Upticks: 10 Retirement Mistakes to Avoid
By Jake Falcon on August 27, 2021
There isn’t a one-size-fits-all solution to financial planning, but there are some key things to steer clear of. On this week’s episode of Upticks, Cory joins Jake to discus ten things to avoid when planning your retirement.
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This week on Upticks, I was joined by my business partner, Cory Bittner, CRPC®, to discuss 10 financial mistakes to avoid. Below are some key points from our conversation. Be sure to listen here for the full dialogue.
#10 Paying High Fees
Cory: If you are planning to use an advisor to manage your money or create a financial plan, you will see a charge. Frankly, some advisors charge excessive fees. If you are paying an advisor an asset management fee or an investment advisory fee, that advisor should be managing your money. If you are paying an advisor to purchase a product that also carries fees, these are the excessive fees I’m talking about. They cut into your returns.
Jake: If you are or are not working with Falcon Wealth Advisors, I encourage you to ask your advisor a few questions. Ask them: “are you charging me based on a percentage of my assets?” (most do), “are you using products”, and “what fees am I paying for the products?”. We are very transparent about our structure. We do not hire outside managers or products. We cut out the middleman and save money.
#9 Not Having a Financial Plan
Jake: Huge mistake. Although a financial plan is not a roadmap and set in stone. I am not suggesting you should plan out the next 30-50 years. I am suggesting that you should have a plan and goals on file with a Chartered Retirement Planning Counselor or CERTIFIED FINANCIAL PLANNER™ to look at future projections. It is perhaps even more important to review your financial plan regularly. We make this a priority for our clients.
#8 Not Having any Concept of Your Expenses
Cory: Understand what your expenses both before and in retirement might look like. We can’t come up with a definite number for 30 years in the future, but when planning for when the paychecks go away you need to have a concept of what your spending needs are. You don’t need to break it down to every single dollar but evaluate and track what you spend money on.
Jake: We have new financial planning software that we are very excited about. I highly encourage you to inquire about it if you are one of our clients. With this software, you can link up all your accounts and it automatically categorizes all your expenses and shows you a breakdown of your spending. We have officially launched a campaign to convert our clients’ current financial plans to the new software and plan to do so as we have client meetings.
#7 Having Bad Investments
Jake: The media and Covid-19’s impact has romanticized investing in meme stocks1 and cryptocurrency, even when it doesn’t make sense in someone’s overall portfolio allocation. It’s like gambling or playing the lottery. It’s not what we do at Falcon Wealth Advisors. It’s not a sound strategy for retirement planning. I’m not going to judge you if you invest in these assets, but you should not be pulling from your retirement accounts to do so. The money in your retirement accounts should be earmarked for serious financial goals, not dreams of winning the lottery.
#6 Deferring All Taxes
Cory: Doing this could ruin your tax diversification. You should have several buckets of money that you can pull from in order to minimize and control the amount of taxes you pay. Since the introduction of tax-deferrable 401(k) contributions, many people have taken advantage of it to lower their taxable income. It’s a great vehicle for that purpose, and you should always at least meet your employer’s match, however not all your retirement savings should be there. Rules have changed regarding required minimum distributions and beneficiary distributions, and diversifying taxes has become increasingly important.
#5 Transfer or Rollover Mistakes
Jake: We encounter new clients who have cashed out an old retirement account and paid penalties and taxes on it. If you have a pension and make the wrong election on the form, you could cost yourself thousands of dollars by making a transfer mistake.
We have a teammate, Abbie Musson, who specializes in this, so you don’t have to go it alone.
#4 Paying Yourself Last
Cory: While you’re working and saving for retirement, pay yourself first. The money you are saving for retirement is critical. You should consider it as another expense like your electrical bill or mortgage. It should be one of the first line items that comes out of your pay.
#3 Fear/Greed
Jake: Don’t let passing emotions drive your investment decisions. Following the fear of the market and selling can make a bad situation worse. Being greedy and trying to invest big in the new hot stock can be just as much of a mistake. It can throw off your allocation and open you up to risk. Make investing decisions that align with your financial plan. Or better yet hire a professional to help you stay the course when things get tough.
#2 Under/Over Insuring
Cory: If you under insure and need to make a claim, you may find you owe much more than you can handle after insurance payouts. In contrast, being over insured means you are paying for something you may not even need. The amount of insurance you carry and therefore the amount of premiums you pay can really make a difference. Money saved in premiums can be invested, and money lost to pay out of pocket could have also been invested.
#1 Not Knowing Your Purpose
Know what you are saving for and know what your true purpose is in life. Have clear goals for the money you are saving. Save for the things you feel passionate about – whether that’s your grandkid’s college education or a workshop for your retirement days. Saving with no purpose can feel draining. Saving with a clear purpose can make you happier and more motivated.
We covered these at a high level, so we welcome any questions or conversation you might have for us. Email jake@FalconWealthAdvisors.com or cory@FalconWealthAdvisors.com.
Clients choose to work with us to enhance their financial literacy and explain exactly what their financial plan means to them.
Learn more about Falcon Wealth Advisors here!
-Jake Falcon, CRPC®
1 Source: https://www.investopedia.com/wallstreetbets-slang-and-memes-5111311
Hightower Advisors, LLC is an SEC registered investment adviser. Securities are offered through Hightower Securities, LLC member FINRA and SIPC. Hightower Advisors, LLC or any of its affiliates do not provide tax or legal advice. This material is not intended or written to provide and should not be relied upon or used as a substitute for tax or legal advice. Information contained herein does not consider an individual’s or entity’s specific circumstances or applicable governing law, which may vary from jurisdiction to jurisdiction and be subject to change. Clients are urged to consult their tax or legal advisor for related questions.
