For most investors, including retirees, it is critical that they understand the philosophy of investing. If you utilize the services of a professional to assist with the implementation of your retirement goals, the logical approach to reaching your goals should be understood by all parties. One of the greatest causes of worry and concern, during retirement, is the lack of clearly communicating the needs, risk tolerance and definition of success between the client and advisor.
Recently, we discovered several individuals that had cash flow needs but had placed all of their retirement funds in a long-term investment that would penalize them to withdraw money from the investment. Many of these investments have a period of time that you are required to keep your money invested within the product and you are paid a “bonus” of interest for doing so. This type of product may have a surrender period of 12 to 20 years before you can withdraw all of your money for your preferential use.
Balance in investing is similar to balance in life. It is often a tragic turn of events when someone places all of their investment assets within a non-liquid investment for the promise of greater returns. These products may have their place in the portfolio but are often erroneously sold by insurance brokers as a superior investment to other options that allow liquidity and control to be retained by the investor.
To alleviate this concern during retirement, carefully review your cash flow needs. There may arise a need that is unexpected and will cause greater concern if you are strained for lack of funding. We believe it is critical to maintain sufficient cash flow, at all times, by creating a 90-day reserve for potential disruptions in life. Times will arise, they often do, when you will be faced with an incident that you will be proud you reserved plenty of funds to meet the need.
Always challenge the costs of any investment. There are no “free” investments. If the insurance salesman is being paid a commission to sell you a long-term product, the higher his commission, the longer the penalty period for withdrawing your money out of the product. Control is the name of the game. When you ask questions, you should be receiving clear, concise answers instead of confusing statements.
Lastly, be alert to any investment approach that does not allow you the opportunity to understand the underlying investment strategy. Many people have been harmed by failing to truly ask the hard questions of the insurance salesman. Don’t be a victim, take control of your finances and your future. If you have questions pertaining to your current investments, seek out a Certified Financial Planner practitioner to receive a “second opinion”. We provide this service as a courtesy to individuals within 5 years of retirement or already retired. You can expect honesty, transparency and integrity in the process. Your retirement is not an infomercial on TV. You can’t set it and forget it!