Blogs & Comment

Personal-finance book had me gasping

I have to admit I had a few gaps in my knowledge of the personal-finance field. But no more. they got filled after reading 10 Things I Wish Someone Had Told Me About Retirement(2010), a book authored by three seasoned financial planners from Alberta: Rein Selles, Jim Yih and Patricia French.
For example, I now can see why retirees, despite having no dependents, might want to buy (or keep) life insurance. When they pass on, the policy can pay off debts, estate taxes, funeral expenses, provide for a large estate, finance businesses and so on.
I was also pleasantly surprised to read advice not normally heardfrom financial planners. They are often accused of emphasizing the investing side of financial planning (particularly buying mutual funds), but there wasnt much of that in this book.
Selles message was that retirement planning is about more thanmoney its also about lifestyle planning, i.e. deciding what you would like to do.
French said debt reduction must be the first priority of a financial plan. How often do you hear financial planners say that? Then she wrote a lengthy and informative chapter on debt management.
Yih said tax planning has a far greater impact than investment planning. And added: unfortunately, many financial planners primarily focus on the investment portfolio and products because of the compensation arrangement in the financial service industry. I almost gasped audibly. Kudos to him .
There were nearly a few more jaw-droppers on reading Yihs thoughts about investments. He writes: The risk continuum has swung too far in the direction of investing in risky investments. While I understand the merits of investing in stocks and mutual funds at younger ages, I think too many people, especially retirees, are taking more risk than they need to. Wow.
A large exposure to stocks means less control and makes retirement planning like a game of rolling the dice, Yih remarks. True, stocks are for the long run, but the average annual returns over a long period such as 20 years can fall within a wide range from 0% to10%. What if you get the 20- or 30-year period at the lower end of that range?
Ask your advisor how much you are paying in fees, Yih continues. Fees are a big determinant of investment performance. Be aware that, in most cases, advisors get paid more to sell you mutual funds and stocks as opposed to [other kinds of products].Applause to him.
A good tip from Selles and the others was to try out, before you leave work for good, the things you think you would like to do in retirement. For example, if you dream of living in a particular place, go try it out for a few weeks while on summer vacation. The experience will confirm whether or not its what you really want to do.