting Investment Advice - Who Knows Best?

If you've spent a lifetime of scrimping and scrapping to build a retirement nest egg, the last thing in the world you want to do is expose it to risk of loss. You don't want to lose any of it, let alone most or all of it. But, sometimes we do things that are not good for us because we're not fully aware of the dangers. This includes not faithfully getting medical checkups, driving too fast at night on rain-slick roads, and not considering all the options when we invest our money. The habits we have accumulated over a lifetime are hard to break quickly, and they may prevent us from keeping up with the "times". Keeping pace with retirement requires that you give up the notion of "making loads of money in the market" and adopt the notion of "keeping what you've got". Good advice but hard to follow.

Assuming you have prepared financially for your retirement, there are two potential hazards you face: losing part or all of your retirement money because of the risks you voluntarily took, and having an unexpected medical emergency that wipes out your savings. Before we focus on the first topic, most of you understand the importance of insurance coverage for your health but sometimes overlook the need for life, disability, and long-term care coverage. But, I'll bet most of you have full coverage on your auto and house. This is not the time to discuss insurance, but you might want to reassess your priorities. Let's close the book on insurance by saying there are only two things to remember: first, it is better to be years early rather than one day late, and second, insure everything you can't afford to lose.

What About a Coach?

Even if you're in retirement, and especially if you're not, you can probably benefit from help in planning how to save for your retirement. I'm not sure the term has been coined, but you need a "Savings Coach" the way you need a fitness coach for your physical well-being. You should know that successful investment is about "time", not "timing", and that compound interest can deliver amazing results given enough time to work. A systematic savings plan of "paying yourself first", conservatively choosing tax-advantaged investments, and avoiding speculative risks is the key to your successful retirement. You can start too late, but never too early. The best advice you can give a younger person is that they should always participate to the maximum in their employer's pension plan PLUS set aside a certain percent of their "take home" pay every month. Then make sure they never invade it for something they've just got to have - this is for their retirement. Of course, saving is not "the American way". At this time most young people are not receptive to advice about money and saving. They'll learn later the consequences of not saving for retirement.

Speaking of savings, the average 65-year old American has less than $60,000 in savings and investments. In a recent survey by a major insurance company, 40 percent of those asked admit they are not savings seriously for retirement. Overall, 38 percent say they expect their retirement to be "financially difficult". The American theme is "why save for tomorrow when you can spend today". This has resulted in a negative savings rate during the past several years: we are spending more than we are taking in by borrowing, refinancing homes and drawing down past savings. The average retiree is not prepared financially: not for lack of opportunity but due to procrastination, poor planning and bad financial choices. Just as bad, many retirees who think they are prepared for retirement now will outlive their money for exactly the same reasons. Most people severely underestimate the amount of money they'll need in retirement - 30 years or more is a very long time to live on Social Security and your retirement nest egg.

Judging from the statistics it's a fact that retirees need professional help with financial planning. Due to medical advances, the biggest risk you face, and a risk generally ignored, is that you may live in retirement for 30 years. The urge to speculate, knowingly or unknowingly, is ingrained in many of us as is the mindset to stay liquid by choosing only short term investments. These are the two most common mistakes retirees make with their lifetime savings. To safeguard your retirement, it is imperative that you avoid losses, assume only risks you can afford and make your money work as smart and hard as you did to earn it. These can be accomplished with an understanding of the options, outside professional help and planning. Your savings are what you plan to live on in retirement and if you lose all or some of them, where will you get the needed income?

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