Boosting Financial Confidence in the Golden Years

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Golden Years Advisory Offers 5 Strategies to Combat the Financial and Emotional Challenges of Aging in Uncertain Economic Times.

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During the best of times, aging presents its own set of challenging circumstances. Add the severity of the recent wealth destruction associated with the stock and real estate market corrections and the result is an environment capable of shaking the financial security and peace of mind of the most optimistic among us. Those living on fixed incomes and reduced savings are not immune to the feelings of fear and uncertainty. In fact, they are the most vulnerable to economic shocks and can least afford to make mistakes in the aftermath when confronting the challenges they pose.

Fortunately, history shows that proactive responses to these challenges enhances long term financial and emotional well-being. As a result, there has never been a better time for seniors to re-evaluate their exposure to post-retirement risks and ensure they are prepared for the future. With this in mind, below are some common pitfalls that, if avoided, will boost the confidence and enrich the quality of life of those who are in, or about to enter, their "Golden Years."

Pitfall #1: Overreacting to the recent market decline. The extreme nature of the recent stock market collapse is causing many investors to reflect on what went wrong over the past year and make changes designed to avoid the problems in the future. The tendency is to over-react and make decisions based on emotion rather than facts. Emotional investing frequently results in inappropriate levels of portfolio risk which could further increase losses.

Solution: Now is a great time to re-evaluate your investment objectives. However, try to control the urge to allow the extreme nature of recent market volatility to cloud the investment decision-making process. History indicates that sharp market corrections are usually followed by strong market gains over the following years. Remain calm and disciplined in your investment approach and your patience will be rewarded.

Pitfall #2: Delaying the development of a comprehensive estate plan. The rationale behind development of a last will and testament is possibly the most misunderstood of all legal documents. Almost everyone is aware on some level of the need for a will and estate plan but studies suggest that only about half of those over 50 years old actually have one. Even fewer have Durable Power of Attorneys, Advanced Healthcare Proxies or trusts of any type in place.

Solution: Certainly, there are benefits to the owner of the estate plan such as controlling the decision making process and maximizing your legacy. However, the real motivation for taking action is to ease the burden of your passing on loved ones. A well-designed estate plan facilitates the execution of your desires and leaves less guesswork for the heirs. The next time you consider delaying the development of an estate plan remember how actions today are less for your benefit than for those you love.

Pitfall #3: Assuming fraud won't happen. It is reported that Jamaican lottery scams collected approximately $30 million from unsuspecting Americans during the first half of 2009 alone. The success of these schemes caused the DeKalb County District Attorney to warn Georgia consumers that such scams "are very prevalent and growing in frequency." Fraud is a lucrative business and the economic downturn is attracting more participants. Their primary victims are almost always seniors.

Solution: Don't let the seemingly remote probability of this happening cause you to drop your guard. Take the initiative to protect family members from such scams by reconciling bank account statements and reviewing expenditures regularly. If time is in short supply, hire a daily money manager to perform these duties. This extra precaution will pay dividends in terms of peace of mind for both you and your family member and avoid a common financial tragedy.

Pitfall #4: Hoping the financial aspects of retirement work out on its own. Does your financial situation keep you awake at night? Studies indicate that retirees are "very concerned" about a number of financial issues ranging from lack of funds for adequate healthcare to outliving one's savings. Regardless of your primary concern, ignoring it does nothing but increase the chances of realizing your fear.

Solution: Engage an independent financial advisor to review your situation. You may not relish the idea of an objective review of your finances but the high stakes nature of your financial security makes it well worth any initial discomfort. Leveraging the skills of an expert puts the odds in your favor and increases the chances of reaching crucial objectives. A financial advisor will listen to your concerns and develop strategies tailored to your specific needs. Take action today and sleep easy knowing your preparation leaves little to fear.

Pitfall #5: Assuming children understand their parent's long term care wishes. As the effects of aging impede the physical and mental abilities of seniors, the need for a family meeting with the children or friends increases. However, the uncomfortable nature of the subject tends to cause most to postpone or delay until the last possible moment. When sensitive discussions like this are held in an emergency situation, the chances are high that some or all parties will feel some sense of anger, frustration or hurt. Few, if any, are completely satisfied with the decisions reached.

Solution: Ideally, these discussions begin prior to a crisis giving everyone time to completely express their feelings and viewpoints. The meeting should address topics such as details of the parent's wishes, location of important documents and the division of caregiving responsibilities. If tensions are likely to run high, consider hiring a neutral third party to facilitate the discussions. Early discussions can be emotionally charged but overtime the groundwork laid will ease the transition and bring the family closer together resulting in deep satisfaction and personal joy.

About the Author

Sam Evans serves as Managing Director of Golden Years Advisory, a firm offering objective financial advice related to retirement planning needs. For more information regarding post-retirement risks, go to http://www.goldenyearsadvisory.com.

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