This is excerpted from Forbes' "Roadblocks to Avoid in Retirement Planning".
I expected an article about how to cash in stock options, enjoy your executive perks, and otherwise retire on $200K/year. I was pleasantly surprised that Forbes doesn't expect everyone to retire to their standard of living, although they leave a few holes in their discussion.
BTW Forbes expects you to read the article and then to scroll through 10 screens of ads to review the individual roadblocks. So here they are without the extra effort but with my () comments:
1. Limited Horizon. Don't plan for X years of retirement, because you may outlive your money. It's also a mistake to assume that you or your spouse will live longer. Run various scenarios and consider the contingencies of each.
2. The Law Of Averages. It's a mistake to assume that the law of averages will work in your favor. Over time, the stock market is the place to be, but if you were close to retirement and took a big hit in the market downdraft after Sept. 11, 2001, you're hurting now. Remember: Averages trace the general trend and don't tell you much about the specific instance. So, don't bet the farm based on an average.
(OK, Forbes, what other benchmark should we use? The Depression?)
3. Following Someone Else's Plan. Don't follow the herd, and don't be bound by the book when drafting a retirement plan. Define your needs carefully and precisely. Make trade-offs as needed that fit your needs--not the outlines of an off-the-shelf plan.
4. Forgetting That The Tax Man Cometh. Remember that you're not immortal, but the IRS is eternal--or so it seems. Therefore, a sound strategy is required if you expect to pass a good chunk of your estate on to your children upon your death. Working with a tax adviser now means the taxman won't morph into "Infernal Revenue Service," and your grandchildren can go to college on the money you bequeath.
5. Panicking. There are always some bumps in the road. If you hit one, don't panic and dump your retirement plan. Consistency is the key to long-term success. Just don't let consistency degenerate into dogma, because it will be necessary to make minor adjustments along the way.
(Don't panic but don't stick to a bad plan. OK, how do we tell the difference?)
6. Future Health Care Costs. Don't base future health care needs on current costs. Age changes everything. There's also the matter of inflation. Work with your financial adviser to plan your future health coverage.
(Ruh-roh-- I can see where the financial advisor would push commissioned sales products. How 'bout another source for assessing & handling health care expenses?)
7. Not Getting Professional Help. OK, hotshot, listen up: You can't run your own money, even if you're top of the heap at work. You need a pro to balance risk and reward and to match asset allocation to your needs. Trying to do this yourself is an invitation to a beheading--yours.
(Glad I'm not subscribing to Forbes.)
8. Hiring The Wrong Pro. When looking for an adviser, competence is a given. Look for fit and trust. If it's not a match, you owe your current adviser nothing. Find another who better meets your needs. Remember: Your adviser's fees come out of your pocket, so make sure you get value. Shop around, because fees and performance vary widely.
9. Dreams vs. Reality. Here's betting that you don't retire to Tahiti where dancers peel grapes for breakfast. But if you're diligent, you might be able to afford that old farmhouse. If your hair is gray, financial reality has almost certainly intruded, and it's time to put aside youthful dreams of the South Pacific and start planning for retirement.
(Now I want to visit Tahiti.)
10. Oversimplifying. How and when do you want to retire? What will it take to achieve your goals? Drafting a sound retirement plan isn't easy and requires mastering the details. Remember: It's your retirement. Get it right.
(JohnGalt, I'll let you handle this one...)
I expected an article about how to cash in stock options, enjoy your executive perks, and otherwise retire on $200K/year. I was pleasantly surprised that Forbes doesn't expect everyone to retire to their standard of living, although they leave a few holes in their discussion.
BTW Forbes expects you to read the article and then to scroll through 10 screens of ads to review the individual roadblocks. So here they are without the extra effort but with my () comments:
1. Limited Horizon. Don't plan for X years of retirement, because you may outlive your money. It's also a mistake to assume that you or your spouse will live longer. Run various scenarios and consider the contingencies of each.
2. The Law Of Averages. It's a mistake to assume that the law of averages will work in your favor. Over time, the stock market is the place to be, but if you were close to retirement and took a big hit in the market downdraft after Sept. 11, 2001, you're hurting now. Remember: Averages trace the general trend and don't tell you much about the specific instance. So, don't bet the farm based on an average.
(OK, Forbes, what other benchmark should we use? The Depression?)
3. Following Someone Else's Plan. Don't follow the herd, and don't be bound by the book when drafting a retirement plan. Define your needs carefully and precisely. Make trade-offs as needed that fit your needs--not the outlines of an off-the-shelf plan.
4. Forgetting That The Tax Man Cometh. Remember that you're not immortal, but the IRS is eternal--or so it seems. Therefore, a sound strategy is required if you expect to pass a good chunk of your estate on to your children upon your death. Working with a tax adviser now means the taxman won't morph into "Infernal Revenue Service," and your grandchildren can go to college on the money you bequeath.
5. Panicking. There are always some bumps in the road. If you hit one, don't panic and dump your retirement plan. Consistency is the key to long-term success. Just don't let consistency degenerate into dogma, because it will be necessary to make minor adjustments along the way.
(Don't panic but don't stick to a bad plan. OK, how do we tell the difference?)
6. Future Health Care Costs. Don't base future health care needs on current costs. Age changes everything. There's also the matter of inflation. Work with your financial adviser to plan your future health coverage.
(Ruh-roh-- I can see where the financial advisor would push commissioned sales products. How 'bout another source for assessing & handling health care expenses?)
7. Not Getting Professional Help. OK, hotshot, listen up: You can't run your own money, even if you're top of the heap at work. You need a pro to balance risk and reward and to match asset allocation to your needs. Trying to do this yourself is an invitation to a beheading--yours.
(Glad I'm not subscribing to Forbes.)
8. Hiring The Wrong Pro. When looking for an adviser, competence is a given. Look for fit and trust. If it's not a match, you owe your current adviser nothing. Find another who better meets your needs. Remember: Your adviser's fees come out of your pocket, so make sure you get value. Shop around, because fees and performance vary widely.
9. Dreams vs. Reality. Here's betting that you don't retire to Tahiti where dancers peel grapes for breakfast. But if you're diligent, you might be able to afford that old farmhouse. If your hair is gray, financial reality has almost certainly intruded, and it's time to put aside youthful dreams of the South Pacific and start planning for retirement.
(Now I want to visit Tahiti.)
10. Oversimplifying. How and when do you want to retire? What will it take to achieve your goals? Drafting a sound retirement plan isn't easy and requires mastering the details. Remember: It's your retirement. Get it right.
(JohnGalt, I'll let you handle this one...)
