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.

Pay close attention to your savings and money as you grow older

One of the fears of growing older is that you might lose the ability to take care of yourself, becoming unduly dependent on others. Un¬fortunately, senior citizens, for any of a number of reasons, fre¬quently fall for schemes and swindles.

Elder abuse

Sadly, the phenomenon of "elder abuse" is becoming more wide¬spread. In places like Florida, it is a fast developing cottage industry. Newspapers report on stories of "caregivers" getting powers-of-attorney from their clients through fraudulent means, unscrupulous relatives stealing from Grandma’s ac¬counts and seemingly loving "sweethearts" marrying older people", either to steal their assets while they are still alive or be¬come beneficiaries of their estate.

Victims

Many victims of financial exploitation are individuals at the beginning stages of disorders’ such as senility, dementia, or Alzheimer’s, which cause them to lose control of their own affairs. Proper preparation and organiza¬tion can help minimize the chances of you or a loved one be¬coming a victim of financial exploitation.

Protect yourself

Take the following steps to protect yourself:

• Review your financial docu¬ments, including your will, powers-of-attorney, and insur¬ance policies, every year to make sure they still represent your wishes.

• Loneliness and depression in¬crease vulnerability. To mini¬mize the attentions of dishon¬est individuals, surround your¬self with family, friends, and enjoyable activities.

• Be diligent about checking bank and other financial records. If you don’t receive them by mail on a regular basis, learn how to check online. Many cases of financial exploitation are only discovered much later, due to lack of awareness.

• If your health is starting to fail, act before it gets too late. Make sure that you have a will and there is someone you know that you can trust who can be given the responsibility of making medical decisions for you, should you no longer be able to do so.

• Let your lawyer or other trust¬ed person know where your important documents are. Knowledge is power, and know¬ing your finances are well-organized and monitored is an impor¬tant defense against being exploited.

A note to the children

If you have elderly parents, keep a close eye on their care-givers and any new "friends" or "sweethearts" that suddenly appear on your parent’s doorstep or who seem to be extra helpful to the exclu¬sion of anyone else. If you ever hear your senior parents talking about “signing papers” or “visiting my lawyer to sign the papers”, be alarmed and find out exactly what is being signed. It may be the ownership deed to the house or a property.

The bank account

A parent in the beginning stages of disor¬ders’ such as senility, dementia, or Alzheimer’s may still have the right to walk into the bank and give instructions about money. If you in such a situation, warn the bank and cancel that person’s right to give the bank instructions. We know a widow whose late husband instructed the bank to sell all their stocks and shares when the market was at its very lowest in the recent recession and they had been living off the dividends. She is now close to destitute.