Updated: May 12
Sometimes you can do everything right but still get it wrong, but we can learn from our mistakes and make adjustments.
There is an incredible amount of retirement information on the internet such as: how to save, how much to save, success stories and even articles on how simple it is, but is this true, is saving for retirement really easy? Is everyone gong to be successful? Well today, I am going to use myself as an example of how I thought I did everything right but still ended up getting it wrong.
“No ones perfect, we all make mistakes, but its more important that we learn from those mistakes even when its difficult .”
Getting started with my retirement
There is an incredible amount of retirement information on the internet such as how to save, all the success stories and even the simplicity of it, but is this really the reality and is everyone successful? Well today I am going to use myself as an example and describe how I progressed. My story starts when I was in my early 20’s still in university struggling to get by, however even though I did not have a lot of disposable income I began to put a small amount of money away. I saved until I had finally secured a reasonable job but at this point I had accumulated only a small amount of money in a mutual fund. Thinking that I was not doing things right, I decided to go to a major bank and work with a financial planner on the best way to build up my retirement funds and get a better return. The Financial planner set me up with a set of mutual funds and I then just put money way automatically every month and just let it ride without thinking about it. Many years later I finally decided to sit down and see how my retirement was doing, at this point I thought I had done everything right, I set aside money on a regular basis, invested it in mutual funds while avoiding risky stock and hopefully I believed my retirement funds would grow. The reality was much different, searching carefully through my mutual funds and looking at the returns, regardless of how I approach the math the reality was very clear, I had done reasonably well on a two mutual funds and very bad on two others, in fact after accounting for my regular contributions and re-investments, I had made only $35 (less than 1%) on a mutual fund with a few thousand dollars!
What the heck!!!!!
I was confused because I had worked with a financial planner and believed my retirement was growing, but looking under the hood I see that I was mistaken, yes it was, but only for half of my funds. Even after taking into account my regular contributions and re-investments, it still was not that great. Surprised, I called my financial planner, who of course had changed for about the fifth time. However, I did voice my concerns and to my shock the financial planner tried very hard to keep me with those poor returning mutual funds. In fact, he gave me all kinds of facts and figures, but as I explained, regardless of his facts, the reality is I made only $35.
Keep in mind when I signed up, ETF’s where not part of the investment vocabulary and setting up trading accounts or using brokers which at the time was much more time consuming and costly to do. However, I also finally came to the conclusion that in order to succeed I would need to take over my financial planning. I had far too many different advisors and I never felt my interests where being met or heard. I was basically putting my retirement planning into the hands of people. I simply did not know who I believe when more are driven to sell me products than to ensure I had a good plan.
I did learn some of the mistakes I made, which include:
1. Not keeping track of my progress.
2. Not looking at my actual returns.
3. Not understand the effects of fees.
4. Not understanding which types of investments I should be looking at.
5. Relying too much on people I did not know.
For most people today it’s a no brainer, just buy low cost ETF’s but remember not all ETF’s are created equally and you may end up with low returns. Admiringly I think they are a superior product over mutual funds as the fees did cut into my returns far more than I would have liked. I also like the ease in which you can set up low cost trading accounts, but again, depending on your investments, you may not end up with a return that you are expecting.
Listen to your inner voice and do what's best for you
Remember, regardless of the articles you read, even mine, each person needs to come up with a plan that works for them. You may end up very successful but making even small errors can cost you in the long run. It took me a long time to come up with a plan on my own and make the necessary adjustments, in fact I would say it was about two years before I finally had my investments set up the way I wanted them to be. I never rushed, it took time and patients but in the end I think I made the right move by taking control over my retirement. Some people may get lucky and find the perfect retirement plan that meets your needs and goals, while others like myself may have a missteps.
Just keep in mind that sometimes you can set up a retirement plan and feel you are doing everything right, but still come up short. Financial planning for retirement is never as easy as it seems. Every day I read articles about how to save a million dollars by the time you retire, however, the assumptions and calculations are away too simplified. Some will achieve the goal while others may make small mistakes but could end up costing them more.