By Antonio Porretta
When there are seemingly endless priorities in your life and a financial future to plan for, it can be easy to make financial mistakes that hinder your progress. I’ve been helping people grow their wealth for over 20 years, and these are the four biggest mistakes I’ve seen clients make. Much like any mistake, you can learn from them and avoid them once you know what to look for.
1. Trying to “Beat†the Market
One of the most prevalent mistakes I see people make is attempting to “beat†the market. Individuals are often lured by the prospect of quick gains and high returns, which leads them to engage in risky investment strategies like trying to time the market. These fast gains are often just as quickly lost. It turns what should be a strategically invested portfolio into more of a gamble.
However, consistently outperforming the market is incredibly difficult, even for seasoned professionals. S&P Dow Jones Indices have shown that over a 20-year period, less than 10 percent of U.S. stock funds met their benchmarks.
Instead of trying to beat the market, focus on long-term strategic investing. Diversify your portfolio across different asset classes, such as stocks, bonds, and real estate. Consider low-cost index funds or exchange-traded funds (ETFs) that offer broad market exposure. By adopting a long-term investment strategy and staying disciplined, you can attain more consistent returns and reduce the risk of significant losses.
2. Not Having an Income Plan Upon Retirement
Most people plan out their retirement for decades by putting money in retirement savings or counting on Social Security benefits. Sometimes individuals still fail to plan on generating consistent income in their post-work years. When you rely solely on Social Security benefits or assume your retirement savings will last throughout retirement, it can lead to financial stress and even deplete your funds earlier than expected.
Avoid this mistake by creating a comprehensive retirement income plan. Start by assessing your expected retirement expenses and determine how much income is required to meet your financial needs. This should factor in all potential income sources, including:
- Pensions
- 401(k) or IRA distributions
- Annuities
- Rental properties
- Part-time work
The best way to develop a retirement income plan is to consult with a wealth advisor. These professionals can help you develop a personalized plan based on your goals, risk tolerance, and available resources.
3. Not Planning for Long-Term Care Costs
While we all would like to maintain perfect health throughout retirement, that’s not always the case. In fact, the Administration for Community Living (ACL) found that by 2030, 7 out of 10 people over 65 will require long-term care.
If you and your family need to make use of long-term care for yourself or your spouse, you’ll need to plan for it in advance. Long-term care costs can pose a significant financial burden on individuals and families. For example, the median annual cost of an assisted living facility is $54,000. If you haven’t accounted for those expenses in your retirement planning, you may find yourself unprepared when the need arises.
To avoid this mistake, it’s essential to include long-term care in your overall financial plan. Consider purchasing long-term care insurance, which can help cover expenses related to nursing homes, assisted living facilities, or in-home care. You can also explore other options such as designating funds for long-term care or investigating government assistance programs.
Planning early and including long-term care as part of your financial strategy can help you prepare for the financial obligation and help you safeguard your assets.
4. Not Planning for Unexpected Risks
Life is full of uncertainties. You can’t possibly plan for everything, but you can prepare for the unexpected. Your financial stability could be impacted by unexpected risks like:
- Emergencies
- Accidents
- Job loss
- Death of a spouse
- Health issues
Failing to plan for those risks can have devastating financial consequences. To mitigate this mistake, establish an emergency fund that covers at least three to six months’ worth of living expenses.
This fund acts as a safety net and provides a financial buffer during challenging times. Additionally, consider obtaining the appropriate insurance coverage to protect against various risks. You should also regularly review your insurance policies to confirm whether they still align with your current needs and circumstances.
Make Better Financial Decisions With a Wealth Advisor
Avoiding these four major financial mistakes can help you shield your wealth and maintain your financial well-being throughout retirement. If you’re ready to make better financial decisions, start by working with a qualified wealth advisor at Blackbridge Financial. Schedule your free 30-minute consultation by emailing me at antonio.porretta@lpl.com or calling 704.960.9646.
About Antonio
Antonio Porretta is an independent wealth manager at Blackbridge Financial with over 20 years of experience. He specializes in helping people create, distribute, and preserve their wealth. Antonio received an executive MBA from Saunders College of Business at Rochester Institute of Technology in 2007 and also holds the Accredited Asset Management Specialist℠, AAMS® designation. Originally from Rochester, NY, Antonio has been a resident of Harrisburg, NC, since 2007. Outside of work, he enjoys playing soccer and tennis, coaching, and spending time with his wife, Laura, and their children, Cristiano, Victoria, and Matteo. To learn more about Antonio and how he can make a difference in your financial life, visit www.blackbridgefinancial.com.
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Securities offered through LPL Financial. Member FINRA/SIPC. Investment advice offered through Independent Advisor Alliance, a registered investment advisor. Independent Advisor Alliance and Blackbridge Financial are separate entities from LPL Financial.
No strategy assures success or protects against loss. There is no guarantee that a diversified portfolio will enhance overall returns or outperform a non-diversified portfolio. Diversification does not protect against market risk.