Are you planning on retiring sometime in the near future? Are you afraid that you are making some of the more common mistakes people make prior to retirement? If you think so, you are not alone in this thinking. The following are some of the common mistakes people who are about to retire make and how to correct them accordingly. For a man who is about to retire at age 65, they can look forward to another 17 years in retirement and women can look forward to an additional 20 years. That is a long time to spend in retirement, and you need to be prepared to the best of your ability.
One of the first mistakes people make is they focus solely on rates of return. While it is everyone’s goal to achieve a high rate of return, that should not be your only area of focus as rates of return are historical and not an indication of what an investment might do this year. It is never a wise Idea to chase rates as past performance is in no way an indication of what will or could happen in the future. Instead, consider creating a well managed diversified portfolio that will maximize your returns while minimizing your risks. This way when a market sector goes bearish or an industry has a downturn your portfolio’s return will be minimized.
A second mistake that is all too common is people tend to forget about taxes when they retire. Depending on what kind of retirement accounts you have this could be a real issue for you. Many people think that once they retire that their taxes will go down but the reality is that in many instances they will go up instead. One way to minimize your taxes in retirement is to have ROTH accounts that you do not have to pay taxes on at all. Then it is wise to structure the sale of retirement accounts to coincide with the years you have lower income while in retirement.
A third mistake people is that they tend to forget to keep planning after they have retired. Just because you enter your golden years does not mean you can stop looking at your retirement plans and goals. It is vital that you examine your investment plan at least on an annual basis, or you run the risk of running out of money, or an investment could go south on you leaving you in trouble. By looking at your plan, you ensure that you will remain vigilant when it comes to your investments.
The fourth and fifth mistakes people make go hand in hand, and they are saving too little and saving too late. For those of us who have workplace retirement accounts they key is to save at least what your company will match least you are leaving free money on the table so to speak. Then set up your workplace savings on autopilot and do not think twice about changing it unless it is to increase the amount you are saving. A key to saving more is to live on what you did last year and increase your savings by any amount you receive in bonuses or raises.
Then if you started saving too late in your career, then you may have to work longer regardless of if that is in your plan or not. Most people that are within ten years of retirement have only saved about $110,000 which is enough to retire on by any means. And then there is your Social Security to consider, and that is by working longer you will increase your Social Security benefits due to the fact you have earned more. Also, if your retirement age is 67 and you work until you are 70, then you will increase your benefits by approximately 24% over your age 67 benefits.
If for any reason you need additional information or require additional assistance, then please feel free to contact me directly.
