Three major landmines in retirement financial management: excessive conservatism, one-time pension, and long-term financial support for adult children

To have peace of mind in retirement, it is important to have good financial planning and asset allocation. (Drawing by this newspaper)

[Financial Channel/Comprehensive Report] The more conservative your investment is after retirement, the safer it will be? Mellody Hobson, co-CEO of Ariel Investments, an American asset management company and former chairman of Starbucks, named three major pitfalls in retirement financial management. The biggest mistake may surprise many people. It is not investing too aggressively, but being "over-conservative."

In an exclusive interview with "Kiplinger", Hobson said that retirees often step on three major financial management landmines, including over-conservative investments, taking out large sums of pension at one time, and continuing financial support for adult children. He said the most common mistake made by retirees and pre-retirees is to reduce their stock positions too quickly and too early as retirement approaches. She said bluntly: "People think that if you don't lose money, you win, but in the long run, you can't beat inflation."

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Hobson pointed out that after retirement, there may still be up to 30 years of life that require funds to support life. Therefore, retirement funds should not only aim at "not losing money", but also consider long-term growth. Stocks are still an important tool for asset growth, but she does not encourage retirees to put all their funds in the stock market. Instead, they should maintain an appropriate and diversified allocation between stocks and fixed-income assets.

If you have made your portfolio overly conservative, there is no need to buy large amounts of stocks all at once. Hobson suggests that you can seek assistance from a financial advisor to gradually increase your stock allocation, or make regular fixed investments over a period of 6 months to a year to reduce the risk of one-time entry.

Aside from being overly conservative with your investments, the second biggest landmine is taking out a large lump sum in your 401(k) when you retire. Hobson pointed out that large withdrawals mean less principal that can continue to be invested and enjoy compound interest growth. If it is a traditional 401(k), you may also face a higher tax burden because the withdrawal is treated as ordinary income.

She also reminded retired people not to impulsively use it to buy a boat, go on vacation or spend lavishly just because they suddenly received a large sum of money. For example, Hobson said, "You don't have to buy a boat, you can go on a boat trip," because temporary pleasure may sacrifice long-term financial security.

The third biggest landmine is continued financial aid to adult children. Hobson even described this phenomenon as reaching an almost "epidemic" level in recent years. If retirees continue to use their retirement assets to subsidize their adult children, they may eventually threaten their own life in their later years.

She called on parents to seriously face the issue of financial independence for their adult children. If they really need to provide assistance, they should clearly define the scope and long-term period of support. When the appropriate time comes, they should "take off the training wheels" for their adult children.

Hobson emphasized that whether you invest too conservatively, take out a large pension in one lump sum, or continue to provide financial support to your adult children, you still have time to adjust even after you retire. Retirement is not the end of financial planning. There is "no real finish line" in pursuing financial security.

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