A third of adults say that running out of money is their top retirement concern

• What experience do you have?
• What are your qualifications?
• What licenses do you have?
• What products and services do you recommend?
• Will you be the only person working with me?
• How are you compensated? For example: Do you charge a flat hourly rate (or "à la carte" rate) for services? Is the fee a percentage of assets under management?
• Do you receive a commission or a referral fee paid by the product or service providers that you sell?
• What organizations are you and your firm regulated by?
• Will you provide a written agreement that details the services and fees that will be provided?

There are ways to make a quick fortune, but…

• Play Lotto.
• Play the progressive slot machines.
• Win a TV show that offers a mega-prize

One bad decision can ruin a lifetime of good ones

Actions have consequences, and this is more than true in the final third of life. If you are at or near retirement, the decisions you’re about to make will have consequences for decades to come. Unfortunately, it only takes one bad decision to ruin a lifetime of good ones. So what are the biggest mistakes to avoid?

Link your retirement to your bank account

If asked when you’ll retire, your answer should be a dollar amount, not a year. Retirement is about independence, not simply age, and money is critical to independence. You need to know exactly how much you need to save to fund the retirement you want.

Managing your risk

Risk is a necessary companion to investing. When you’re in your 20s and 30s, you can afford to take greater risks in hopes of receiving greater returns. If you lose money, you have decades to recover. Not so as you approach retirement. You can’t afford to operate at the same risk level. As you age, you need to progressively shift out of potentially volatile investments. During retirement, large losses in your portfolio are extinction-level events. The bigger the loss, the worse the recovery. If markets have taught us anything during the last 10 years, it’s that you need a plan to manage your risks and avoid large losses.

Senior risks

The same is true for a whole host of new risks that come with growing older. A serious medical condition, the death of a spouse, getting laid off, entering a long-term care facility or getting divorced could all significantly impact your emotional and financial well-being. The goal is to consistently identify and manage your risks in order to increase your odds of a rewarding retirement.

Minimize debt

An increasing number of people are entering retirement age with no pension, inadequate savings, a big mortgage, an average of about six credit cards, and debt on one or more cars. Work is not a choice at that point any more than it’s a choice for a 30-year-old with all the same obligations and a growing family to feed. Debt adds risk and reduces cash flow. Your primary goal should be to retire debt-free and have your income at your disposal. If you retire with debt, you will spend a long period paying for the purchases of yesteryear instead of using your income to live the life you’ve dreamed of. Get professional advice. Preparing for retirement is all about accumulation, saving and investment performance are your primary concerns. But in retirement, your primary goal becomes much more complex: to continue to grow the pie while simultaneously eating it. Going without a competent adviser at this stage could be a big mistake.

Distribution strategy

When you retire, your portfolio takes over the job that the payroll department handled during your working years, namely to send you a paycheck every month. If you retire when you’re 65 and live until you’re 85, it needs to cut you 240 monthly checks. There are a host of variables that will affect its ability to do that, such as the distribution rate you choose, investment returns, inflation, how long you live, and good old-fashioned luck. Some things you can control and others you can’t, but having a well-conceived, sustainable distribution strategy will help ensure that your money lasts as long as you do.

How much do you need to invest to live off your money?

It’s a long time ago and I don’t have the details, but I remember that my Dad quit working when he was 65 and spent the next 18 years pruning the roses, tearing up the golf course and reading the papers.

Me

I’m 73 and still working and trying to stretch my salary from one end of the month to the other. Somehow, my retirement is different and it’s not me that’s to blame. Other things have changed and left me out in the cold. So I work and the truth is, I enjoy it. I like waking up in the morning knowing that I have something to do.

On the other hand…

I often think about stopping work, especially on the days when things don’t go so well. I find myself making mistakes and I find myself not understanding a conversation or argument as I used to. Perhaps it’s time to quit…

Question: How much money do I need?

Answer: How much longer do you intend living?

Many people think there’s some magic number of how much they need to have to be set for life financially. And I suppose there is a number that’s big enough that it would cover the financial needs of most people. But the amount of money we must have to get us by in life depends on how much we spend or need each year. And there’s just no way to give a pat answer that will be appropriate for all investors.

I’d also like to maintain my standard of living

Let’s say I want $50,000 a year. Inflation is about 3.5% a year and income returns about 5% a year. Using these numbers as a guide shows that I have to put away $1.2 million dollars at the beginning of the 30 year period. No good for me. In any case where can you get a 5% return? That’s a key to the puzzle. With U.S. Treasury rates so low, you’ll need to take some risk to achieve 5% yields in the current environment.

A portfolio

One example portfolio that might get you there could be a mix like IFA.com Portfolio 10, which is the safest one the investment firm offers. This portfolio holds 8% in U.S. large company stocks, 4% in small company stocks, 2% in real estate, 4% in international, 2% in emerging markets and 80% in bonds. Historically, which isn’t a predictor of future success, over time this portfolio generated a long-term average return of 5.6% on average a year. But with the added risk, including the exposure to stocks, investors need to be aware that a few bad years in the market could curtail your gains.

Do the exercise

Again, the above scenario may not be right for you or for most people. However, the exercise of backing into how much money an investor needs to reach a goal, and understanding what risk must be taken to get that return, is a valuable exercise for all. Guess I’ll just keep on working, mistakes and all.