Screwing Up Retirement

When the question is posed to the average American asking “Why do you think that people who retired with assets fail in retirement?”….a survey conducted found that the most common response recorded by participants was “investment performance”. Herein lies the gap between false assumption and reality. Financial markets (and fees) have far less impact on investor performance than investor’s investment behavior, or spending habits, and much less the interpersonal dynamics of individual’s lifestyle choices. After two decades of working as a Registered Advisor, it is my opinion, that neither performance (nor fees) is the reason behind a faltering retiree who started with sufficient assets for a reasonable planned-for lifestyle. Let me share with you six top reasons most commonly experienced, written about and talked about in my field that severely compromise the potential success of one’s financial retirement status. 1) Divorce. When assets are split and living expenses increased, personal financial situations face significant challenges going forward. 2) Second homes. Owning a second home often represents a bucket list dream. Oftentimes prompted by an impulsive desire, it is typical that costly future financial implications are overlooked. Most people buy when they are in their peak earning years, pulling large sums out of accounts tagged for retirement, not considering the draining impact of the maintenance, property taxes and loans, that owning one one or two homes during a time when they will have smaller cash flows [in retirement]. 3) Adult children. This problem seems to dwarfs all others. Parents are allowing themselves to be sucked dry by adult children who lack the personal dignity of being independent. I am not talking about a grandparent who picks up a grandchild’s college tuition or a brief interlude where an adult child faced a short term disability and needed financial assistance to bridge the gap until back at work….I am referring to the situation when an adult child chronically hits the parent for money for this or that to fund their irresponsible lifestyle and the parent doesn’t say “No.”. 4) Starting a business post retirement that required substantial capital funding, and using retirement funds to do it. Rarely a success story. 5) Health Care. Lifestyle choices leading to unhealthy personal habits, obesity, and poor health nearly guarantee costly out-of-pocket healthcare expendituress during retirement. 6) Overspending. This is what I witness most often. Overspending in the first seven years of retirement can have a significant impact on one’s future financial stability in later years. It is not uncommon for me to witness a new retiree embarking on a road of taking bucket-list vacations, annually, along with a high-ticket remodel of their house and new car. In essence, this retiree is spending a lot more retired than when they were earning an income.  I can’t say that I have ever met anyone who was failing at retirement due to investment performance. If that was the case, I would most likely guess that the investor choice and speculative nature of the investment was the culprit………not the financial markets.

Print this Page