Retirees are often seen avoiding financial planning. MoneyMindz, Free Financial Assistance Advisory Portal talks about few reasons:
It’s a fact that financial planning is a goal based exercise but meaning of goals is something where the confusion lies in. As people think that goal is something fixed and one-time event. Basically, it is something which has a certain fixed value and thus one needs to chalk out an investment plan to achieve that goal comfortably.
But in general a goal is what you want to achieve. It either may or may not be a fixed certain event that requires a specific amount. Goal can actually be organizing and consolidation of finances, it can be arranging investments to generate regular income and also can be spending the limited income wisely etc.
No Long term Horizon
One of the biggest misconceptions among retirees is that financial planning is only for those who have a long-term horizon and since retirees can’t have such a long horizon thus they avoid this approach.
Whereas financial planning is not one size fits all approach. It only requires you to have some horizon either long or short doesn’t matter. Only your requirement, your risk tolerance, your investments composition, your aspirations and also other arrangements will take you to the structure best suited to you.
Growth targeted Investments
Usually, retirees feel that financial planning is all about making investments to make money grow and they are not wrong in assuming the same. Growth is targeted while person is in accumulation stage. As post-retirement itself is a distribution stage, there is no point having a high growth targeted allocation. Also portfolio is designed with a target of income generation.
Behavior biases leads reluctance to change
Financial planning not only involve making new investments but it also require you to come out of non-suitable investments. If you hold some unwanted insurance policies or some taxable deposits etc, financial planner may advise as per the plan. It is difficult to accept that where you had been investing for the past so many years is no longer a suitable product for you.
In your whole working life you have taken all financial services for ‘Free’ and even got some part of commission cut back from the agent you have dealt with, it is quite natural to find difficulty in paying the fee to the professional.
How can the retirees overcome these misconceptions?
The most important thing which will help is the acceptance from heart that you require financial planning. Even a doctor cannot help if you don’t accept that you are unwell. You will require financial planning to come out of few old investments that may not suit your requirement.
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