Matt's money: Seven things I’ve learned about retirement

by Matt Montgomery

In 1983, I had been in this business for one year. I didn’t have any clients who were retired. After all, what does a 23-year old really understand about retirement except what he reads, right? 37 years later, almost half of my clients are either retired or within ten years of retirement. Not only have I seen first-hand what it takes to get to this stage of life, I’ve also learned several lessons in walking down this road with people that I want to share.

1. Get a Strategy: By far, this is still the biggest mistake I see people make – no plan, no strategy. When you’re in your 20s and 30s, a retirement strategy is usually the last thing on your mind. Suddenly, you’re 50 and you start getting that “I better do something” feeling. If you haven’t mapped out a strategy as to what happens when you stop working, why not?

2. Estate Planning: I’m still amazed at how many people don’t have wills or powers of attorney. Completing “The Fire Drill” -- something I’ve discussed many times in this column -- is a great starting place to make sure you have your ducks in a row. It’s for your family. Get on it!

3. Do Not Retire with Too Much Debt: If too much debt is bad when you’re making money, it can be quite painful when you’re living in retirement. Always make debt elimination (not reduction, elimination) part of your strategy. I have personally seen many retirements ruined because of debt.

4. Stop Trading: Investment management is not being in the “hot” investment of the moment or the best performer. If you don’t have a clear, concise, and personalized investment policy, you will feel the stress when the stock and bond markets go up and down. Who wants to worry about the stock market all the time? Get an asset allocation strategy that matches your tolerance for risk. Have you even considered whether you should be in the stock market at all? You will never know until you do # 1 above (Get a Strategy).

5. Maximize Tax-Deferred Savings: Workers have tax-advantaged ways to save for retirement. Not participating in your employer’s 401(k) may be a mistake, especially when you’re passing up free money in the form of employer-matching contributions. If you don’t have a 401K, what about an IRA? Or a Roth IRA? People over 50 can save up to $6,500 per year in an IRA.

6. Adjust Your Investment Approach Well Before Retirement: The last thing your retirement portfolio can afford when you’re within a few years of retirement is a bear market like 2000-2002 or 2008-2009. Again, this is part of # 1 above (yes, just about everything goes back to that).

7. It’s Not Just the Money: I can’t tell you how many clients have told me they should have done a better job of planning what they’ll do every day once they don’t have to go to work. Look, you can only play golf, fish, hunt, or take trips for so long. What I’m learning from own clients is you must stay active, stay socially involved, volunteer, have a healthy diet, exercise regularly, and remain intellectually active.

Securities offered through Royal Alliance Associates, Inc. Member FINRA, SIPC. Advisory services offered through Matt Montgomery, a Registered Investment Advisor not affiliated with Royal Alliance Associates, Inc., 1504 East Rusk, Jacksonville, Texas, 903-586-3494, * An Index is a portfolio of specific securities (common examples are S&P, DJIA, NASDAQ), the performance of which is used as a benchmark in judging the relative performance of certain asset classes. Indexes are un-managed portfolios and investors cannot invest directly in an index. Past performance is not indicative of future results.