Common Investing Mistakes Educators Make

1) Starting too late:

The most common mistake I have seen over the years and the one that educators like you can do nothing to remedy, is starting too late.

Let me say this, it’s better to start late than to not start at all. But I cannot tell you how many clients have come to me within ten years of their retirement date and expect me to help them walk away with a fully funded retirement. It’s just not possible. So, start early. You’ve all heard the term “let your money work for you.” If you start early, you will get to see that ideal play out.

2) Investing without a goal:

It’s back to school night. The favorite night of every educator! It’s a chance for you to tell a room full of hopeful parents how you are going to transform their precious child into a genius... But instead of telling them about your systematic way of taking care of the basics for each subject and the plan on how you will update them on their child’s progress etc... you told the group of parents that in your class you have no academic plan and you won’t be updating them or the students on how the student is doing until the end of the semester, and by then it will be too late to do anything to increase the grade.

The parents would go crazy! Most parents want progress reports. They want to be updated if something is not going according to plan so when the end of the year comes and it’s time to graduate there are no surprises.

Unfortunately, many school employees plan their retirement the same way.

They wait until the “May or June” of their working careers and decide that they’ve had enough and it’s time to retire. By then, of course, the numbers are not in their favor.

We could all share a good laugh if we could dig up that old elementary school drill asking us to say what we wanted to be when we grew up. It wouldn’t be much different asking a new teacher on their first day on the job what they would like their retirement to look like. The future will always be uncertain - because it has yet to happen.

You do know certain things, however. You will be making a career of teaching, you will retire from teaching some distant day, you will have many years left to enjoy your post career life and there are financial products available to educators that can help make those years as financially secure as possible.

To begin retirement planning without a goal in mind is one of the most common mistakes we see. The important point here is our goals change, just like what we wanted to be when we grew up. You’re not becoming a educator to get rich, but it doesn’t have to result in a vow of poverty either. Set goals for yourself. Think about how you want your post- teaching years to look. Talk to your adviser and let him know what you’re thinking. Talk about everything from the safe ideas to your biggest whim. Your adviser can help steer you. Every possibility requires different planning. Invest with your future goals in mind.

3) Not reviewing investments regularly:

Reviewing your investments does not mean getting all dressed up and driving downtown for a four-hour meeting. After several in person reviews, if no important changes are anticipated, the review can be as simple as a quarterly phone call. Even then, a common mistake I have seen is investors not following up regularly on their investments. Agree upon a schedule of communication with your adviser that you are comfortable with.

As your life changes, your thoughts and goals about retirement will change. Make sure your adviser is kept up to date with any major changes in your retirement thinking during these scheduled review calls.

4) Not increasing contributions regularly:

Your first-year pension will likely be 40-60 percent of your final salary if you put your years in. If you start small but commit to little increases each year as your salary climbs, before long your monthly contributions will be substantial, yet affordable.

I like to use the example of a hot Jacuzzi. You’re not going to jump right in. No chance, it would be way too hot. You want to ease in slowly. The same thing applies with your monthly contributions. Start where it is comfortable and slowly increase over time.

5) Listening to your peer group:

For advisers, nothing ages us more than when our clients come to us wanting to change something up in their portfolio because they overheard another school employee talking about an investment. It’s understandable to get swept up in the euphoria of the good times, as well as the fear and uncertainty of the tougher times. But be prudent here.

As with most things in life, everyone has an opinion about darn near everything. Most are harmless and mere conversation. How a peer’s stock tip of the moment fits in to your carefully planned out retirement savings plan is a different story. Be careful here. People mean well and they want to share in their good fortunes. But you chose your adviser for a reason. Allow them to investigate investments for you before deciding upon them. That is what they do. Allow them to do the work you are paying them for.