Nobody wants to run out of money in retirement, so many people go out of their way to ensure that doesn’t happen. Others, however, exhibit certain types of behaviors, which over time have proven detrimental to their long-term retirement plans.
Regularly tapping into savings can happen for a number of legitimate reasons… be it for adult children, an aging parent, or personal / medical emergency. However, I’m not just talking about those more common issues. I’m talking about four specific actions that investors take when they don’t want to make changes to their withdrawal strategy but may need to.
Avoiding Statements
I cringe whenever I hear a client say, “I never open my statements.” In fact, so much so that once a client says it, I often request they bring in their two most recent statements when we are doing account reviews in order to try and curb this behavior.
I realize some people prefer not to open a statement after a tough month or difficult quarter because they are focused on the long-term. However, clients who are taking withdrawals and avoid opening statements often signal a “hope and prayer” strategy. They simply hope and pray that they can just keep on doing what they are without any repercussions.
Obviously that’s not how it works, and I can’t tell you how many times people are shocked when I tell them how much money they have yanked. Comments like “I had no idea,” or “”I can’t believe that,” and even a long drawn out “Really” combined with a puzzled look take place simply because of their denial.
For those who haven’t been opening statements, don’t overwhelm yourself by trying to make up for lost time by digging through them all in one afternoon. Simply pick up the phone and call your advisors (or investment company) and ask them how much has come out and what overall percentage of your savings that equates to. As a rule of thumb, anything above 4% may need to be re-evaluated.
Not Showing Up
If you dodge your financial advisors phone calls or are elusive in setting and keeping an appointment, it’s generally a sign that you don’t want to see or talk to them for a reason. Don’t get me wrong, things come up and we all get sick, but when you consistently avoid a concerned advisor and their suggestions to slow down, it may be time to make that appointment a higher priority.
If you’ve avoided your advisors most recent call, have changed advisors because their suggestions didn’t match your withdrawal plans, or recognize you need to reduce withdrawals but aren’t sure where to make cuts, get serious about getting into their office and being open to help.
Disrupting The Plan
It some rare cases, I come across clients who have either received an inheritance or saved money outside of an IRA, 401(k), 403(b) type plan.
Unlike qualified plans, most investment companies don’t require a signed document for withdrawals from these types of accounts… and some offer check writing privileges.
This unique feature complicates tradition planning strategies because most withdrawals are planned out, consistent transfers that are automatically generated on a monthly or quarterly basis. It’s very orderly and systematic so we can track and follow the funds and client account progress… but all that goes out the window when someone has a checkbook and nobody looking over their shoulder.
Combine this situation with someone who doesn’t open their statements, or avoids their financial advisor, and the odds of becoming a grocery store greeter dramatically increase.
Helping Uncle Sam
Another obvious symptom of excessive withdrawals can be hefty annual tax payments. This topic can be a little more complicated and may differ for each retiree based on their age and timeframe for taking Social Security.
Therefore, suffice it to say that if you complete your taxes each year and find yourself owing more money than the previous year or find a portion of your Social Security being taxed, it may be a sign that your withdrawing too much money from your retirement accounts.
Whether it's avoiding statements, constantly rescheduling appointments, writing checks, or helping Uncle Sam, the idea of withdrawing too much from your retirement savings can be a hard pill to swallow. However, there is a bright side to it all.
It’s been my experience that people who need to make changes are relieved once they actually do it. Whether they sell their 2nd car, stop funding an adult child’s failing business, finally agree to downsize, or cut up their credit cards, it all starts by simply acknowledging one or more of these behaviors and picking up the phone to get some professional support.
