Monday, June 16, 2014

Are You Inadvertently Generalizing Your Retirement into Financial Ruin?

Are You Inadvertently Generalizing Your Retirement into Financial Ruin?

It’s no secret that there’s a troubling trend plaguing America, in terms of the increasingly huge number of retirees who are barely able to make ends meet, even after they have invested money during their working years and planned for retirement. My last column highlighted some of the latest statistics and thoughts about some of the larger causes of this – in my opinion – extremely sad and dangerous situation.

In that column, I placed the lion’s share of the blame squarely in the lap of the financial planning community,
and I’m not retracting that, by any measure. However, today, I’d like to focus on something that is equally lethal, when it comes to squashing your financial future – and it has to do with you, the retirement investor. It’s called generalization, and it’s ruining more retirements that you’d ever imagine, at least from where I’m sitting as a front-row eyewitness into many people’s retirements for the better part of the last two decades.

Here are the two most common forms that generalization takes:

(1)   A certain concept or plan worked, is working, or seems to be working well for my friend/aunt/coworker/mailman/pastor’s mother, so naturally it will work for me, too. I can understand why it’s easy to jump to such a conclusion, but the fact is that while things may work that way in many other aspects of our lives, retirement planning just doesn’t follow that same rule. This would be akin to the logic of deciding to take someone else’s prescription medication without your doctor’s blessing because you have the exact same symptoms as they do. A terrible idea, isn’t it? Because while you both may have the same symptoms - and you both desire the same outcome (relief) - the underlying illnesses may be completely different. In fact, even if both of you have the same illness, differences in your genetic make ups may mean your pal’s medication could end up hurting you, couldn’t it? The same principle is true with your retirement, so never assume that what works for someone will work for you too – please never do this! 

(2)   I signed up for my employer’s retirement plan, so I’m all set. Well, let me simply put it this way: it’s not always the case that all you have to do to achieve a financially comfy retirement is sign up for the work plan. If it were, we would probably have a sizable number of wealthy retirees, instead of the masses who are struggling just to survive.

The thing about generalizing with your financial plan is that it happens so subtly that most of us don’t even realize we’re doing it. And the multiplicity of so-called financial gurus, dishing out “hot tips to financial freedom across the media to all 360 million of us, as if retirement planning were the same as purchasing an iPad or an iPhone, makes it even more challenging for the average person seeking financial direction. It’s essential for you to keep in mind that your family’s financial future is at stake here. Align yourself with a credible, trustworthy, and experienced financial advisor who can help you zero in on what will work best for YOU and help you stay focused in the midst of all this noise.

Happy retirement!
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