Most baby boomers do not have much in common with professional athletes on the playing field, but when it comes to financial planning, they might consider thinking like one.
Lowering risk and working with people you trust are key parts of that mindset. Here are some ways baby boomers should be thinking like athletes when it comes to their money.
Leave the risk behind
While it may be tempting to take swings at home-run investments, well-paid athletes have too much money to lose and are wise to be prudent. Baby boomers who are late in their earning years have another reason to be prudent — they don’t have the time to recover from misses.
Everybody should want enough money to live comfortably in retirement. Baby boomers and athletes are no exception. What separates baby boomers and athletes from others is that they should already have the money they need saved up. That means their plans should be to sustain their earnings rather than put them at risk.
While starting a new business or investing in a high-risk/high-reward scheme might sound exciting and fun in retirement, failures in these endeavors can cause major setbacks to a retirement plan. For example, one of the riskiest but all-too-common investments people make is in restaurants and bars. These business ventures might be enjoyable for a period, but statistically they are very likely to fail. Over the years, many athletes have made the mistake of investing in these types of businesses.
Baby boomers should be careful of those kinds of risky ventures. Like an athlete, they should be more focused on preserving and building on what they’ve already earned and saved rather than trying to hit a grand slam that will change their financial picture. They might end up striking out.
It’s not a good idea for anyone to make overly risky investments. Some risk is inherent, of course. The more money you have, and the closer you get to retirement, the amount of risk you are willing to take on should be very low.
Surround yourself with people you trust
People nearing retirement and athletes with large incomes are often the targets of unscrupulous people who are eager to take advantage of them. For an athlete, it’s important to find the right agent who will have his or her best interests in mind.
The same is true for baby boomers and financial advisors. Take the time to interview financial advisors before working with them. Make sure they are the right fit for you and are able to lead you in the proper direction for your financial future. Find out what types of clients your advisor prospects typically manage. Are they used to serving clients with your particular needs and background? Learn how your advisor prospects were educated and what licenses they have earned.
For instance, are they a fiduciary? A fiduciary upholds the professional standard of recommending investments that are in your best interests. Your financial advisor should be someone you can have a relationship with and someone you feel comfortable helping you make financial decisions.
That’s why it’s important to ask for references. You can also use more than one advisor if necessary. An athlete, for example, may want to have an agent to manage business prospects and a financial advisor to manage personal finances. If it becomes necessary, it is much harder to separate from someone who is in control of all aspects of your financial life as opposed to transitioning from someone who is assisting you in a specific financial field.
Whether you’re a professional athlete making millions of dollars or a baby boomer making sure your years of savings last well beyond the finish line, it’s important to choose the right person to help you develop a game plan that avoids unnecessary risk and improves your wealth potential. Following these strategies will help make sure you are in a position to succeed when the clock is ticking down.
Andrew Costa is a managing director and co-founder of Global Wealth Management in Fort Lauderdale, Florida. This article first appeared at NerdWallet. Learn more about Andrew on NerdWallet’s Ask An Advisor.