As more and more baby boomers and others look towards a financially secure retirement, thoughts turn from worry over the workday routine to how to manage your “golden years”. How prepared are you?
How much money will you need in your retirement? Do you know the ins and outs of your retirement plan(s)? When do you claim Social Security?
These are just some of the subjects that you need to deal with before you retire. Make certain that you are making the wisest decisions regarding your retirement before making any irreversible decisions.
- Relocating on a whim: Too many new retirees move to their dream destination only to find out that they entered into a nightmare. The pace of life is too slow, everyone is a stranger and daily golfing is becoming a bore. Before you make any irreversible decision about relocating, spend an extended period of time at your anointed destination to get a feel for the people and the lifestyle. Consider renting before buying as an option.
- Planning to work indefinitely: Many baby boomers have every intention of staying on the job beyond age 65 either because they want to or they have to in order to maximize Social Security. This could backfire. More than half of all workers plan to continue working part-time in retirement indefinitely. Older workers are phasing into retirement slowly by working part-time or more flexible hours. However you could be forced to stop working and retire early due to health issues, layoffs, buyouts, etc.. Failing to maintain skills up-to-date is another reason that workers struggle to get hired.
- Claiming Social Security too early: You can claim Social Security as early as age 62. However if you do so, you will permanently lose a portion of your benefits by doing so. You should at least wait until your full retirement age which is 67. If you can wait to claim until age 70, you will receive a benefit boost of 8% per year from age 67 to age 70. This benefit boost will continue on as long as you claim your benefits. Work longer if you have to in order to claim at age 70.
- Putting your kids/grandkids first: Not to sound selfish, but footing the bill for private tuition and lavish weddings at the expense of your retirement savings could come back to haunt you. Money for education could be obtained through student loans. There are no government loans for retirement!
- Avoiding the stock market: Shying away from stocks or mutual funds because they seem too risky is one of the biggest mistakes you can make when saving for retirement. Yes, the stock market has its ups and downs. However over the long-term, a retiree’s greatest financial risk is the risk of outliving their money, not losing their money. Depending upon your health, you could be in retirement for 30 years. What will inflation due over that time to the cost of goods and services? Savings accounts will not keep pace with inflation causing you to run out of money before running out of time.
- Ignoring long-term care: Even the hardiest of retirees can fall ill. When the day arrives that you or a loved one requires long-term care, be prepared for sticker shock. Assisted living can run over $5,000 per month. Memory care can exceed $6,000 per month and independent living over $3,000 per month. These are averages, your local area could easily double the figures mentioned. There are numerous methods of funding these costs.
- Neglecting estate planning: Estate planning isn’t only for the wealthy. Even with modest assets, you should identify who gets what and who will be in charge of dispersing your money and possessions. Die without a will and the state will determine who gets your assets. This process could take months to determine. A qualified estate planning attorney will help you determine the situation you are in and help point you in the right direction.
- Borrowing against your home: It is tempting if you are house-rich to tap into that equity. If you do, can you afford to pay back the loan while retired? Rather than doing that, what about downsizing and selling your current home to buy a smaller home? What about moving to a less expensive location? You may want to explore what is known as a Reverse Mortgage. Tread carefully when evaluating your options regarding this topic.
- Failing to plan how you will fill your free time: This is a very important topic and one that I deal with constantly when advising clients. On average, it takes 6-12 months for a new retiree to realize that she/he is bored with their new life as a retiree. Our careers provide structure and once that structure is gone, boredom can creep in. It is critical to plan your time in retirement before you retire. Just as you must plan your finances prior to retirement, you must do the same for your time. You could ease into retirement by slowing down your work schedule if you are allowed to do so. You could volunteer for a cause that you believe in. You could take adult education courses to keep your mind active.
Doing your homework regarding this issue is critical to a happy retirement. At Retirement Solutions we have been assisting those in or near retirement for over 40 years. We have the knowledge, experience and tools to assist you in making your “golden years” truly enjoyable.
We offer a no-cost, no-obligation consultation to determine if we can assist you and if you would like to work with us. Simply click the link in the upper right hand corner of the website “Let’s Discuss Your Financial Future” to arrange a time for us to talk. You talk, we listen.