“All men make mistakes, but a good man yields when he knows his course is wrong and repairs the evil. The only crime is pride.”
– Sophocles
By AARON KATSMANShekel money bills(photo credit: REUTERS)
How many of us can admit that we are wrong? I speak from personal experience when I say I haven’t made a mistake in the 14 years that I have been married. Okay, well at least in the last 12 minutes I have been mistake free.When it comes to retirement, I have seen investors make the same mistakes over and over again. Here are some common missteps that if corrected can have an immensely positive impact on ones retirement: Lack of organization Too often I learn that retirees have multiple investment and savings accounts with different firms, which makes it difficult to supervise and evaluate. Not only does having so many accounts make it complicated to get a full financial picture, it can create havoc when the retiree gets older and may not be able to stay in control of the accounts, or worse, forgets that the accounts even exist.When a client has multiple accounts, his financial adviser should be sitting on top of his entire situation. The professional will not just focus on one account but should assess everything and see how the entire financial situation fits his client’s goals and needs. In short, your financial adviser should be like a corporate chief financial officer (CFO).Budgeting I volunteer for an organization that helps get people out of debt. I can’t tell you how many times I sit with someone and they tell me that they earn $5,000 a month and they spend $5,000 a month, and for some reason they are always in debt.Nine times out of 10 it is because they forgot annual expenses when they formulated their monthly budgets. Annual items could be car insurance, a vacation or anything else that isn’t a day-to-day expense, including home maintenance. When budgeting, always remember to take annual expenses into account.Keeping too much in money-market funds Part of any financial plan is to keep between three and six months of expenses on the side, totally liquid, in the case of an emergency. This is generally referred to as an emergency fund. I often see investors keep more and more money in money-market funds. While seven years ago money-market funds were used as a strategic asset because they carried a decent yield, now they pay virtually nothing. Nadda, as we say in the vernacular. Keep your emergency fund in money market, but get the additional money invested and starting to work for you.Locking assets outside your own reach As retiree’s age, they usually don’t add someone to the account to execute changes on their behalf. I advise retirees to give a child or a trusted confidant trading authority. This way, if the client can’t fully supervise the account, it doesn’t become frozen.I have seen cases where an older client had an individual account and became ill. They are unable to execute any instructions in their account. This is the time when access to money is extremely crucial, and since the individual is the only one with any authority over the account, the money becomes as good as locked up.There are many ways to go about this that provide for checks and balances. Perhaps you will want to require two signatures from a list of three possible signers. Perhaps you draw up a power of attorney. Consult with your family and advisers to devise a plan and instruments that work for you to give signing authority to someone.Check your pride at the door and correct your mistakes so that you can have a financially sound retirement.The information contained in this article reflects the opinion of the author and not necessarily the opinion of Portfolio Resources Group, Inc., or its affiliates.aaron@lighthousecapital.co.il Aaron Katsman is a licensed financial professional in Israel and the United States who helps people with US investment accounts.He is the author of the book Retirement GPS: How to Navigate Your Way to A Secure Financial Future with Global Investing.
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