Retirement is something a lot of people are really looking forward to. When we were young, we had a lot of time and had little money. During our working years, we had money but had little time. During retirement, we are excited because we finally have money and time and the same time, well for some of us at least.

It is unfortunate that very few Filipinos actually prepare for retirement but that’s not my point of discussion for this blog. To the few who actually have some money upon retirement, there are many things that can go wrong financially.

The following are some common mistakes of retirees:

1)      Short-term orientation – the fact is, you will probably live about 15 to 20 years of your life during retirement (longer hopefully). Upon retirement, you will still need to grow some of your money and invest a portion on some growth oriented investments like equity funds. While it is advisable to reduce the percentage of your portfolio in more risk oriented investments, don’t totally remove them.

2)      Forgetting about inflation – inflation will not retire just because you did. Your retirement funds will still need to grow to catch up with inflation which is why I recommended investing in some equity funds during retirement.

3)      Putting all your eggs in one basket – the rule on investing still applies during retirement which is to diversify. Maintain a healthy portfolio of cash, money market investments, bonds or bond funds and a small portion on equity or equity funds.

4)      Spending too much, too soon – a common behavior among retirees is the rush into a spending spree. Retirement to others is liberating and the urge to live beyond your means is a very strong temptation. Don’t rush, you still have a lot of time so take it slow.

5)      Simplifying estate planning – you probably will need more than just a will. Retirement is a good time to consider some serious estate planning. Learn about the many ways you can plan for your estate.

6)      Not preparing for medical emergencies – 60 or 65 is still a relatively young age, medically speaking so the need for medical concerns is not yet taken seriously. However, while the spirit is still willing, the body is not and it will be good to provide for a time when we will experience serious physical break downs.

7)      Not reviewing finances & investments – now more than ever, the need to do a periodic review on finances and investments should be a primary concern of any retiree. While it is not a good idea to worry too much, being too care-free is not a prudent thing to do. As I said earlier, you still have a long time to go.

8)      Relying on Social Security alone – seriously? SSS is meant for a retiree to survive, not for a retiree to enjoy his retirement. Do the math, no one can live a decent life with just SSS benefits.

9)      Making risky moves with money – while I recommend that a retiree should still be investing, going into high risk or speculative endeavors might not be a really good idea. A very risky appetite during retirement may not be a swell idea.

10)   Worrying too much – alas, while prudence is key during retirement, fear is a very crippling mindset. So long as you follow common sense and have done your best in preparing for retirement, try to relax as this is what retirement is all about. If you are always fearful that your wealth will not be sufficient during your retirement, you may not live long enough to actually enjoy that wealth.

Like in anything in life, balance is key. Prepare properly for retirement but enjoy it as well.

Those who live in the shelter of the Most High  will find rest in the shadow of the Almighty. This I declare about the Lord: He alone is my refuge, my place of safety; he is my God, and I trust him. For he will rescue you from every trap and protect you from deadly disease. He will cover you with his feathers. He will shelter you with his wings.His faithful promises are your armor and protection. Do not be afraid of the terrors of the night, nor the arrow that flies in the day. Do not dread the disease that stalks in darkness, nor the disaster that strikes at midday… – Psalm 91:1-6, NLT

FINANCIAL PLANNING is a relatively new profession.  It represents the first broad-scope service profession to emerge in recent years.  Its development can be traced back to  1969, when a small group of financial services professionals met at a hotel near Chicago’s O’Hare Airport to discuss the inadequacy they saw in the state of financial services at that time.  They voiced their frustrations and searched for ways to introduce a new degree of client orientation and professionalism into a field that was neither well known nor well defined.

The planning pioneers who founded this profession led a movement to provide clients with better and more targeted service.  They looked forward to the time when comprehensive financial planning would become an accepted and integrated means for providing service and product delivery to consumers.  In doing so they revolutionized their business, creating a new way for individuals to manage their personal finances.  The pioneer’s approach was to focus on the client’s needs and objectives by putting their client’s interests first and foremost above personal gain.

