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5 Ways to Ruin Your Retirement

Updated: Mar 23

A special note from 2020–There is no shortage of opinions when it comes to how to prepare and plan for retirement. While I believe that each and every family has their own journey, there are some common themes or trends that can be considered. This post was originally drafted back in 2016, and some of the content has been amended or updated; but I’ve tried to leave most of it unchanged. I still feel that each of these points have merit.

In his book, Elite Minds, Dr. Stan Beecham recalls a time when he gave a presentation to parents, asking them the question, “How do you know if you’ve done a good job parenting, or if you’ve failed your kid?” Most parents answered the question in terms of their child finding happiness in life or being content. However, Dr. Beecham offered a different definition of successful parenting— he believes that the most important job of parents is to raise children who become independent adults. In effect, you put yourself out of a job as a parent.

For several years, there has been a troubling development with the younger generations in that more and more of them are going to college and then returning home to live with mom and dad. Now, I know that each and every family situation is unique, and to be fair, I think that sometimes it can makes sense for a child to move home with mom and dad—temporarily. What we are seeing now, however, is a trend of kids returning home and staying home for prolonged periods of time. For the first time in history, we have more young adults ages 18-34 living with their parents than any other living arrangement (i.e. being married, living with roommates, etc.)

Some will blame this boomerang effect on the lack of employment opportunities for college graduates. Others will state that these young people simply can’t afford to live away from home because they are saddled with student loan debt. For whatever the reason, this trend is not a promising one for a number of reasons.

Kids who head back to the nest are getting a later start with financial independence, which means resources used to support them are not being used in retirement planning for the parents. Our economy also needs these young adults to get up on their feet financially. Individual family case studies are too diverse and unique to discuss in-depth, so here are a few good guidelines for parents who have teenagers or kids in college:

Start planning now for life AFTER college. There is a myth that, once you graduate from college, you must have it all figured out. That’s simply not true. It’s probably the biggest fantasy your kids have been told about life. Yes, college can be a very important stepping stone, but there’s no guarantee that you will graduate knowing 100% what your career path should be. Make a plan for the first 6 months, 12 months, and 2 years. The rest will eventually fall into place if you are intentional about your choices after graduation.

Prepare your kids for the possibility that they may have to find a job while they look for a career opportunity. The temptation is quite strong to be still and wait, but those days of idleness need to have a short lifespan after graduation. When your kids have little professional experience, I believe the best recipe is to get started building it. Plus, working in different jobs can be very helpful to them in figuring out what they DON’T want to do.

If your kids do return home, you should create some very clear ground rules for the household economics. The more financially attached they are to you, the more difficult it’s going to be for them to detach themselves. Economics is the science of choice—they must develop their own personal economics. Personal money skills are 21st century survival skills. I’m a huge fan of creating a financial plan for them while they are at home AND an exit date for them to move out. Remember—a goal without a deadline is only a wish.

Lastly, I must briefly mention student loans and their impact on one’s ability to save for other financial goals like retirement. Colleges and universities will often bundle loans in with their aid packages in an effort to show families how they can afford to send their child to that school. Be extremely careful when considering a Parent PLUS loan or co-signing any loan with your child.

If your name is on the documents, you can be held liable for that debt obligation. Sometimes, the intention of the parent is to co-sign the loan so that the child can have access to the funds, but the debt is considered the “child’s” debt, only to be repaid by the child.

Unfortunately, that’s not how the creditors see the loan—especially if you’ve co-signed as a guarantor. There are many horror stories of this type of arrangement going wrong for parents who meant well. Be careful.

#2 Relying Too Much on Financial Journalism

I try very hard not to throw stones in this business because I genuinely want to believe that if you’re involved in financial services, you goal is to help those that you serve. That being said, I feel obligated to share a warning about financial journalism. Over the years, I have read multiple articles on planning for retirement where financial journalists were either deliberately biased with the information they were giving to readers or worse, they were simply ignorant about the subjects they are covering.

The need for financial content for topics like planning for retirement or funding college is at all time highs. When the demand is this high, supply will rise to meet it. Unfortunately, there are large gaps in financial literacy, so it can be simple to sound authoritative if most of your readers aren’t familiar with the vocabulary being used.

For instance, I read an article recently that was written with the premise of how to protect yourself from financial scams when considering investment choices. Naturally, this is something that people who are trying to invest their money would like to read about because, well, two words: Bernie Madoff.

