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presented
Much has been written about the classic financial mistakes that plague retirement. Whether they result from ignorance or fate, we need to be aware of them as we plan for and enter retirement.
Leaving work too early. The full retirement age for many baby boomers is 66. As Social Security benefits rise about 8% for every year you delay receiving them, waiting a few years to apply for benefits can position you for greater retirement income. Underestimating medical expenses. Fidelity Investments says that the typical couple retiring at 65 today will need $240,000 to pay for their future health care costs (assuming one spouse lives to 82 and the other to 85). Taking the potential for longevity too lightly. Are you 65? If you are a man, you have a 40% chance of living to age 85; if you are a woman, a 53% chance. Those numbers are from the Social Security Administration. Planning for a 20 or 30-year retirement isn’t absurd; it may be wise. Withdrawing too much each year. You may have heard of the “4% rule”, a popular guideline stating that you should withdraw only about 4% of your retirement savings annually. The “4% rule” isn’t a rule, but many cautious retirees do try to abide by it. So why do some retirees withdraw 7% or 8% a year? In the first phase of retirement, people tend to live it up; more free time naturally promotes new ventures and adventures, and an inclination to live a bit more lavishly.
Ignoring tax efficiency & fees. It can be a good idea to have both taxable and tax-advantaged accounts in retirement. Taking retirement income off both the principal and interest of a portfolio may give you a way to reduce ordinary income and income taxes. Account fees must also be watched. Avoid market risk. The return on many fixed-rate investments might seem pitiful in comparison to other options these days. Equity investment does invite rise, but the reward may be worth it. Retiring with big debts. It is pretty hard to preserve (or accumulate) wealth when you are handing chunks of it to assorted creditors. Retiring with no plan or investment strategy. Many people do this – too many. An unplanned retirement may bring terrible financial surprises; retiring without an investment strategy is just silly. These are some of the classic retirement planning mistakes. Why not plan to avoid them? Take a little time to review amnd refine your retirement strategy I the company of the financial professional you know and trust. Nicole Albrecht may be reached at (951) 719-1515 or nicolea@taxmanfred.com“>nicolea@taxmanfred.com. www.taxmanfred.com. |
by Nicole Albrecht