If you are on the cusp of retirement, get ready for more attention than a high school football phenom being recruited by scores of solicitous college coaches. The reason for your sudden popularity is that you are a member of a large group approaching retirement age that has accumulated almost $13 trillion dollars -- yes, trillion -- in a combination of IRA and 401(k) accounts, according to the U.S. Government Accountability Office.
And while most of us have no idea what to do with our portion of those retirement funds, there are thousands of “advisers” who, like a sleuth of hungry bears attracted to a honeypot, are anxious to get their paws on your money.
Developing and implementing a plan for a secure, comfortable retirement can be complicated, and it is important to have good advice, but it is even more important to make sure it is the best advice for advisee -- not just the adviser.
When facing retirement, there are many valid concerns: Will my accumulated assets generate enough guaranteed income to maintain a reasonable standard of living? Will the income continue as long as I live? Will the income keep pace with inflation? Will there be funds available to meet unexpected financial emergencies or medical expenses?
These are not easy questions to answer, and there may not be enough accumulated funds to resolve all the issues satisfactorily, but there are solid options available. It may be necessary to prioritize your retirement goals and explore a variety of alternatives to achieve them. In this process, it is imperative to understand that, no matter what some high-powered financial adviser may tell you, rarely is there a single, absolute option available to realize your retirement objectives.
Don’t limit your retirement options.
With all the options available for putting your money to work to create a secure and comfortable retirement, it is difficult to know which one is best for you and which adviser to trust for objective advice. But one thing is certain: Your retirement is too important for you to limit your options. With that in mind, be wary of the person pining for your money who offers “absolute” answers.
Here is what I mean by that. There is one guy who advertises heavily on television and social media, making the pitch that guaranteed income annuities are absolutely the worst financial product for an individual to own. He screeches that annuities are tantamount to a rip-off and, as such, (apparently to demonstrate his ethics) proclaims he will never sell them. But he does not stop there. The second stanza of his song proclaims that those who already own annuities have every reason to cash them in and move the money to a “better investment plan.”
Conversely, there is another guy who also uses television and social media advertising to pitch annuities as absolutely the best financial product for retirement. He argues that individuals should put most, if not all, of their retirement nest-egg into an annuity.
Don’t fly blind into retirement.
Most of us don’t have the experience, inclination or time to understand the nuances of annuities and investments, but when individuals seeking to manage your retirement funds come at you with absolute reasons why you should or should not buy a particular product, you have every right to be -- and should be -- skeptical. In assessing their pitch, it is often more important (and easier) to understand the motivation behind the absolute advice they offer.
Take the individual who tells you that retirement annuities are absolutely the worst product you could buy. With a simple Google search, you will discover that his real (and only) business is to sell investments. He knows that any funds used to purchase an annuity means less money to be put into investments that could potentially be churned to create increased fees or commissions. That does not mean that annuities would be a good option for you, but how will you know for sure when the advice received is so tainted and absolute? Likewise, it is reasonable to be skeptical of the individual who suggests that an annuity is absolutely the only product that should be used to fund your retirement. How can you know if that is the case if other options are not explored and compared?
There is only one absolute when it comes to retirement planning.
It all comes down to understanding -- and not being persuaded otherwise -- that there are no product absolutes when it comes to successful retirement planning. Too much depends on an individual’s personal objectives and the funds available to meet those objectives to eliminate any potential option. To do so is to risk the safe and secure retirement that is both desired and deserved.