So, the article has financial scams in the title, and the first paragraph essentially says that scammers are trying to get you to buy annuities and life insurance. Next, the article spins into a few quotes and some helpful questions to ask from FINRA, which stands for Financial Industry Regulatory Authority. All things seem to appear legit, but the article itself is hot garbage.

In my view, the overly broad declaration that annuities and life insurance are scams, when they are merely products, is way over the top. Think of it this way—if you have a child who is getting ready to play soccer, most likely they need a pair of soccer cleats. You go down to the local sports store, and you meet with the salesperson there. They have all sorts of cleats to choose from, and they recommend that you purchase a pair of football cleats instead of the soccer cleats. When you get home, you realize that the football cleats are not a good fit at all— where do you place the blame? Do you blame the cleats? Or, do you blame the salesperson?

If you are a sane person, you blame the salesperson for not helping you find what you need. The cleats were always just a tool—and in the case of many bad life insurance and annuity sales, the salesperson is at fault, not the product. To see a journalist completely place blame at the feet of a financial product and not the person who recommended it is financial journalism malpractice. (my opinion)

Second, annuities and life insurance are two very broad product classifications. There are fixed annuities, fixed index annuities, multi-year guarantee annuities, deferred income annuities, single premium immediate annuities, variable annuities, fixed index / variable annuities with living benefit riders….wait, there’s also whole life insurance, indexed whole life insurance, universal life, guaranteed universal life insurance, variable universal life, indexed universal life, and term life insurance. So, which ones are the scams exactly?

What the article doesn’t fully explain in detail is the specific types of products that are being referenced. By interviewing FINRA, the natural assumption would be that the author was referring to variable annuities and variable life insurance, since those are the products that FINRA directly oversees—the products sold by brokers.

In fact, there is even a reference to BrokerCheck, which is a public site for consumers to look up brokers and review their work and complaint history. However, this is all completely irrelevant for someone who is being recommended a fixed insurance product because FINRA doesn’t regulate insurance-only advisors! That authority is left to the states in which insurance-only agents operate. Thus, the FINRA talk is all worthless for people who aren’t working with a brokerage firm…an important fact that was omitted from the article.

I could keep going, but like I said earlier, I don’t want to focus on just one article. I want to focus instead on the issue— financial journalism is not a substitute for good financial advice. We are well into the Information Age, and financial content is now so ubiquitous that we have a new crop of millionaires and billionaires that have built businesses by leveraging the internet and social media. Content is the currency of the internet age, and sadly, many sites will settle for bad content if the alternative is less frequent content or no content at all. As a result, we have reporters (not financial experts) who now cover many types of financial topics, including important areas like retirement income and how to position savings for retirement.

I have some friends that focus on financial planning and retirement topics, and their writing is top notch. They respect their craft enough to write meaningful, well-researched articles that can help their readers. If you are consuming content online about your financial future, do some homework on the author. It’s worth the effort to make sure you are getting great information; however, please note that information is NOT the same thing as financial advice.

Our world is increasingly becoming more and more connected, and the ease with which people can get online and discuss anything is staggering. In the recent years, we’ve seen how easy it can be for search engines and social media to manipulate search results. We have to be more than just consumers of content–now we have to think about how to curate the content as well.

There can be big money in content creation because there is big money in consumer attention–which leads to advertising revenue. As long as this continues, the media will continue to look for ways to protect its turf by generating tons of content in hopes of being the primary source of information when it comes to retirement topics. In my opinion, consumers would be much better off in the long-run by finding a highly qualified financial advisor who can help you build a plan and work as a guide to curate the media blitz as you plan for your retirement years.

#3 Not Planning for Taxes

I have been in a church on more than one occasion where the preacher has referenced the Bible verse that calls for Christians to be cheerful givers, and I have met some extraordinarily generous people over the years that truly embody the spirit of generosity. However, I don’t know that I have ever met a cheerful taxpayer. I’m sure they exist…they probably are great friends with Peter Pan in NeverNeverLand.

Yes, I do believe that taxes are an essential ingredient to making society work—but our government’s increasing appetite for tax revenue is creating a significant divide in our country. Our politicians continue to stoke the flames of class warfare for political purposes, and there is a desire by some lawmakers to shift more and more of the tax burden to higher income earners. Higher marginal tax brackets may end up impacting some retirement savers who’ve accumulated wealth in their retirement accounts.

