“Retirement Killers” – it’s a term that sounds ominous, as well it should. If you’re a regular here at the Blog, you know that planning for a safe, secure, rewarding retirement is what we’re all about, and it has been the mission of Rajiv Nagaich for over two decades. Rajiv has helped thousands of people succeed in retirement, showing them ways to protect their assets, avoid becoming a burden to those they love, and live out their lives the way they choose, not forced against their will into institutional care.

Still, there are so-called “retirement killers” out there. The term could describe the type of major life events and disasters that people have to plan for, such as a health crisis or some other catastrophe. But this 2022 article from Kiplinger describing what the writer, investment adviser Edward Grosko calls “six retirement killers,” isn’t talking about that kind of crisis. Instead, he is sounding a warning about six behavioral blind spots that have the power to undermine even the best-laid financial plan.

Let’s take a second look and see if Grosko’s warning is warranted. We’ve also asked Rajiv to weigh in on this important topic.

Preparing for Retirement is a Source of Stress

“If you’re starting to wonder if you’ll ever have enough money saved to retire, you aren’t alone,” Grosko begins his Kiplinger article. And according to the Employee Benefit Research Institute’s most recent Retirement Confidence Survey, he’s right.

In the survey, a mere 28 percent of respondents reported feeling “very confident” that they would be financially stable enough to retire comfortably. A significant 58 percent reported feeling stressed when they considered retirement.

Grosko understands the challenge of planning retirement finances, and he knows that it’s not easy for the vast majority of retirees to wrap their minds around being fully prepared, no matter their career, income level, or when they start saving. Referencing the survey, Grosko writes, “But when I see those numbers, it also reminds me of all the things I’ve seen folks get really wrong – actions that, at the very least, can throw a retirement off track and, in some cases, have potentially irreversible consequences.”

He calls them “retirement killers”, and he gives his list of the six most common below.

Killer #1: No Written Income Plan

According to Grosko, most retirees worry about outliving their money. But those same people seem to just “wing it” without a solid plan, something written down and easy to consult. They don’t know how much they will need from one year to the next, how to replace their paycheck, or even how long the money they have will last them. A scary proposition, but so common!

Grosko’s response? “A written income plan is like a compass: If you use it correctly, you’ll always know where you are and where you’re going. You may have to make some adjustments each year, as priorities and costs are bound to change as you move through retirement. But if you understand and stick with your income plan, it should help keep you on course.”

(Naturally, Rajiv has a strong opinion about what kind of financial tool retirees need. It’s called a financial dashboard, and we’ll have more to say about it at the end of the article. Read on.)

Killer #2: Assuming Pie-in-the-Sky Investment Returns

We all know that a gamble is not a dependable plan, and yet Grosko sees far too many people count on their investments to pan out perfectly in order for their retirement plans to work. If the market doesn’t do what you expect, what will you do, then? Yet pre-retirees frequently assume their portfolio will deliver consistent returns that are frankly unrealistic.

In his Kiplinger article, Grosko writes, “Be a bit conservative when making assumptions about market performance. As a rule of thumb, your income plan should use a withdrawal rate of no more than 4 percent from your investments to provide income and be sure that your investment portfolio is positioned in a way that avoids wild swings in the market.”

As a precaution, he adds, “Keep at least 18 months to two years in cash available in that portfolio so you are not forced to sell investment positions to pay income when the market value is down. Cash and more stable investments in your portfolio help you get through a bear market. It’s better to get a pleasant surprise when the market is stronger than expected than to have to deal with a devastating disappointment.”

Killer #3: Too Much Investment Risk

It’s easy to get caught up in accumulating money, but some people forget to protect what they have as retirement draws near. Grosko also sees other people make the mistake of thinking they have a conservative portfolio, when it’s actually true that their asset allocation is far more aggressive than they thought.

Grosko explains, “A financial adviser can do an exhaustive review of your investments, simulate how they would react to historic market crises (the 2000 and 2008 corrections, for example) and assess how vulnerable your current portfolio might be to future corrections. Once you have an idea of your true risk exposure, you can reconstruct your investment strategy to suit your needs and goals. This is huge when you’re counting on a stress-free and enjoyable retirement.” (A financial dashboard will help you plan risk far more proactively.)

Killer #4: Being a Retirement Miser

We’ve spoken about miserly behavior before here on the blog: what begins as wise frugality can easily turn sour. Some retirees get so nervous watching their retirement accounts get depleted without anything coming back in that they curtail everything, even the things that they originally wanted out of retirement: travel, for example, or trying new restaurants or hobbies, or visits with family. The upshot is often grief and regret, as those people reach their mid-80s and realize that they haven’t done any of the things they wanted to do.

