Avoid These 5 Mistakes in Your Retirement Plan

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Avoid These 5 Mistakes in
Your Retirement Plan

By DAVID KANANI, INVESTMENT ADVISOR REPRESENTATIVE | Kanani Advisory Group
August 2018

PROFESSIONAL INSIGHTS FOR SMART FINANCIAL PLANNING

Do you have all your bases covered to pave the way for
30 years of retirement? Or does your plan have a big hole?

 

If you’re new to retirement, you
can expect to make some mistakes.
It’s all unexplored territory for
you, after all, and you’ll have to
figure out some things as you go.
But you can learn a lot from the
experiences of those who’ve gone
before you—and that’s especially
important when it comes to your
finances. Too many stumbles and
surprises could take a toll on your
hard-earned nest egg.
Here are some common errors
to avoid:

1. Not guarding against
market decline.
We’ve seen tremendous growth
in the stock market for almost a
decade—the second-longest bull
run in U.S. history. Long enough
that many people seem to have
forgotten what happened to their
savings and/or net worth during
the recession of 2008. They’ve
let their guards down—and that
inevitably leads to taking too much
risk. All bull markets end, often
dramatically. If you’re near or
in retirement when a correction
occurs, it can be devastating.
We will see another market
correction; we just don’t know
when. It’s crucial to put your
emotions aside—euphoria, greed,
overconfidence—and adjust your
risk to match up to where you are
in life.
2. Thinking of bonds as a
safe investment.
Although bonds are considered
less volatile than stocks, they have
their downsides—particularly in

an environment of rising interest
rates. Interest rates and bond
prices typically have an inverse
relationship: When one goes up,
the other goes down. The Fed
raised rates three times in 2017,
and it is forecasting three more
hikes this year. If that happens,
many investors will see some
losses in their bond portfolios.
It’s one more reason to diversify.
Some alternatives for safer money
strategies would be considering
certificates of deposits by banks.
With interest rates rising, CDs are
becoming slightly more attractive
over the last 12 months. Also,
there are some very attractive
fixed index annuities that could
also be a great alternative to
bonds.
3. Assuming that a particular
financial tool is always good or
always bad.
It would be nice if everything
were black and white, and we
could say Investment A is great
and Investment B is terrible. But
From a
Contributing Professional

in the real world, one could be
good for some and bad for others.
Annuities, for example, are often
either lauded as the perfect
retirement solution or condemned
as the worst financial product
you could purchase. In actuality,
it depends on the type of annuity
you’re looking at and how it fits
in your overall financial plan.
This is true for most products and

strategies: There is no one-size-
fits-all.

4. Not protecting against
long-term care costs.
According to the Genworth 2017
Cost of Care Survey, the average
American underestimates the cost
of in-home long-term care (the most
popular long-term option) by almost
50%. Even those aware of the costs
often pass on purchasing long-term
care insurance—either because
it’s expensive or hard to get, or
because they don’t like the idea that
if they don’t use it, they lose it and
the insurance company wins. But
there are many alternative options
to assist with the costs associated
with long-term care that retirees
may want to explore. These benefits
are typically added through a rider,
which may have an additional cost.
There are some that offer protection
of principal from market losses, but
also have the potential to provide
higher interest earnings. These
insurance products—and their
benefits and features—vary from
state to state but are definitely
worth checking out if you want to
help protect your savings.

5. Not having an income plan.
Regardless of the size of your
nest egg, once you retire and
your paychecks stop, there is
almost always some anxiety about
running out of money or having
to make lifestyle adjustments.
By having an income plan,
with proper Social Security
maximization strategies, you
and your spouse can get a better
handle on how much you’ll need
and where it will come from. By
mapping out the next 20, 30 or 40
years, you can clearly see what the
future may look like as retirees,
and if there is a shortfall that will
require you to make changes or
keep working. Or you may learn
that you’re right on track, and
you’re more financially stable than
you thought.

The path to and through
retirement can be complicated,
and like any first-time journey,
it’s good to have a guide. Getting
advice from a friend or family
member can help with some
issues, but when it comes to your
finances, you may wish to work
with a financial adviser who is
up-to-date on the latest products
and strategies. Sitting down with
an independent financial adviser
who is experienced in working
with retirees and pre-retirees,
and who puts a priority on income
planning—could help you get
around many of the pitfalls and
roadblocks along the way.

Kim Franke-Folstad contributed to this
article.
Investing involves risk, including the
potential loss of principal. Any references
to protection benefits generally refer
to insurance products, never securities
or investment products. Insurance and
annuity product guarantees are backed

by the financial strength and claims-
paying ability of the issuing insurance

company.
Investment advisory services offered
through Kanani Advisory Group, a
Registered Investment Advisor. Securities
offered through Madison Avenue
Securities, LLC (MAS), member FINRA/
SIPC. MAS and Kanani Advisory Group
are not affiliated companies. CA License
#0B34918
David Kanani is the president of Kanani
Advisory Group. He has passed his Series
7 and Series 65 securities exams, and is
also licensed to sell life insurance and
annuity products.

David maintains top
ratings from the National Ethics Bureau
and the Better Business Bureau.
ratings from the National Ethics

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