Financial Group

Retirement Mistakes to Fix Before the Holidays

Spend as much time planning for retirement as you do for the holidays!

Some people spend more time planning their holiday gatherings than preparing for their golden years. As a result, basic steps in retirement planning are overlooked. Here are a few of the top mistakes people make that are crucial to saving.

Not specifying goals. Many people say something like, “I want to retire in my 60s.” Fine, but pinpointing the age when you want to retire is just one piece of the puzzle. Additional key questions to answer:

  • How much do you need to retire?
  • How much have you saved already?
  • Will your investments generate enough income to meet your retirement goals?

An example of a specific retirement goal is: “I want to retire at 62 with $2,000,000 of investable assets that yield approximately $110,000 a year of income, including my pension and Social Security.”

Focusing on desired rather than needed returns. Don’t obsess with how much your portfolio can make and what your friends make investing. How much return your portfolio generates may mean little. More important is identifying how much you need to make to live comfortably in retirement. How much income do you need each month to survive? To live as well as you do now, or better?

How does your investment income complement your other retirement income sources, such as pensions and Social Security? Stop focusing on the rumored 10% return that big-time investors claim to make and start focusing on what you may actually need.

Not regularly reviewing portfolios. When did you last open your account statement? When did you last sit down with your financial advisor and review your investments and 401(k)?

If you did either in the last 365 days, that’s a start. Many investors don’t know the rate of return in their primary accounts.

You need to know what goes on with your investments. It is recommended you discuss your investments with your financial advisor at least twice a year.

Ingesting too much financial news. The media is not your financial advisor. Its objective is to sell advertisements.

Underestimating one’s lifespan. Advances in medicine keep people alive longer. According to the National Institute on Aging, “The rising life expectancy within the older population itself is increasing the number and proportion of people at very old ages.”1

According to Fidelity’s 20th Annual Retiree Health Care Cost Estimate, the average couple should expect to spend $300,000 on health care and medical expenses during retirement – yet half of the pre-retirees surveyed believe they will only need approximately $50,000.2 Among other findings related to health spending in later years:

  • 82% of Americans say that the pandemic has had some impact on their retirement plans. One in five (22%) of those within 10-years of retirement will be accelerating their timeline to exit the workforce.3
  • 80% of these individuals are under the age of 65, meaning they will likely need to bridge their health care options before eligibility for Medicare is available.3

Although health care is often a top stressor when thinking about retirement, 58% of those surveyed say they have devoted little or no time considering what they need to cover in retirement.3

Statistics suggest that a proactive approach in saving and investing may help people of all ages to better prepare for their future health care needs.

Failing to check beneficiaries. Consider this story of three brothers who received an inheritance from their recently deceased mom. The money came from the mom’s individual retirement account but the brothers also learned that she held an annuity three times larger than the IRA.

The mom’s will named all three brothers as equal beneficiaries. What mom didn’t know, or forgot: Her annuity named the oldest son the sole beneficiary even though her will divided the money equally between the three siblings.

The annuity superseded the will and the oldest brother got all the money.

The siblings knew mom wanted the money split three ways so of course, the oldest brother split it equally, right? Wrong. He took the entire $1,000,000 annuity and bought an airplane.

Check your beneficiaries. Review your 401(k)s, annuities, and life insurance policies. It can take less than 10 minutes to mitigate potential trouble, heartache, and misuse of your retirement money during and after your last years.

This holiday season, be the person who spends as much time planning for retirement as planning the festivities.


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Important Disclosures

Investing involves risks including possible loss of principal. No investment strategy or risk management technique can guarantee return or eliminate risk in all market environments.

This material was created for educational and informational purposes only and is not intended as legal or investment advice. If you are seeking investment advice specific to your needs, such advice services must be obtained on your own separate from this educational material.

This article was prepared by RSW Publishing.

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