The efforts toward targeted client service led to the development of two principal types of financial plans, segmented and comprehensive.  Segmented plans enable practitioners to review one aspect of a client’s life, such as insurance, investments, or retirement.  Comprehensive plans provide a more detailed and complete approach by factoring in all of the financial concerns affecting the client’s life, such as cash flow, education, insurance, investments, income tax, retirement, and estate issues.  These revolutionary changes in approach paved the way for a new profession: Financial Planning.

The next step for these innovators was to educate the public about their new service profession.  They wanted to show the public how they differed from their predecessors and why it would be worthwhile to use their services.  To counteract negative perceptions, a number of financial services professionals began pursuing a different way of helping their clients.  They strove expressly to adopt a logical and consistent format in providing good financial advice not just in one specialized are, but in every aspect of client’s financial lives.  Furthermore, they wanted their clients to know that they were trained specialists in their area of practice.

WHO ARE TODAY’S FINANCIAL PLANNERS?

FINANCIAL PLANNERS have come from a variety of fields and hold many licenses and designations.  As noted previously, many today are midcareer professionals who have retired from their first field, have grown bored with it, or wanted to branch out into something new that involves helping others.  For example, many are CPAs with twenty or more years of experience who have found that their clients specifically ask for such services; if they fail to provide financial planning, they run the risk of losing clients to other CPAs who do.

Similarly, many representatives, brokers, and related employees at major brokerage firms and insurance companies find it difficult to compete solely by selling products; financial planning offers a more flexible and comprehensive approach to satisfying their client’s needs.  Likewise, bankers more and more are finding that they cannot effectively compete in the service marketplace without taking an overall view of financial planning for their clientele.  The banks have finally recognized that financial planning in its own right can be a very profitable revenue center.

So what does this all mean?  For many financial services professionals, the days of pushing a product-centered transaction with little or no concern for client needs and objectives are gone.  That approach is being replaced by the services offered by more sophisticated and better-trained financial planners who want to understand their clients in order to make the most appropriate choices for them.

Although the history is largely U.S. experience, the world has seen the evolution from product pushing to solutions provision… thus evolving from Agents to Planners.  Asia has seen changes, and the changes are happening in a much faster pace.  Singapore has been the most successful in its evolution to Financial Planners with strict implementations of standards and procedures.  Thailand, Indonesia, Malaysia and other ASEAN countries are also on its way in developing substantial numbers of professional financial planners.

For many years now, it has been my quest to take part in the evolution of the financial planning practice in the Philippines. In 2005, I help found the Registered Financial Planner Institute of the Philippines which will hopefully result to the evolution of Filipino Financial Planners but the evolution to professional financial planners goes beyond the RFP.

Today, there are a lot of advisors claiming to be Financial Planners and while some are true-blue ones, many are still in name rather than in deed. However, I am very hopeful with the rate the financial planners are evolving and soon, this profession will be one of the most respected in the Philippines as well.

I was searching for something and I ended up seeing a very old post I wrote in the early part of 2008. This blog was not even up then and it was posted in Multiply, remember that site? I felt the need to re-post it in this site.

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Is Wealth Important?