In their simplest form, taxes are a way for citizens to fund our government and its core functions. However, there continues to be a significant shift in beliefs about what the core functions of our government actually should be. Because my aim is not to be political, I will only suggest that BOTH of the major political parties are guilty of being poor stewards of our nation’s tax revenues. Poor legislation and even worse fiscal policy have resulted in our nation finding itself in a tremendous hole from a budgetary perspective. The deficit spending existed well before the pandemic in 2020; and I believe deficit spending may be here to stay.

There are 3 ways to get our nation out of debt—

We raise taxes

We cut spending

We grow our way out through increased GDP

Unfortunately, if we raise taxes or slash spending to the bone, it somewhat eliminates the probability that we’ll see any meaningful economic growth.

So, what is likely to happen?

If you were to talk to 100 economists, you will probably get at least 101 solid opinions on what to expect in the coming months and years ahead. For me, I take a simpler approach: Expect a continuous call for taxes to go up.

As a financial planner, I believe that the best way you can protect yourself (both now and in retirement) is to create a financial plan to be as tax-efficient as possible while accumulating wealth and after you reach retirement age.

How can you do this?

First, if you can, discover your friend the ROTH IRA. These accounts can be quite magical if used correctly, and they offer savers an opportunity to have their investments grow tax-deferred and qualified distributions come out tax-free after age 59 1/2.

Second, work with a financial planning expert with a great knowledge base about IRAs to discover if you have any opportunities to make ROTH conversions from existing IRA accounts. Take caution not to be over aggressive with the conversion process, as you don’t want to pay more in taxes than necessary or decimate your IRAs. Sometimes we can create wealth destruction if we are too overzealous. Yet, as we continue to see pressures that may push taxpayers into higher tax brackets, converting some IRA assets to ROTH could be a great move.

Lastly, find creative ways to get tax deductions by leveraging charitable giving through trusts, qualified charitable distributions, or donor advised funds. As you get older, it is possible that your ability to itemize deductions on your tax returns will fade. Since charitable gifts are an itemized deduction, tax payers that file for a standard deduction are not getting tax credit for their philanthropy.

I am all for charitable intentions—but if you can also benefit by doing good, shouldn’t you? I’m not a believer that philanthropy should only be a win for the beneficiaries—it can and should be win-win.

#4 Not Planning for a Long-Term Care Event

The long-term care discussion is one that evades many families, despite the growing amount of evidence that shows Long Term Care is a significant issue for retirees. According to the US Department of Health and Human Services, approximately 70% of adults over age 65 will need Long Term Care at some point during their lifetime. With numbers this compelling, you would think that many people would be taking action. Sadly, that isn’t the case. In fact, according to the National Bureau of Economic Research, only about 10% of seniors actually own a private long-term care policy.

So, what gives?

The answer is usually simple–purchasing Long-Term Care insurance can be expensive. The real question we should ask ourselves is—

What’s my plan if I don’t have insurance? 

What assets will I sell first to pay for long-term care expenses if I need it?

This may sound over-exaggerated, but I assure you that it isn’t. There are many families today that are slowly trying to figure out how to preserve a loved one’s savings and pay for care. Check out this video of a woman who’s dealing with her mother’s long-term care expenses.

Trust me when I say that this is not a game you want to play if you can avoid it.

Second, many people don’t understand the role that Medicare and Medicaid play until it’s too late. For some reason, there is a myth that Medicare pays for Long Term Care; and it continues to persist among average Americans. This may simply be some confusion between the names of Medicare and Medicaid, but for the record—Medicare does NOT cover Long Term Care.

The only time that Medicare covers long-term care expenses is when someone has been moved to a skilled care nursing facility (following a 3 day inpatient hospital stay). Medicare can cover the first 20 days of recovery in this facility with no charge. After the first 20 days, there is an additional coinsurance amount that must be paid through day 100. After 100 days—all expenses are billable to the recipient.

*It is very important that anyone needing this type of treatment plan make sure that they are admitted to the hospital for 3 full days before being transferred to a skilled nursing facility.

For families that have never had to deal with Medicaid, it’s not uncommon for family members to be unfamiliar with the rules that Medicaid has when it comes to Long-Term Care. People are often shocked to find out that you have to qualify for coverage under Medicaid. This means that Medicaid will evaluate your situation based on general requirements and financial requirements. (Since Medicaid is still regulated by the states, different states may have slightly different qualifications.)

