TRAILER

Welcome to episode 75 of the One for the Money podcast. I am both glad and grateful you have taken the time to listen. They say wisdom is learning from the mistakes of others and in that spirit, this episode will feature the mistakes a retirement expert made about her own retirement and I’ll share ways to avoid these same mistakes.

In the tips, tricks, and strategies portion, I will share a handy rule of thumb regarding knowing if you are on track for retirement.

In this episode...

• Who Is Alicia Munnell? [1:45]
• Mismanagement of Investments [2:47]
• Failure to Utilize Roth 401(k) [5:24]
• Premature Government Pension Withdrawal [8:14]
• Using Retirement Funds Early [10:07]

MAIN

Most people really only have one shot at retirement so you want to be sure you get it right and you will want to be sure to avoid any mistakes. They say wisdom is learning from the mistakes of others and in that spirit, there was a recent article in the WSJ on the ways a retirement authority got it wrong. This can serve as an example of what not to do. The Oct 12, 2024 article states in its opening line “Alicia Munnell spent decades trying to improve how Americans retire. Even she made mistakes in her retirement planning.”

First, let me share more about Alicia Munnell. She is an economist who served as an assistant secretary at the Treasury Department under President Bill Clinton. Her time in the Treasury Department was preceded by 20 years at the Federal Reserve Bank of Boston. After her time in the public sector, she established Boston College’s Center for Retirement Research, a think tank in 1998.

Alicia, who is 82 years young, has been steeped in finance for many decades and her work covered everything from improving the 401(k) to whether the U.S. faces a retirement crisis.(Her Answer: Probably yes, since she and her colleagues calculate about 40% of the working population isn’t saving enough to maintain their lifestyle throughout retirement.) And yet despite the focus of her life’s work, she made some basic mistakes about her very own retirement.

Here were some of her mistakes along with my thoughts on how she could have avoided them.

One mistake she repeatedly made was not regularly monitoring her investments. Like many people, she said that she lacked the time and interest to manage money. What she would do would rely on the occasional advice from her son, who works at a financial firm.

In her words “Every now and then, he tells me to send him my asset allocation and then he tells me how to adjust it. If I had to figure out what to invest in, I’d have no clue,” said Munnell. “People have busy lives. Retirement planning should not be something they have to put a lot of effort into.”

This boggles the mind. I am shocked a retirement authority, who highlights the importance of 401ks handles her retirement investments so carelessly. First, she doesn’t have a set schedule to review her investments on a regular basis, instead, she said that “every now and then” she reaches out to her son who works at a financial firm for changes she should make. And because she approached things so haphazardly, she or her son never consider her overall goals or taxable implications regarding her investments as demonstrated by the other mistakes that she had made.

Here’s how Alicia could have avoided this investment management mistake. She should have spent the time with her husband outlining their specific goals for retirement. These goals would then be used to align her investments with those specific goals. She then should have had regularly scheduled meetings to confirm their goals and re-align their investments if necessary. She should have assumed this responsibility herself or delegated it to a financial planning professional who was aware of her goals and could...