Unfortunately, many folks don't spend a lot of time even thinking about retirement because they think it's planning better left until tomorrow when more money will have been magically accumulated. That may very well mean that by the time your reach retirement age you will not have the funds to buy the condo in Cozumel, pay for the grandkids' education, or live a life of leisure. Someone in this situation might have to find a part-time job to make ends meet—and it's not out of the question that they could outlive their money. Don't end up without the money you need for retirement. Avoid these common mistakes:
- Not understanding taxes. We know that most of the time our money is taxable right away, like earnings from employment or interest on savings. But with individual retirement accounts, the taxes can be deferred. There's also tax-free money, like municipal bonds, life insurance proceeds, and 529 education savings plans. You should try to move as much taxable money as you can to the tax-deferred or tax-free categories.
- Acting without specialized advice. Don't think that one person can be an expert in all areas of planning. A financial advisor may handle your investment needs, but you should also work in concert with an eldercare and estate-planning attorney, especially if you are 60 or older.
- Not appreciating the longevity risk. Modern medicine lets us live longer. But that can create a problem of outliving your money, and it also can mean increased odds of needing nursing home or other long-term care. These can be expensive. So ask yourself if you have enough money to deal with these expenses for your entire lifetime. The sooner you tackle the longevity risk, the more prepared you'll be to live a rich life.
You still have time to get this going even if you are nearing retirement—it is never too late to make a plan. Remember to give us a call at 757-259-0707.
Reference: CPA Practice Advisor (March 22, 2016) "3 Retirement Errors to Avoid"