An important consideration for people that have assets— Medicaid does a 60 month look-back to determine if there was any discharge of assets during this time period. For instance, if grandma decided to give away 14k to each of her 3 grandchildren just 3 years before needing assistance, she may be denied coverage by Medicaid for a period of time. This penalty period is determined by calculating the amount of care (time period) grandma could have potentially paid for her own care with the financial assets she gave away.

It is very important that you or people in your family that may be needing Medicaid assistance fully understand how Medicaid works in your state. A good place to start is the government website, and you can also seek the assistance of a good elder law attorney in your local area.

Lastly, as one plans for retirement, it’s very important to explore the different types of long term care insurance. Just like you would evaluate different wealth managers or investment options, you should look into the various ways to protect yourself using long term care insurance. The insurance industry knows that the need for protection from long term care expenses will only grow, and insurance companies are working to meet this need. This demand is driving innovation in the insurance industry, which is a good thing.

Readers should know that it is a distinct possibility that having Long Term Care insurance may just be a hedge against the cost of a long-term care event. Since the severity and duration of a long-term care event are relative unknowns, it becomes difficult to plan for protection that can cover every scenario and every cost. Thus, we have to determine how much coverage we want, how long we want it, and how we should pay for it…all without knowing when and how we’ll need it.

This level of uncertainty often discourages people who have the means to purchase a policy from actually acquiring some protection. In my view, this can be a critical mistake. Naturally, you want to create a financial plan that covers your financial priorities, so buying long-term care insurance before creating a retirement income plan may not make sense. In other cases, people purchased long-term care years ago while they were working, and now, they must determine how to keep the coverage during their retirement years when income may be limited.

The most important thing is that you actually have this conversation with a financial planner who knows and understands how long-term care insurance works. These conversations may not always result in a long-term care insurance purchase, but they should at least result in awareness and a strategy for dealing with long-term care events in the future. You wouldn’t hesitate to ask for investment help if you were worried about running out of money. Why not seek help for one of the largest potential wealth killers out there?

#5 Not Creating a Financial Plan that is Adaptable

“The same wind blows on us all. What determines your course is the set of your sail.” —Jim Rohn

As a CERTIFIED FINANCIAL PLANNER™ professional, people will often approach me with a question or two about financial matters. These questions are usually simple and technical–like what to do with a 401k rollover from a previous employer or when should they claim social security income. While I don’t condone providing drive-by financial advice, I always appreciate the fact that someone valued my thoughts enough to ask.

Of course, most of the time, I am unable to provide a response because the true answer would require knowing much more about their current financial situation, their goals, and how they make financial decisions. This is why I encourage everyone to focus on creating a financial plan for themselves.

Think about building a house.

“When you begin the process of building a home, what is the first thing you do?”

Many people honestly say they don’t know, while others say, “Lay a good foundation.”

The truth is, the very first thing you do when building a house is you have to engage an architect to help you draw up blueprints. This is a critical step because the blueprint serves as the guide for every other decision. Many people who have built their own home know that getting the blueprints just right can be a challenging process. However, no one questions how critical it is to have the blueprints finished before you begin building.

This is a great analogy for personal finance. Many of us have a vision of what we’d like our lives to be like—while raising children, during our working years, and living out our retirement years. As we move through these phases of life, the strategies we need in our financial lives will change and require adjustments. Life is not static—it’s dynamic. You need a dynamic financial plan, one that can change as your life changes.

This idea of “financial planning” is where many people can get stuck. They believe that if they’re going to create a financial plan that it has to be perfect. I’m here to tell you that no perfect plan exists. Sure, there may be some changes that are easy and require no real effort to implement. Other plan changes may be much more difficult.

Sometimes you find yourself planning for something like your retirement in the midst of political, social, or economic change. There’s no doubt that these challenges can be daunting for some of us. The important thing is that your financial plan is adaptable. Falling into the trap of needing your plan to be perfect for each and every scenario can cause analysis paralysis—and you end up doing nothing.

I said earlier that life is not static, and I truly believe that. Right now, we find ourselves in a season of uncertainty. Our nation is about to elect a new President, Britain just voted to exit the EU, Radical Islam continues to be a threat to national security…. I could keep going. The media will never be short of a crisis to promote. My challenge to you is that if you want to enjoy your retirement years, create a solid financial plan—one that is adaptable—and stick to it. Tune out the noise and stay focused on the things you can control.


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