What financial planners wish you knew about retirement goes beyond choosing sound investment strategies or fashioning healthy savings targets.
Advisers do recommend making wise financial preparations for the day when you leave behind that 9-to-5 job. Such plans can improve efforts to sock away enough money for your elder years.
But financial planners also want you to reflect on some big-picture questions: What do you want to achieve or enjoy in retirement? What do you hope to leave to your children and heirs? And will you have enough saved up if you live into your 90s?
All this reflection and planning takes work, they say, but the effort can pay dividends.
“It’s not just about the money,” said Michael Gorman, a certified financial planner in Petaluma with Creekside Partners. “This is really a major life change, like having a baby or getting married.”
Not making preparations “is kind of the worst thing you can do,” Gorman added. As you get older, “you’re going to stress.”
What do financial planners wish people grasped about preparing for retirement?
John Kamola, founder of JW Financial Advisors in Santa Rosa, said he wants people to think about when they want to retire and how they’d like to fill their days once they have “a whole week of weekends.”
“Imagine your perfect retirement,” Kamola said. “What does a typical weekday look like?”
Such reflection gets you thinking about what matters most to you, he said. But the goals you set for travel and other desired activities also can help when estimating the amount of money you’ll need to live on.
Among advisers, a common suggestion for both young and old workers is to get started — or to take the next step — in saving and planning.
One easy saving method is through a company retirement plan, such as a 401(k). Put a portion of each paycheck into the plan, and every year see if you can increase the amount.
If you start small and make gradual increases, “you won’t really notice the money out of your check,” said David Brown, president of Encore Wealth Management in Santa Rosa. But decades later “your friends will call you lucky.”
Another suggestion was to get some basic education about finance and investing.
Brandon Grundy, owner of Ridgeview Financial Planning in Santa Rosa, said he wishes more clients understood the basics of how the bond market affects the costs of mortgages and other loans.
In the low-interest-rate environment of the past eight years, money has been relatively cheap to borrow, Grundy said, “but it’s about to get more expensive.” That means those borrowing with variable interest rate loans should consider paying off the debt or refinancing it to a fixed rate.
Credit card debt remains the most expensive debt to carry because it comes with a high interest rate, making it the most important to pay off first, Grundy said. Also, he avoids taking cash advances with such cards because “it’s going to cost me through the nose.”
Plenty of good books and online materials exist on financial matters, Grundy said. One book he finds helpful for those starting out is “Investing for Dummies.”