With an estimated 51% of the US population categorized as single, it’s becoming more and more common to have men and women walk into my office unaccompanied and who are completely on their own when it comes to making retirement decisions. Many single retirees do have a sibling or adult child with whom they discuss these things, but some people have no one to turn to and are 100% on their own.
These folks in particular have concerns about trust, fraud, or receiving bad advice. However, in the same breath, they frequently concede that they don’t know anything about investing, Social Security, or other key aspects of retirement.
That makes it crucial for people in a “solo” situation to be aware of potential traps, and develop strategies that will help them sleep better at night instead of worrying if they made the right decisions. There is a lot to consider if you are on your own in retirement:
A red flag issue for solo retirees is the sales pitch for time-sensitive products. Whenever someone suggests there’s only a limited time to act, lock in a special rate, or avoid a unique fee or other charge, it might be time to walk away.
Time sensitive products have caused a great deal of financial remorse because they tend to create a panic mode among investors instead of the more methodical due diligence mode. They prey on emotions, exhorting victims not to “miss out” but, later, when the fine print gets read, or there’s a special request because something unexpected came up, the buyer finds out that the product or service doesn’t fit into their plan the way they were led to believe it would.
Along the same lines, the investment process includes recommended time lines that help protect investors. A key question any financial professional should ask a solo retiree is, “How long before you need access to this money?”
Generally speaking, products such as annuities come with 7-10 year surrender periods before the owner can access the entire principal. Mutual funds, ETFs, and stocks that don’t come with guarantees are probably best for those investors with at least a 3-5 year time horizon… and with the understanding that a 10-20% correction is highly likely during that time period.
Good Marketing Vs Good Advice
“Can you put that in writing?” is the one thing solo retirees should always demand. That one question helps differentiate between good marketing and good advice. When financial products and services are marketed, the features and benefits are highlighted. In other words, all the good stuff gets emphasized.
Written recommendations, however, are more likely to include disclosures, caveats, and what-ifs to help better clarify the complete product and what one is getting into. However, it’s important to point out that there is no best product or service, or that written recommendations won’t result in money lost.
Written recommendations, in conjunction with the other safeguards, usually better position the investor to feel good about going one way or another, rather than just hoping they get it right and that things work out as expected.
It’s somewhat surprising to me that more solo investors don’t employ more than one advisor. There are no rules that say you have to give all your money to one firm or advisor. True, it may be more convenient to work with a single financial professional, but for those going solo, having two separate professional opinions may be a worthwhile way to diversify fears and concerns.
It’s critical for solo retirees to understand that there are different types of advisors, with different capabilities. An easy way to figure out where an advisor stands is to ask what they are NOT licensed to advise on. By knowing what an advisor can’t talk about or sell, solo retirees will better understand the type of advice they are getting and how it may fit into their long-term plans.
Typically, insurance agents who aren’t licensed to sell stocks or bonds might suggest an annuity as the best fit. A fee-based RIA who doesn’t like annuities may suggest low-cost ETFs are the way to go.
Since no product or service will meet everyone’s needs, it’s worth the time to uncover the foundations for their advice; whether they follow a suitability standard or fiduciary rule; and if the time lines for their products or services match up to a solo retirees needs and expectation.
While these are just three of many considerations for solo retirees to consider, this three-pronged approach can be a good start to feeling better about facing retirement decisions all by yourself.
It’s about making sure not to act emotionally on a time sensitive product; asking for written recommendations that clarify the pros and cons of advice received; and that it might not be a bad idea to diversify both investments and the professionals you get advice from.
In any event, going solo doesn’t have to be stressful or overwhelming as long as sufficient time is taken to discover the foundations underlying the advice given, and to finding the right professionals and services.
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About the Author:
As the Retirement Activist, Robert Laura created the Retirement Coaches Association and RetirementProject.org. He is the leading voice for the retirement coaching industry and has pioneered many tools and resources to help people prepare for the non-financial aspects of retirement including the Certified Professional Retirement Coach CRPC training and designation.
He is the author of several books and guides including Naked Retirement and Retirement Rx. He is also a nationally syndicated columnist for Forbes.com and Financial Advisor Magazine. Robert is a sought-after corporate trainer, speaker, consultant, and financial expert witness. He can be reached here