Expert Interview with Colin Williams on Expert Retirement Planning for boldin.com

Colin Williams has worked almost every aspect of the financial planning industry, starting as a financial advisor and working his way up to top management at major financial firms. Currently, he’s sharing insights on personal finance and retirement planning as the founder and key contributor to Humble Savers. He spoke with us about planning retirement the smart way. Where do you start with retirement saving? What products should we be looking at? A great question, and of course the answer is: It depends. There are a lot of factors that will determine your starting point. The one thing I remind everyone is that “every journey starts with the first step.” Taking that first step is the most important part of your retirement planning. The direction and length of that first step will depend on your current age, the timing of your retirement and the income you would need in retirement. There are plenty of calculators on the web to help you with those questions. But beware – calculators predict a straight-line forecast, and rarely will anyone’s retirement fall into a straight line. Just think of how the retirement plans went for your grandparents, parents, aunties and uncles? I will guarantee that few went to plan. The typical problems that occur and derail your retirement plans include:

• Not being able to maintain stable employment – major factor as we age
• Divorce – Can be expensive, both the divorce and the repercussions of living on your own
• Bad timing – market crashes at the wrong time.

The easiest way to combat most of these issues is to start early and save plenty. By starting early, you get the benefit of compound interest, that is “interest on interest.” As for products – take advantage of any help you can get. The 401(k) funds have tax advantages. Consider property and the benefits that come through various deductions. Diversify your investment products. One problem with government-assisted products is that you become a client of the government and subject to legislative risk. Might not seem a big issue, but as we have seen right around the world, particularly through the GFC, governments are more than happy to tinker with the legislation. How do people with tight budgets find room for retirement saving? Budget wisely! People on big wages often struggle just as much on those with small wages. The goal is to make room for saving and make it a priority. I’m not a fan of recommending budgeting as a way forward. In my experience, very few people do this right, and in a short time, the budget is forgotten. I recommend you “save first, spend later.” This means putting money aside each payday into an account that is hard to access. If you don’t see the money in your account, it is a lot easier not to spend it. What are some misconceptions about retirement saving you often see online? The misconceptions are the “straight-line” results you get when investigating retirement. We all focus on averages, raging from average age to retire, average years in retirement, average returns from investments, and on it goes. As touched on earlier, rarely does retirement planning in real life follow averages. You need to have a fall-back position, and the best way to solve that problem is to save early and create a safety net for yourself. Another misconception is “don’t take risks when you retire.” With people living longer, you need a growth in your portfolio or otherwise, you’ll soon run out of the savings. The last myth is that you must deal with an advisor face to face. With technology changing in so many ways, it is now easier to deal directly with a firm of experts online. As I often say to my financial advisor friends, “You still insist on seeing a client face to face no matter how inconvenient it is for both of you!” When does retirement saving take priority, and when should other financial needs like debt be first in line? It should always be a priority; it’s matter of getting your mind over your end goal requirements. For example, taking debt to buy a great home can be a part of your retirement plan. At retirement, you can downsize and use the difference to fund your retirement. The critical issue is to get rid of debt that has no benefit. For example, debts associated with assets that depreciate, such as a car. A car only depreciates in value, which means you lose. How should younger workers be planning ahead? Will the retirement age shift? Start early and start with the mentality of “save first, spend later.” I wouldn’t focus on retirement as a goal; focus on saving and investing wisely as a goal. To save and invest successfully takes skills that must be learned, and some of the lessons will come from the mistakes. Get in the habit of saving and investing; retirement will take care of itself. We often hear that 40 is the new 30, and now we hear people say that 60 is the new 40. I believe there will be no typical retirement age. Many people will feel fit and healthy as they grow older and will want to work in some capacity and ease their way into retirement. This will see many people look to retrain and start small businesses. Other will look at part-time work and so on. What are some trends we should be watching in retirement saving? A key trend is better managing the final steps into retirement. Rather than going from full-time work to full-time retirement, more people recognize the benefits of transitioning into retirement with a plan. Employees are negotiating a staggered approach into retirement. This takes some pressure off their hard-earned retirement nest egg. For more of Colin’s insights, follow Humble Savers on Facebook, Twitter and Google+.