How People Fail at Retirement, by Chuck Dudley

  • July 1, 2015

Chuck DudleyIn the June edition of Financial Advisor Magazine, there was an article entitled ‘Why Clients Fail @ Retirement’.  It was authored by a man named Evan Simonoff.

It’s a headline that will grab your attention.  In addition to longevity risk (yes, outliving your money), the author has several excellent points that identify why you may fail at retirement.

Of course, first you have to be ready to exit the workforce.  And the smart person will have activities lined up to keep oneself busy.  Time and time again, there is no plan for filling the daily activities one had for 40 years or so.  You think you want to play golf, or travel, or fish…..or something similar.  But in reality, you can only do so many of those things.  The state of your health will determine a lot of how that plan actually plays out.

So, let’s look at some of the ways people fail at retirement.

DIVORCE

Making a lifestyle transition can be hard on both parties.  One spouse may have lots of ideas for the other one at retirement.  And they could be directly opposed to your spouse’s plans and desires.  The divorce rate for people over 50 has been rising since 1990.  It doesn’t matter the reasons; it does affect retirement planning, however.

If you thought you had enough to retire on, and then half of it goes away………………………………..you see the problem.

SECOND HOMES

This one is pretty simple.  If you have a nice income and can support a vacation home, great!!  But at retirement, income usually drops.  There are property taxes, repairs and upkeep that must be done.  Maybe it’s better to do it on one house instead of two.

And let’s hope there is not a real estate downturn again.

ADULT CHILDREN WITH NO SHAME

This is a tough one.  The trend seems to be for kids to move back when they have no job, or are just too lazy to work themselves out of a tough situation.  It’s tough enough to prepare for your own retirement, much less taking care of adult children that should be out in the world making their own mark.  Unfortunately, this seems to be a bigger and bigger problem.

STARTING A BUSINESS

So you always wanted to own that little restaurant/watering hole over on the lake.  It becomes available and you convince yourself you can work a few hours a day, hire “good people,” and rake in the retirement cash.  Until you discover that running a business is 24/7 and you’re required to be onsite.

This is a risk, the author states, with a lot of men in particular.  They can go stir crazy and need some more structure in their lives.  Someplace to go, something to do.  If you take your retirement funds to start a business, you also get the risk of failure that goes with it.  If you had owned an establishment on Lake Travis in Austin, Texas 6 years ago, you would be bankrupt today possibly. Why?  The lake dropped and no one could get on it until the recent rains in Texas filled the lake back up.  It’s too late now.

OVERSPENDING ASSETS

This is easy to do.  Pre-retirement, you had a lifestyle.  You spent because you could.

But in retirement, you have to create a better plan, and spend more wisely.  Here is where we go back to the longevity risk, out-living your money.

Quite frankly, “every day is Saturday” now.  You have time to shop and spend, where you only used to do it on Saturday.  It’s a habit that is hard to break.

SWINDLED BY ELDER FRAUD

People over 60 have the money, so those people inclined to swindle have an affluent base to attack.  The author states the surge of Senior fraud is becoming a national epidemic.  In August 2012, a survey conducted by the CFP Board of Standards estimated the average senior victim of financial abuse lost $140,500.  That money is hard to replace, and the mental anguish takes another large toll on you.

WHAT TO DO THEN?

Of course, proper planning is the first thing.  Manage your expectations and realize that retirement can be a longer time than expected.

My grandmother used to say:  “I don’t know why they call them the Golden Years because they sure aren’t!”  Maybe they will be Golden and maybe not……………..but if you have a financial plan and a “lifestyle plan,” you stand a better chance of making them Golden.

Planning your lifestyle and reining in your spending habits will make things a lot easier.

In any event, maybe this month’s newsletter will help you get a handle on your expectations and nudge you toward proper planning.

ACTION PLAN

If you really want to make sure you have right ideas for moving forward in a positive manner, we will listen.  We’ve been able to help families and businesses learn to use money wisely, and we’d like to help you too.   We would be honored to visit with you about how to help you and your business.  My number is 501-318-0010, or you can send me an email at cdudley@argentfinancial.com.

An hour of your time spent analyzing your situation might make a lifetime of difference

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