Q: Most all inquiries seem to be from people who have many years of service and are less than 70 years old. How about some advice for the older group out there…
My office has hired a number of older OPS guys that were in their 60’s when they hired on and are in their 70’s now. Most of us rolled our IRAs into TSP to avoid the MRA at 70. What are the pitfalls for us old codgers in retirement planning? My SCD is October of 2000 and I’m thinking of retiring at 76 or 77 or whenever. Are there one or two things that I should be looking at to start planning?
A: You are right, most of the inquiries I receive are from individuals with less life experience than you and your office companions.
So, I am excited to have the opportunity to help someone with your level of developed wisdom. Here you go!
Since, you have already passed all the major (age related) retirement planning hurdles, I have to assume your federal pension and Social Security income benefits have already been dealt with. But, there are still several retirement planning steps you need to take.
You should initiate your planning by looking at investment risk. Perhaps at this stage in your life, more than ever, managing the risk “MIX” of your assets may be the most important thing to focus on. By managing risk, I am NOT saying you should eliminate risk. I am saying you should understand it, so you can manage it, to meet your needs.
What I am referring to is finding out how much personal investment (TSP, IRA, etc…) risk you should be exposed to. Age is NOT the only determining factor. This has more to do with each person’s individual feelings about (or their stomach for) financial losses vs. their desire for financial growth. This is referred to as “risk tolerance.”
Once personal risk tolerance is identified, it’s time to establish if retirement assets are properly aligned with individual needs and desires. (It’s important that you and your investments are a good fit for one another).
Risk management is an area that most are unfamiliar with and even less interested in. Yet, it is extremely important. We all have different opinions about what constitutes real “investment risk” and what constitutes real “investment success.” When it comes to intelligent risk management, you need to adequately address both.
Too much risk and quite frankly, you could experience losses that you simply don’t have time to overcome. But, too conservative and you could miss out on desirable (and possibly even essential) gains.
What you should be doing is pursuing the sweet spot. I.E. – Enough risk to offer a chance at desired gains, but, not so much (unnecessary) risk as to jeopardize retirement assets more than you are comfortable with.
I recently answered another question where the subject of risk was involved. I will provide you the same guidance that I gave to them.
Go to the free “Risk Analyzing Tool” on my website. It will take you to a simple 5 minute questionnaire that calculates individual risk tolerance. When completed you will receive a unique numerical score between 1 and 99. Then contact me (randy.silvey@lpl.com or 816-524-1515) and I will help you do the same thing with your investment portfolio (TSP, IRA’s, etc…). It too will have a score that ranges from 1 to 99.
Once you learn both numbers, you can compare them to make sure they match. That’s it!
NOTE: If you are going to answer the questions, you need to be as honest and accurate as possible. Inaccurate answers WILL give you inaccurate results. “Garbage in, Garbage out!”
Disclosure: Investing involves risks, including the loss of principal. Asset allocation does not ensure a profit or protect against loss. Securities offered through LPL Financial, member FINRA/SIPC.
