How to Avoid Financial Regret in Retirement

The state of most people’s savings is scarily precarious. Yes, it’s true that, for many, the Great Recession’s layoffs and chronic worker income stagnation make investing for the future seem like a luxury. But even folks of modest means can afford to put something away toward the day when they aren’t working. Social Security won’t provide all they need. Moreover, a lot those who do invest don’t do it well.

The best antidote is to get good financial guidance from a savvy financial advisor. Not everyone has the time or inclination to become an ace investor. And even people who do need a smart third-party to guide them. After all, doctors go to another doctor when it comes to their own health.

According to a September survey by financial site Bankrate, some 68% of Americans say they aren’t able to reach their retirement goals. What’s more, a poll from Northwestern Mutual finds that two of three have no financial plan at all. And a TIAA-CREF poll shows that people in the U.S. spend less time planning their individual retirement account investments than choosing a restaurant.

During the Great Recession, when the stock market tanked, the bottom 90% of U.S. households by income sold stock, a Federal Reserve study states. They continued to bail out of equities amid the recovery. Only the top 10% kept buying when shares were cheap. Getting out of stocks is almost suicidal. Although stocks gyrate more than most other assets, they have the best chance long-term of getting you to your goals. Stocks can double, triple or quadruple; bonds (unless they are deeply distressed and stage an unlikely comeback) don’t do that.

Source: Thinkstock

Source: Thinkstock

Certainly, the bottom nine-tenths of the population may have needed the money more to meet everyday expenses. Yet even during the worst of the economic downturn, when unemployment hit 10%, lots of people still were working, and presumably could have kept investing to some degree.

Of those that remain in the stock market, too many stray from the path of smart investing principles. A Gallup poll says that Americans from all age groups – about a third of each cohort – think real estate is the best long-term investment. While housing has recovered from its crisis lows, there is no way it can ever equal stocks’ promise over time.

Meanwhile, a lot of investors allocate their money in a skewed fashion, either too much into stocks or too much into bonds. An Employee Benefit Research Institute survey of IRA holders indicates that one-fifth of them have more than 90% in bonds, and just over a third have 90%-plus in stocks. The bond-heavy group won’t see its nest egg grow enough, while the stock-heavy bunch is taking on too much risk.

With the perspective of age, people come to regret their early missteps. A study by American Century Investments asks pre-retirement investors (age 55-65) in employee-sponsored investment plans what advice they’d give their younger selves. Some 57% say not saving enough was one of the biggest mistakes they had made in their lives. Prevalent reasons for their wrong turn was not making sufficient money or paying off debt.

A smart advisor, however, could have shown them how to juggle their current travails and provide for their futures.

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