When it comes to planning for retirement, don’t pull a Homer J. Simpson “Doh!” moment and make a costly move. Unfortunately, when it comes to making key decisions for retirement, you only got one shot- so you better make it count! Don’t dismiss how much time it takes to plan a successful retirement. Some plan more on the annual family vacation that they do on retirement. Please don’t let this be you. Here are some of the more common mistakes people make when retiring and how you can avoid them.
1. Close Your Ears
It’s not a bad idea to pick the brain of friends or colleagues that are in a similar situation. You have to remember though that they made the best choice for them– not you. Everyone’s got an opinion about what you should do with your money nowadays. You want to make sure you hire a qualified financial planner to help you along the way. This is no time for amateur hour.
2. Pension Options
If you’re one of the few boomers to still have a pension, deciding what to do with it is the most important decision in your life. You can take out a lifetime payment on your and your spouse’s life or you can roll the pension into an IRA.
If you’re married, the joint life payout option might be the best so your spouse will continue receiving a monthly benefit when you die. The only problem there is that the pension ends when both of your life’s do- meaning that your kids get nothing. You also have to think about what happens to your pension if your company goes bankrupt. You do have the PBGC insurance, but it only covers a certain amount.
3. Calling it Quits Too Soon.
Just because you’re to tell your boss what you really think about him and call it a day, it might be premature. Do you have enough saved? Do you have your health insurance paid off? Do you still have a lot of debt? If so, you might want to consider a balance transfer with Discover® More® Card – $50 Cashback Bonus® or a debt consolidation loan through Lending Club. This will get you closer on track to finally being able to retire the right way.
4. Tax Rules That Apply to You
Think you can stay on top of the tax code? Don’t even think about it. Every financial decision has a tax consequence. Be sure to have a trusted accountant or CPA in your corner who can show you how to minimize your taxes and keep more of what you make.
5. Medicare & Social Security Pays for What?
There’s a 70% chance you’re going to need some sort of long term care. Will your finances cover that? You have to be basically poor before the government will step in to help you. Make sure you have done the proper planning and have secured long term care insurance, a Medicare supplement policy or have enough assets to pay your own way. Don’t have long term care insurance yet?
Get a long term insurance quote to make sure your family is taken care of.
6. Risky Business
Retirement encompasses many types of risk: longevity risk, interest rate risk, inflation risk, geopolitical risk, default risk, credit risk. How will you manage risk in retirement? The first step is having a financial plan. Don’t let blind luck and pure guesswork lead you to the promise land. If you have sense of where you are and where you need to get to, you have a much greater chance of success.
Don’t let retirement be a bumpy ride. Avoid these mistakes and enjoy the golden years!