The Wall Street Journal recently outlined four common mistakes financial advisors are seeing their clients make that could spell disaster for their already precarious retirements. As the paper points out, retirement planning encompasses more than just securing an income for your clients after they stop working; health care and estate planning are major parts of the retirement equation.

  1. Putting too much faith in bonds. Massive losses on stocks have made many retirees hesitant to stay invested in them; instead they opt for bonds, but the Journal offers a warning. Lawrence Glazer, of Boston-based Mayflower Advisors, told the paper, “It’s a fallacy to think you can’t lose money in bonds.” Credit risk, splendidly exemplified by Lehman Brothers last year, is a major concern. Likewise, low interest rates can lead retirees to reach for longer maturities and greater risk.
  2. Overspending. Your clients need a realistic spending budget, as well as a sustainable withdrawal rate, the paper writes. They also need to factor in rising health care costs and inflation. Another variable that is often overlooked by retirees is unexpected big expenses or big investment losses. As the past year has demonstrated, a back-up plan for sudden market losses is an important part of your clients’ retirement plans.
  3. Not maintaining their legacy. A will does not necessarily guarantee your clients’ assets will go to the people they want them to, although many people assume it’s sufficient, New York attorney Philip Bouklas told the paper. Your clients should have, and regularly update, a will, health care proxy and beneficiaries on their retirement accounts.
  4. Not broaching the subject. No one likes to talk about their own mortality, but it’s important for your clients to have a plan for what will happen to their assets after their death, or if they’re incapacitated due to an illness or disability.