In our previous newsletter, we looked at the impact of inflation on retirement planning.
These next two are not part of the BIG 5, but often cause our plans to go awry.
- Going for a “Big thing”
So often we find that retirees have lots of time and watch TV or read or sit around talking to others – much more than they used to. Often, they will hear about a “Big Thing”, a tip that could make a lot of money. Those who have not prepared sufficiently for retirement seem to be more susceptible to falling for something like this. Not all speculation is bad. But placing too much at risk on one thing could be.
Over the years we have seen many large companies (and small) who were the “Big Thing”, only to land on the trash heap years later – General Electric, Enron, Tyco, Tower Records, Compaq, and many others.
If you hear a “Hot tip”, it is probably likely that many before you have heard the same tip already and it has already been priced into the stock, or it could be a scam, or you could simply be wrong.
I always tell my clients that it is OK to gamble a little if that is what you like doing or have the propensity to do, but make sure that you are using a small amount of “Vegas money” that you are willing to lose, without affecting the quality of your retirement. Keep this money separate from retirement money.
- Getting caught in online and Ponzi schemes
I have some personal experience with this. My uncle who was retired in his 70’s got caught up in something that seemed really good to him and before anyone knew the whole extent of it, not even his wife, he had lost a large sum of money to a scam with devastating effect even today.
Fortunately, someone at the bank was sharp enough to say something before he lost all of his life savings. During our younger years, we might sometimes joke about falling for things like this, but as we get older, we often lose some of our ability to think through things as carefully as we might once have.
We often hear these responses:
“He seemed like such a nice person”, “She was just trying to help me”, “They said they were going to pay me back with interest” It is not just strangers who are the culprits here. Unfortunately, statistics show that in the majority of cases, financial elder abuse comes from family members or a close friend.
Bernie Madoff’s company was both the custodian and the advisor to his clients, and we all know what happened there. “He seemed like such a nice person”
Some advice here – it might be wise to arrange that the company that holds your money – for instance Fidelity, Schwab – is separate from the person who is the Money Manager (for those mainly reading this that would be SageView Advisory). This is not a guarantee that it will not happen but makes it less likely.
Many times, if there is a good long-term relationship with a financial advisor, these things might be detected early and a “Trusted Contact” on record could be contacted to verify things.
Please feel free to contact me if you would like to discuss how we can help you with your family’s plan either in person, over the phone or on Zoom
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