Debra Quoted in is WSJ article.
PRACTICE MANAGEMENT: Mistakes That Can Wreck A Retirement
By Veronica Dagher
A DOW JONES NEWSWIRES COLUMN
3 May 2011
NEW YORK (Dow Jones)–Some retirees are making avoidable mistakes, damaging both their personal and financial lives.
Not having a game plan in retirement, botching up their investments and making hasty housing decisions are just a few of the pitfalls advisers are seeing clients fall into.
Greensboro, N.C.-based certified financial planner Dennis Stearns had a client who “sailed into retirement with plenty of money and good health.” But the client became bored within a couple of years of playing golf and sitting around the house.
The client had an affair, left his wife and married his girlfriend. The divorce, remarriage, and subsequent divorce wrecked his finances and alienated him from his entire family.
While Stearns says this is an extreme example, it demonstrates the need for retirees to have a game plan. “Too much time can lead to overspending and some other major personal and financial mistakes,” he says.
If an adviser notices a client is foundering with their new found free time or not thinking through the consequences of their decisions, Stearns says they can “gently nudge” the clients to stay active, engaged and set goals. Then can also lay out the financial implications of bad decisions.
Quitting work cold turkey can be a big mistake for some soon-to-be retirees, says Peg Eddy, a San Diego-based certified financial planner. One of Eddy’s clients resigned from his role as corporate executive but then struggled to find his identity. “It took him a while to get used to the idea he was no longer ‘John Smith, CEO of ABC Co.,'” she says.
To make the transition easier, and if it’s possible, Eddy advises clients to ratchet down their work schedule step-by-step, a year or 18 months before retiring. She recommends clients work four days a week and then eventually stop working completely.
Eddy also says clients who wish to do consulting work after they retire should cultivate potential business while they are still employed. “It’s too tough to reconnect after you are out of the corporate world/womb,” she says.
Abigail Rosen, a Madison, N.J.-based certified financial planner, has seen too many clients assume that because they are retired they should make their investments significantly more conservative.
That’s usually not a good idea, she says. “What some retirees don’t understand is that they could live another 20 to 30 years,” says Rosen. Instead, she encourages clients to maintain a well-diversified portfolio to ensure the growth they’ll need in their late 80’s or 90’s.
Retirees often plan on downsizing their home, says Alan Moore, a Rapid City, S.D., certified financial planner. “Most figure they will sell the two-story, 2,500 square-foot house and downsize to a quaint, one-story house that is easier to maintain,” he says. And while they often assume the one-story house will be cheaper since it’s smaller, they often buy where other retirees live and the housing prices are a bit higher than a normal neighborhood, he says. As a result, they may end up spending all of the sale proceeds from their home on the new, smaller home.
Moore says while it generally makes sense to downsize, retirees should make sure they run the numbers with their adviser to ensure they’ll end up spending less and not more.
Retirees should also spend at least four to six months in the area they are thinking of relocating to before they buy a property in that area, says Debra Morrison, a Roseland, N.J.-based certified financial planner. “It’s best to experience the summer heat in Florida and Arizona first-hand, for example, before pounding in stakes permanently,” she says.