by Daniel Foran
Why People Put Off Retirement Planning
Retirement looks different to everyone. However, regardless of what it looks like to you, proper planning is essential.
This is where people get overwhelmed – it’s fun to make plans for retirement, but knowing what to do and how to do it is another story. That’s where a financial advisor can help. Knowing what to watch for in the market, staying on top of new tax laws and understanding how different retirement plans work can be overwhelming when you’re not professionally trained in the financial services industry. There are also many factors to consider based on your situation:
- Are you divorced?
- Do you have children?
- What are your goals?
- Where do you plan to spend your retirement? Retirement planning in New Jersey, for example, is different than in other areas.
It’s important to address these questions as well as the curveballs life throws. Putting your retirement planning off “until later” is not the answer.
In our decades of experience helping families with their retirement plans, we’ve seen far too many people frantically trying to play catch-up. There’s a big difference between a comfortable retirement and one where you constantly worry about money.
Let’s take a look at some common reasons people put off their retirement planning.
It’s never too early to start planning for your future. Contact Foran Financial Group and get the conversation started.
The Process is Too Overwhelming
Many people put off their retirement planning because they think it’s a monumental task. The good news is it doesn’t have to be.
Wes Moss, author of “You Can Retire Sooner Than You Think,” surveyed retirees to help identify the traits of those who were happiest with their retirements. One of his key findings was that happy retirees had spent at least five hours a year planning for retirement. To clarify, that’s five hours per year, not per month or per week. And two of these hours were spent with their financial advisors – one hour every six months.
Sure, planning for retirement used to be a much simpler process. Just 20 years ago, retirees typically only had a pension, a retirement plan and Social Security to worry about. But that’s not common any longer. Today, pensions are rare, Social Security provides less (and its future is uncertain) and we’re living longer.
This is another reason why a financial plan is so beneficial. It can help guide you down a specific path that is appropriate for your goals, responsibilities and risk tolerance. In fact, not having a financial plan is when retirement planning really gets overwhelming. Think about it.
I Don’t Know Where to Start
Step 1: Contact a financial advisor.
Take the burden off your shoulders and find a financial advisor you trust to put a plan in place. A financial advisor will know what questions to ask and how to proceed. But remember, not all financial advisors are created equal.
Look for a fiduciary financial advisor. A fiduciary financial advisor is legally obligated to put your interests first.
Also, make sure you’re working with an advisor who specializes in clients like you – clients who have your same concerns, issues and goals.
I’ll Handle it On My Own – Later
As we all know, life is never predictable. Even those who have the best intentions of putting a retirement plan in place can get distracted. Life can get busy. Major life events can change things dramatically.
- Job loss or business downturn
- Significant health issues or disability
- Aging parents needing your financial help and care
- Death of a family member
- Marriage or divorce
- Birth of a child
With all of these unknowns, “later” can quickly become too late. At Foran Financial Group, we’ve seen many clients who are hoping to retire in the next few years and they have no plan in place. Planning for retirement is too important to put off.
Another problem we see with people wanting to handle their finances on their own is they can make emotional mistakes – it’s very easy to do, especially when it comes to money.
Just think about the dot com crash and 2008’s financial crisis. Many retirement plans lost years of profits during this time.
As humans, we need to fight our instincts when it comes to investing decisions. We naturally feel safest with the crowd, so we tend to chase performance, which can be devastating if we’re not doing the things we need to do (like rebalancing, which helps make sure you maintain the proper risk levels). We tend to panic and sell at the wrong time. When we go through bear markets, we tend to stop buying stocks, when, in fact, the risk is less and stocks are cheaper.
A financial advisor can provide that outside, unbiased opinion. In our combined 58 years of experience working with busy families, we’ve seen many different climates. We work closely with our clients to educate them about their behavioral tendencies. Then we consider it our job to help our clients avoid these emotional mistakes.
I Get Social Security, So I Don’t Need a Plan
These days, specifically when retirement planning in New Jersey, Social Security is not enough to live on. Especially when people file for Social Security benefits without examining their options.
For example, there’s your age. Waiting to file until age 70 can increase your Social Security payments by 8 percent for each year that you wait, up to age 70.
You may also be able to benefit from catch-up contributions, which allow you to set more aside each year in your retirement plan, starting at age 50. This applies to most retirement accounts, including your 401(k), 403(b), 457 or Thrift Savings Plan. There’s also an additional catch-up contribution allowed for Health Savings Plans (HSPs) starting at age 55.
The Bottom Line
Retirement should be a wonderful time, when you can spend time with grandkids, finally take that road trip you’ve been dreaming of or travel the world – whatever your plans may be. Contact Foran Financial Group to see if you’re on the right track.
The financial professionals associated with Foran Financial Group may discuss and/or transact business only with residents of the states in which they are properly registered or licensed. No offers may be made or accepted from any resident of any other state.