When and Where Do I Begin Planning for Retirement?
The first part of this question is very simple to answer. When do you begin planning for your retirement? The answer in my opinion is, “AS SOON AS POSSIBLE.”
To give you a simple example of how this time concept works, imagine someone at age 20 sets aside only $50 per week for 10 years at 7% and stops adding any more money until age 65, he will have more money than if another person starts the same savings plan at age 30, and continues at the same amount until age 65. The first person with only 10 years of initial investment will have $428,178 while the second person with 3 ½ times the initial investment will only have $387,226.
However, starting “AS SOON AS POSSIBLE” is typically met with excuses such as, “I want everything and I want it NOW,” “who knows what will happened tomorrow,” “I want to enjoy my life now,” “I have plenty time later,” “my expenses are too high now,” and so on and so forth.
In an article I read about people living in Japan, I discovered that from the first day they start working, they have learned to set aside 10% of their earning for emergencies, vacation and retirement. This is, of course, a great concept, but as long as we are dealing with the excuses I mentioned, it remains a personal choice for us when to wise up.
The second part of this question, however, has a little more depth to it. Where do you begin planning for your retirement? The answer could be simple, but we could make it quite complicated too.
The way that we bring complication into this simple solution is dealing with what I call “coffee table advisors,” or simply put, “incompetent advisors.” These advisors know enough about a subject to be dangerous. These incompetent advisors could be your next-door neighbor, one of your friends, or maybe a relative. Please understand, I am not saying that they purposefully steer you into the wrong plan. On the contrary, I believe they are genuine in the advice they give you; however, they are genuinely wrong about it.
Retirement planning cannot be carried out with a cookie-cutter approach. Every individual and family’s situation is unique. For the past 23 years, I have heard so many stories from my clients and prospects. The worst one was about one of my client that I met in Fayetteville, GA. He and his neighbor were best friends for 25 years. The neighbor did some planning for his parents, working with his parents’ advisor. Without consulting me, based on his neighbor’s recommendation, he did the same thing for his parents. My client ended up losing his parents’ $250,000 home to the nursing home after his parent passed away in the nursing home. The part that my client and his neighbor overlooked was the fact that the neighbor’s parents were living in another state. Medicaid and nursing home planning guidelines are state driven, each state having its own set of guidelines.
When you are looking for an advisor, there are three areas you should consider.
First, you need to find an advisor you can trust. In today’s environment, with search engines like Google, Yahoo, Bing and so many others, checking someone’s background is very easy. For your peace of mind, call them and ask for a reference. Most reputable advisors will give you references from their existing clients and even help you with ways to check up on them. The only ones who get upset are the one who have something up their sleeves.
Second, the advisor you find should be knowledgeable in the field of retirement. I am not talking about someone who knows everything. Such a person, in my opinion, doesn’t exist. However, this advisor needs to have good, basic knowledge about retirement planning and should be transparent and open about it. If they don’t know about an area, they should let you know instead of giving you incorrect information to avoid looking bad. It is essential for your advisor to know how to find the answer to your questions or solution to a problem.
Lastly, the most important part of working with an advisor is taking the time to make a proper choice with the provided information. The advisor needs to work at your pace and give you an opportunity to digest the information. I would strongly suggest staying away from any advisor who puts pressure on you, especially if they say things like, “today is your last chance” or “it’s now or never.” Anytime you are dealing with someone like that, you should always choose “NEVER.”
After all, the job for an advisor like me is to advise. The decisions are yours and yours alone. The way I look at it, my job as an advisor is to provide information and give you proper knowledge. With the information you have been provided, you need take the time to digest it at your own pace and make a wise and educated choice. If you feel my advice will improve your financial situation and protect your future retirement plans, you will ask me to implement those plans.
In conclusion, you need to be proactive. The last thing you want to do in this environment is to be a deer caught in the headlights; otherwise, you will end up saying things like, “I should have done this,” or, “I wish I would have done that.” As long as you have time to take advantage of opportunities, you need to do something about it. Once something is broken, it is already too late; no matter how you fix it, it will never be like before. As I’ve learned in my 23 years of experience dealing with businesses and individuals, no one plans to fail, they simply fail to plan.
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