Introduction

What causes a retirement fail? That is, why do people who have prepared for retirement end up unable to fully enjoy the thing they worked so hard for? I have thought about this question a lot. Most people believe that it's due to poor investments. But I cannot recall a single instance in which investment performance has been the cause of a client losing financial independence or failing to enjoy the life in retirement that he or she desired.

I joke with my clients that, rather than portfolio performance, it's usually the things you have to care for that weigh more than 50 pounds that wreak havoc on retirement finances: Grown kids, houses, horses, cars, boats. Clients laugh with me, sometimes because they have already made these mistakes – or, more often, because they are wondering which decisions down the road will impact their own retirement. What do you think can trip you up in your post-work life? Will it be your finances, health, family, a divorce, a scam? The list goes on.

Retirement Fail is not about going broke or becoming destitute; it is about the personal, emotional, and financial decisions you make that can disrupt the life you could have enjoyed in your post-work life. Whether you have $500,000, $5 million, or $50 million, the issues we discuss are real and relevant, not only for you but for your children and other family members.

I talk with my clients about how to plan for the evitable, for the things you are capable of avoiding. People focus on the inevitable – what will happen, no matter what – and that's important, too. But we humans may be tempted to throw up our hands and leave to chance the very things we truly can control, those we should be taking thoughtful and deliberate steps to avoid. We sometimes court retirement fail.

A Kernel of an Idea

In the fall of 2014, Evan Simonoff, editor-in-chief and editorial director of Financial Advisor magazine as well as editorial director of Private Wealth magazine, called me and asked me to speak at the Inside Retirement Conference, which focuses on current topics that affect retirees. He asked if I could speak on using income-generating assets for retirement in a low-interest-rate environment. “That is a great topic,” I told Evan, “but what I would love to talk about is how people fail in retirement.” No one is talking about this issue, I told him, though 10,000 people are retiring every day. I shared that I had nine reasons I have seen people fail in retirement, and that the best way to avoid those failures was to get the conversation going early. Evan didn't hesitate for a second: “I love it…that's your subject,” he told me.

Every day, I and my colleagues at Sullivan, Bruyette, Speros & Blayney (SBSB) talk with our clients about decision making in retirement and in the lead-up years. And while we discuss investments, how to best allocate portfolios for cash needs, taxes, and other related items, most of our energy goes into discussions that are far thornier. These conversations can be delicate because they often involve a person's most deep-rooted wishes, fears, or insecurities: Maintaining his or her role as provider for the kids (even though the children are in their 30s); recovering one's identity after exiting the professional world by starting a business (even a high-risk business like a trendy restaurant or a vineyard); or buying that dream vacation home (even though it might not be truly affordable).

The topic struck a nerve – the room was packed, and other advisors came up to me after the conference, wanting to learn more about how to have these important discussions with their clients. Evan later wrote a piece for Financial Advisor based on my talk and our conversations, and that, too, generated a lot of buzz and comments from other financial advisors. And the more I thought about it, the more I realized how critical the emotional part of retirement planning and decision making truly is, and how much my clients and others like them could benefit from a guide to take away, with stories that underlined the realities of some common retirement fails.

Are You Talking to Me?

There are plenty of books about how much money you need in retirement and how to save and invest your cash. This is not one of them. I wrote Retirement Fail for those of you who have been preparing for retirement financially but need some guidance to ensure that your plans for a happy, healthy retirement are not compromised. Ready or not, you will be making decisions that can positively or negatively impact your financial future. You may be on track with savings goals, but there are potential pitfalls ahead, and the deepest pits are the ones you don't even see or, in some cases, those you would rather not acknowledge.

Many people have good, strong financial plans, but they don't necessarily notice themselves getting caught up in troubling patterns – or they may be surprised by an event they didn't see coming. The numerical side is one thing; an advisor can easily come up with numbers and projections. The more difficult thing is to look at the way the decisions we all make impact our own future and those around us. Retirement Fail shows you the watch points you need to pay attention to and helps you think through what your priorities are – and what trade-offs you may have to make to reach your goals.

If you're working with a financial advisor – and a Certified Financial Planner Board of Standards (CFP Board) survey indicates that 40% of Americans are now consulting a financial professional1 – you can use this book to help start productive conversations with your advisor. You don't need to stick to the technical investments and hard numbers – as you'll see from the stories in Retirement Fail, we see lots of different scenarios and can offer suggestions for handling many complex issues related to individual and family finances.

We like to share stories, both those of clients (all carefully anonymous, of course) and from our own lives. Money is one of those things people often don't talk about with their friends. That's why stories are so powerful – it's why we use them in our meetings and why I use them throughout this book. We can say, “We know another person who was in your exact spot, and this is what he did.” Everybody likes confirmation or affirmation that they are making wise decisions, or that others faced similar situations and came out on the other side. We can learn from others' successes and take warning from their losses.

Where's the Advice?

My parents dropped me off at the main campus of Penn State University in September 1975. I was surrounded by mountains (locals call the area Happy Valley) and by 30,000 other eager, energetic college students. Mom and Dad took me out for lunch before they left, and my dad asked me what I thought I was going to do when I graduated.

That was an interesting question for a freshman who had not yet been to one class. But I was one of those rare freshmen who actually did have an idea of what I wanted to do. I had loved reading about stocks and different businesses since I was young, so I said, “I am either going to work on Wall Street and help people with their finances or I am going to be CEO of a company and run a business.” Without skipping a beat, he said, “The smartest people I know in business are CPAs [certified public accountants]. You should get a degree in accounting.” Being a bean counter had never crossed my mind – I wanted to help people with their finances and investments.

My father's words stuck with me, though, and when I graduated with a degree in accounting I went to work for Ernst & Whinney (now Ernst & Young) in Washington, DC. After a couple of years in public accounting, I left and joined a local brokerage firm as a financial planner, following my real passion.

Excited about the job change, I called my parents to tell them of my big move. Dad, a bit shocked, said, “Why would you leave a great career in public accounting to become a salesman?” When I told him I was going to be a financial planner, not a salesman, he replied, “Every financial planner I know is just trying to sell me something.”

I thought he didn't know what he was talking about. I had this vision of helping people, not selling to them. But darned if he wasn't right. A few months after I started my job, I went to the national financial planning conference. There were several thousand attendees, and everyone I met was selling something: Insurance, annuities, heavy commission-based mutual funds, private partnerships, and so on. Where was the advice? Who was helping people make smart financial decisions?

I was fortunate in my new job, and one colleague in particular, the late Dave Dondero, took me under his wing and helped me learn how to prepare a financial plan driven by a client's goals and financial capabilities. I taught classes, wrote case studies, and became the in-house expert on tax and financial planning strategies. Most of the people at the company used my work to sell products, but I was learning the craft and building a reputation for providing quality advice.

In 1988 I decided to start my own independent firm, Sullivan Financial Consultants, with the goal of helping clients make smart financial decisions, untroubled by conflicts of interest. Then, in 1991, I was fortunate to partner in a new...