I have yet to find a person who will sincerely say that he does not want to be wealthy. While there may be those who claim they prefer not to be wealthy, I really doubt that they really meant what they say. Being in this line of profession, I’ve met a lot of wealthy people. I’d like to believe that many of them seem happy, although some aren’t. I also noticed that it is not the level of wealth that dictates their level of happiness. Why is this so? This got me wondering and prompted me to write about it in this column. I recently read the book Till Debt Do Us Part by Chinkee Tan. I hope my friend will not mind if I take out a few words from his wonderful book (I highly recommend the readers getting a copy of this book). “Wealth gives people a sense of security. The philosophy behind it is the more money you have, the more secure your future will be. That life will be easier and be more stress-free because you don’t have to worry about money and the things that money can buy.” When you read Chinkee’s words, it really sounds logical. How many times have we worried about money? How many times have we been so stressed because of our need for money? If you are like me, that’s a lot of times. However, Chinkee disproves this philosophy. “Actually, this is a myth. This myth takes many forms. Usually, it takes the form of ‘If I only had a newer car, if I only had a larger house, if I only had another few millions per year, if I only had a new phone, if I only had some better clothes, if I only had a better education.’” If the purpose of wealth is that it gives you a false sense of security, you will never have real peace of mind. Wealth is important not because of wealth, per se. Wealth becomes important because of the purpose of wealth itself. It is why we need to be wealthy that really gives it true importance. For some, wealth is associated with something evil. Many people find power with wealth. There is even a common saying that money is the root of all evil. Majority of crimes being perpetuated are due to the need to accumulate or the need for money. Well, money is also needed to survive. Even primitive civilizations saw the need to use money for many things. Yet, money and wealth seem to have always had a bad reputation. Is accumulation of wealth really a bad thing? If you look at the Bible in Matthew 19:24, it is written: “Again, I tell you, it is easier for a camel to go through the eye of a needle than for a rich man to enter the kingdom of God.” If you take this verse to heart, you will never want to be wealthy. I am not a theologian, I’m not even religious… but I think what was really meant in that verse is about our real purpose of acquiring wealth. If the accumulation of wealth is something that consumes you, then maybe wealth can be considered as evil. In my opinion, wealth and money are amoral. It is neither right nor wrong. Just like a knife—in the hands of a chef, it is a good tool, but in the hands of a criminal, it is a bad tool. Besides, money being the root of all evil has often been misquoted. The correct verse is found in 1 Timothy 6:10, “For the love of money is the root of all kinds of evil. Some people, eager for money, have wandered from the faith and pierced themselves with many grieves.” The wealthy people who seemed to be genuinely happy are those who are not consumed in their quest to accumulate their wealth. The wealthy people who seem unhappy despite their wealth are those that are consumed by money—finding happiness in what their wealth can afford them. Wealthy people aren’t really bad people, even our Lord Jesus Christ had wealthy friends like Nicodemus. Being wealthy is important. We need the peace of mind. We need to provide for our family. We need to have enough so we can share. For us to give, we need extra. For us to have extra, we must provide more than our needs. Having more than our needs is having wealth. Having wealth allows us to live the life we deserve, a victorious life that each one of us should be enjoying. I sincerely doubt that God wanted us to live a life of hardship and a life of mediocrity. In fact, if you read Deuteronomy 15:4, it says, “However, there should be no poor among you, for in the land the Lord your God is giving you to possess as your inheritance, He will richly bless you.” So what I am saying is, wealth is not bad. In fact, it is important. How we acquire our wealth and what we do with it will speak about our character—it will define who we really are. How does one become wealthy? Well, that would be a nice topic for another day, but here’s some basic tips that I am sure you’ve heard or read already: spend less than what you earn; be disciplined in your financial management; invest, invest, invest; take risks (calculated ones)—and, most important, follow simple common sense in dealing with your finances. There are a lot of folks out there who’d settle for a 2-percent per annum placement but will not think twice about buying something through his/her credit card and use the deferred option that charges five to eight times more than his/her savings placement—or worse, use the revolving scheme of his/her credit card that will be charging more than 15 times his/her placement’s yield! Be wealthy, but do it for the right reasons. If we have the resolve, many of us can be wealthy. All we need is the right attitude, the passion and, most important, the time. Did you know we are destined to be wealthy? Don’t doubt my words. Pick up the Book and read Jeremiah 29:11, which says, “For I know the plans I have for you,” declares the Lord. “Plans to prosper for you and not to harm you, plans to give you hope and a future.” Enjoy your quest for wealth; it really is important.