Managing Your Finances in Retirement
Should you be the person managing your finances in retirement? Many people think that, unless you’re qualified, that is excellent advice. I would not disagree. Hiring a professional for any job makes a lot of sense. However, I always point out that there is a glaring loophole when it comes to outsourcing anything as important as your life savings. Although I have graduate level degrees in finance as part of my MBA, I do not think I am qualified to give advice except for this one insight that has never failed me. When you give someone a job to do on your behalf (like managing your retirement funds), it should never mean that you abdicate any of your responsibility. I believe everyone should know enough about investment principles that you have enough knowledge to ask questions of whomever you choose to be your financial caretaker. I have found that a good advisor will welcome those questions, and every advisor should be asking for your participation in the management process. They should be aware of your risk tolerance and what your income needs are as you forecast your portfolio’s performance over the course of your retirement years.
In the end, managing your finances in retirement should be YOUR responsibility.
You should also have a clear understanding of what fees your advisor will charge and a full disclosure on whether or not they will be making any commissions on a product they are offering. Taking the time to gain some knowledge about the investment and financial world can help tremendously in managing your finances in retirement. Know the full cost of any investment that is being offered and always insist on a comparison of strategies. Annuities, for example, sound like you can sleep easier with a guaranteed income but they can be expensive and more beneficial to your advisor and the company they work with than to you. I am aware that many retirees are easily intimidated when it comes to investing in stocks and bonds, but it takes just a little bit of reading and knowledge to become better equipped to discuss your finances with anyone. Remember, this is YOUR money and you have every right to ask as many questions as you need to before you entrust your life savings to any advisor.
I would also suggest having more than one advisor, at least until you’ve had a chance to compare the performance of each. You should be up front with each one that your assets are divided among other advisors or companies, but you have the right to protect yourself. In the end, you are the one who needs to take responsibility for managing your finances in retirement. We actually have three companies where our funds are invested. My wife and I each had separate accounts that we contributed to while we are working and our bank acts as a third management entity. It is very beneficial to compare the three approaches and to be able to compare their performance. We will probably move toward consolidating our accounts at some point, but I think having three different management professionals who consult with us quite regularly is a very sound approach to protect the savings we built up throughout our working years. We like the diversification and the added sense of security that it gives us. When I think back to the Bernie Madoff story, I couldn’t help but feel sorry for those people who lost everything. But I also have to ask, how could you have let one person have control of all of your money. Diversification gives you added security as you take responsibility for managing your finances in retirement.
I find the investment world fascinating and challenging, and I made it a point to keep a little money in a separate account where I could research investment options and to see how I do when I had complete control. I subscribe to a couple of newsletters, and I’ve followed through on a couple of their recommendations. I’ve done very well, I’m happy to say but I would never have the confidence to manage anyone else’s money. What my investment experience has given me, however, is an understanding of how to value a company and how to discover hidden gems within the thousands of stocks that can be purchased. It’s made me a much better-informed client who is able to ask questions and understand why one investment is better than another. It doesn’t take a lot of time, and, with a little effort, you can understand the basics of how the market works. Almost all investments are cyclical and keeping track of the growing market sectors and the rapidly developing global markets around the world can broaden your investment opportunities and make you an informed investor. Do this for a couple of months and you might find yourself watching the finance channels and subscribing to a couple of newsletters yourself. Should you consider yourself an expert at that point? Probably not but you’ll be better informed than ninety percent of the people out there who blindly hand over their savings and hope for the best. Everyone should be an active participant in managing their finances in retirement.
Investing can be a great hobby. It has been something I’ve had an interest in since I earned my first paycheck. My father always told me to save my money and invest it wisely. He never made a lot of money, but he invested in a retirement account while he worked for Grumman Aircraft. Once a quarter he got a list of the stocks that the fund had invested in and I would keep track of how each one did. I learned about stock symbols and shares and always scanned the stock listings to see what stocks went up the highest. What started out as a total mystery about why stock was better than the other turned into an interest that has stayed with me for over sixty years. It’s never too late to learn. Investing can be a great hobby, a rewarding pastime and, definitely, one more way to Enjoy Retired Life!
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