Grosko suggests: “The goal here is to find a happy middle ground, and a ‘bucket’ strategy for your assets can give cautious retirees the confidence they need to enjoy their money throughout their lifetime. In this approach, each bucket provides for a different need.”

He continues, “For example, you might have a ‘safety’ bucket for money you can get your hands on any time (cash and cash equivalents) to use for vacations and big purchases. An ‘income’ bucket would include assets that are protected from the market and reliable income streams (Social Security, a pension) you can use to pay your bills. And a ‘growth’ bucket would hold riskier assets that are chosen to build wealth for future needs and to counter inflation.” 

Killer #5: Giving Your Kids Too Much, Too Soon

Grosko notes that this particular retirement killer can come in many different “flavors.” There are parents whose grown children are still essentially dependents for living expenses or student loans, for example. Parents can get into the habit of making loans to their adult kids, co-signing on big purchases, or gifting their kids large amounts of cash, only come up short themselves. As Grosko puts it: “I’ve seen way too many examples of couples giving everything they have to their kids, and it’s not helping anybody. It doesn’t help the children, and it’s certainly not helping the parents.”

His solution: “When you fly, they always tell you to put your oxygen mask on first, before you help the person next to you. That should be a rule for parents when it comes to gifting or lending money to their children. Always make sure you are OK first – whether you’re still saving for retirement or you’re already there. And if that makes you feel stingy, think of it this way: You’re giving your kids a different kind of gift – the gift of financial independence, for them and yourselves, too.”

Killer #6: Trusting Your Financial Adviser a Bit Too Much

Your financial adviser is a great asset for you—essential, even—but if he or she is the only one who understands your plan, or if they haven’t made one for you at all, then you’re going to be in trouble. If your planner is constantly telling you that “you’ll be okay” without providing the proof that your future is secure, it’s only a matter of time before reality sets in. As President Reagan famously said, “Trust, but verify.”

Grosko writes, “If you’re paying for advice, you should be getting it. If your financial professional can’t make time to build a plan for you or doesn’t have the ability to do so, you should be concerned. Or, if he or she is focused primarily on growth vs. conservation and income it may be time to move on.”

There’s a Right Way to Plan, Says Rajiv

Rajiv Nagaich of AgingOptions understand full well how planning for retirement in an atmosphere of higher taxes, rising inflation, and market volatility puts seniors in a bind. But, he said, there’s a solid solution, in the form of a planning tool called a financial dashboard. “Imagine flying an airplane without instruments,” says Rajiv. “You would never attempt it! Yet millions of people head into retirement literally flying blind when it comes to their finances. No wonder their so-called plans fall to pieces.”

Without a dashboard, unforeseen stressors like a family emergency or a down market can catch you off guard. Instead, the financial dashboard takes into account all income, spending, and investments, and allows you (with the help of a qualified planner) to see and prepare for the impact of everything from rising taxes to inflation. You can run various “what-if” scenarios to gauge the best route to achieve your financial goals. Most of the “retirement killers” in the Kiplinger article can be addressed with careful attention to a well-prepared financial dashboard.

 If you’ll contact AgingOptions, we can refer you to a planner who will assist you in preparing this essential retirement planning tool.

Breaking News: Rajiv’s New Book is Here!

We have big news! The long-awaited book by Rajiv Nagaich, called Your Retirement: Dream or Disaster, has been released and is now available to the public.  As a friend of AgingOptions, we know you’ll want to get your copy and spread the word.

You’ve heard Rajiv say it repeatedly: 70 percent of retirement plans will fail. If you know someone whose retirement turned into a nightmare when they were forced into a nursing home, went broke paying for care, or became a burden to their families – and you want to make sure it doesn’t happen to you – then this book is must-read.

Through stories, examples, and personal insights, Rajiv takes us along on his journey of expanding awareness about a problem that few are willing to talk about, yet it’s one that results in millions of Americans sleepwalking their way into their worst nightmares about aging. Rajiv lays bare the shortcomings of traditional retirement planning advice, exposes the biases many professionals have about what is best for older adults, and much more.

Rajiv then offers a solution: LifePlanning, his groundbreaking approach to retirement planning. Rajiv explains the essential planning steps and, most importantly, how to develop the framework for these elements to work in concert toward your most deeply held retirement goals.

Your retirement can be the exciting and fulfilling life you’ve always wanted it to be. Start by reading and sharing Rajiv’s important new book. And remember, Age On, everyone!

(originally reported at www.kiplinger.com)