PARTING SHOT

Here ’ s how you can help them avoid costly errors .

HE END OF THE YEAR IS AN EXCELLENT TIME TO REBALANCE a retirement portfolio , and this year , that ’ s especially important after all the market movements prompted by the U . S . presidential election . As financial advisors help their clients through retirement planning , a few things should be kept in mind so that retirees can avoid mistakes that would cost them .

Addressing Debt

It ’ s easy for retirees to fixate on their account balances . The loudest advice they often get is about how much they ’ ll have to amass for a happy retirement . But while they ’ re pursuing a magic number , they can run into problems if they ignore other key financial metrics .

Debt is one of those . If it ’ s not addressed as part of the investing strategy , it can derail a retiree ’ s financial dreams . The more debt people have to manage after entering retirement , the less flexibility and security they have . It ’ s often better if they pay it down , even it means entering retirement with less money in investments .

Consider an investor who has saved $ 2 million but enters retirement with a mortgage , a car loan and credit card debt . The repayments on these might require a significant amount of their retirement income , and beyond that the debt could come with interest rates outpacing their average investment returns . If the market dips , it could affect the investor ’ s finances , leaving them without the resources to meet their obligations .

On the other hand , a retiree with only $ 500,000 saved but zero debt will be in a better position to live comfortably with Social Security and a small pen-

A retiree with only $ 500,000 saved but zero debt will be in a better position to live comfortably with Social Security and a small pension .

sion . This debt-free person will also have more flexibility to adjust spending when market fluctuations demand .

Those who have paid off their debt also enjoy greater peace of mind — less stress and more control over their finances . They can more easily adjust their spending , especially when health issues or other unexpected events occur , requiring them to make unanticipated financial changes .

Costs Of The ‘ Go-Go Years ’

When rebalancing , retirees should consider the early days of their retirement . Sometimes referred to as the “ gogo years ,” this first phase often involves a lot of activity that tapers off over time . The person is often still in good health when they retire and excited about travel , hobbies and other activities that can involve elevated spending .

To help them fund those activities in a way that won ’ t eat into their spending potential farther down the road , financial advisors can help these clients think through what their “ go-go years ” will involve and the steps that should be taken to fund them . The closer retirees get to the end of work , the easier it can be to nail down their continued on page 58

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