Avoid These Retirement Planning Mistakes
Retirement looks different for everyone. Whether you want to finally climb that mountain you’ve been thinking about for years or spend the rest of your days in the warm tropical climes of a faraway beach paradise, someone is going to have to pay for it. Hopefully, you’re one of the two thirds of Americans who actually have some retirement money put away, and hopefully, you’re not one of the 23% of Americans who have less than $10,000 in savings.
There are a lot of things to plan for when it comes to retirement. Here are some common mistakes, and how to avoid them.
Don’t ignore your retirement
While it may be easier not to face the inevitable, it’s not the smartest thing to do. It’s easier in the short term. But time has a way of forcing us to confront what we weren’t willing to in the past. If you have any desire to call it a day on the daily grind sometime in the future, NOW is the time to start planning for it.
Be realistic
Keep in mind that whatever it is you want to do in retirement will most likely come with a price tag. Taking a round-the-world trip or hiking the Hindu Kush, being fed peeled grapes on a private beach in paradise – Social Security checks aren’t going to cover those things. You will need a realistic grasp on your financial situation and what your projected retirement income will afford you.
Uncle Sam
Don’t underestimate the impact that taxes will have on your retirement income. 401k accounts are tax deferred, which means when you start to take your distributions, the IRS will take regular rate taxes out of them. In other words, if your tax rate is 25% – your 401k is only worth 75% of what it seems.
To balance this liability, you might consider putting a portion of your after tax income into tax-free retirement vehicles as well.
Health Care
The potential need for long term care and rising health costs in your older age are a reality which cannot be ignored. Make sure to factor these into your equations when planning retirement. Consider taking out a long term care insurance policy.
IMPORTANT DISCLOSURES
Material contained in this article is provided for information purposes only and is not intended to be used in connection with the evaluation of any investments offered by David Lerner Associates, Inc. This material does not constitute an offer or recommendation to buy or sell securities and should not be considered in connection with the purchase or sale of securities.
To the extent that this material concerns tax matters, it is not intended or written to be used, and cannot be used, by a taxpayer for the purpose of avoiding penalties that may be imposed by law.
Each taxpayer should seek independent advice from a tax professional based on his or her individual circumstances.
These materials are provided for general information and educational purposes based upon publicly available information from sources believed to be reliable– we cannot assure the accuracy or completeness of these materials. The information in these materials may change at any time and without notice.
David Lerner Associates does not provide tax or legal advice. The information presented here is not specific to any individual's personal circumstances. Member FINRA & SIPC