5 Need-to-Know Items as You Approach Retirement From a Holistic Financial Planner

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If you’re 10 years out from when you expect to retire, then now is the time to get serious about a retirement plan.

No matter what stage you’re in, there’s never a bad time to take responsibility for your financial destiny. However, a decade away from retirement should signify to pre-retirees that it’s really time to get a comprehensive plan if you want to enjoy retirement.

In recent years, retirement planning has received plenty of attention. In 2011, the first of the baby boomers reached what used to be known as retirement age. That kicked off an 18-year run for boomers, who’ll be turning 65 at a rate of about 10,000 a day.

Despite the attention, there are plenty of important details that most pre-retirees are likely to miss.

Four Important Buckets for Your Money and Assets

The first bucket includes liquidity for emergency funds, involving products like money markets, CDs and savings. The second bucket is lifetime, contractually guaranteed income that you can never outlive. That entails pensions, social security, and hybrid annuities. Long-term growth is the third bucket and that is where we get capital appreciation through investments such as stocks, bonds, ETFs and principle protected notes. Finally, there’s the legacy bucket, which focuses on estate planning, charitable and tax planning, long-term care planning, as well as inheritance and passing assets to our loved ones.

You don’t need to know all of the ins and outs of these buckets. Understanding these buckets, however, will put you on the right path.

Most Financial Professionals Meet a Minimal Standard

Brokers and advisors who operate under the suitability standard rather than a fiduciary standard carry products from companies they represent. Under the law, these brokers are only responsible for doing what is “suitable” for clients, or what is “good enough,” but that doesn’t mean “optimal.” Approximately 85 percent of financial professionals meet this minimal requirement, as reported on PBS Frontline. Only 15 percent of financial professionals meet the fiduciary standard, which, under law, requires the “very best” advice to clients.

Everyone Is Different, so Their Portfolios Should Be, Too

Given that so many advisors meet only the suitability standard, which doesn’t require the very best advice, it may be no surprise that many Americans have a cookie-cutter-style retirement plan. A product that’s great for your neighbor may not be for you. Ask questions. Be curious as to whether your products are really best for you.

Beware of Hidden Fees

Mutual funds can be two to three times more costly than advertised and often carry front-end and back-end loads of charges. Variable annuities are considered one of the most expensive risk-type vehicles an investor can own today. According to a 2012 study from the research firm Demos, the average American household will lose approximately $155,000, or 30 percent, of what they would have otherwise saved, to money managers of their 401(k) funds.

Dying Costs Money

Simply having a will in place will not protect you from probate and unnecessary taxation to dollars you want to pass on to your loved ones. Often, an estate plan doesn’t “sync up” with an individual’s portfolio properly, which leads to large legal problems for loved ones in the time of loss. Asset protection is one of the most important measures in getting your money to where you want it to go after death. Don’t have an ex-spouse successfully claim your hard-earned money, which you’d intended go to your children.