The 10 Mistakes You Want To Avoid In Retirement –Part 2
When you retire, it can either be a sweet time of enjoying family, relaxing and picking up new hobbies, even some extra traveling, or it could be a time characterized by greater stress due to financially instability. Unfortunately, once you’ve crossed that threshold into retirement it’s very difficult to get a “second chance” or a do-over, on saving for retirement and creating that retirement nest egg. Meaning, if you make mistakes it could cost you more than just a little money. It has the potential to destroy your peace of mind and the enjoyment that comes with being retired. By avoiding the common mistakes discussed below, you can keep yourself away from many of the financial pitfalls facing people in retirement.
Don’t Stop Updating Your Portfolio Just Because You’ve Reached Retirement
What many people do, is they hit retirement, switch out their portfolio from higher risk equities into low-risk bonds and they just leave them there. While is true that during retirement you want to be sure your income is secure, meaning you don’t want to risk it all on high risk equities, having a good balance between high risk (red money) investments and low risk (green money) investments can keep your income sustainable for the 20-30 years you spend in retirement. Updating it regularly and working with a financial advisor can also help curtail this issue.
Be Careful To Not Make A Mistake With The Distribution Of Your Accounts For Retirement Income
Allowing with sitting down with your Redhawk Wealth Advisor to create a strategy for your retirement portfolio, it is also a good idea to discuss the area of distribution. When moving money from a retirement account to your personal account, it could cost you thousands of dollars in tax liability by simply tapping the wrong retirement account at the inappropriate time. For example, if you withdraw too early from a 401(k) account, it can cost you as much as 20%! When you’re no longer in the work force, you don’t want your income going out in tax penalties!
Don’t Put All Your Eggs In One Basket Regarding Your Retirement Portfolio
This is kind of along the lines of what I said before about not putting your money automatically in bonds, just because you’re retiring. It’s important that you maintain a well diversified, well-rounded portfolio even in retirement to help reduce risk exposure. In addition to your 401(k) and or IRA, a mixture of some stocks, bonds, annuities, even precious metals can keep you better insulated against fluctuations in the economy and market.
Don’t Underestimate The Cost Of Health Care In Retirement
The Current numbers are saying you will need an additional $220,000 during retirement just to cover the cost of health care. Medicare and Medicaid help with this, but there are still many things not covered and the $220,000 mentioned above does go towards insurance premiums, co-payments, and towards costs not covered by benefits. You can also save yourself money by investing in a healthy lifestyle accompanied by good eating habits and exercise early on in life.
Get Rid Of Debt Before You Retire!
Like I keep saying, there is no magic retirement age! Just because you’re 65 years old, if you have outstanding debt from earlier in your life, it would be advisable to have that debt knocked off before you enter into retirement. Credit Card debt in particular, can be very destructive to a retiree’s income stream.
Keep Your Lifestyle Choices In Check During Retirement
Retirement is not a blank check to spend money and have fun. Unfortunately for most, a fixed income means you need to tighten up a little during retirement. Failure to do so could result in running out of money before retirement is over.
As you can see, there are so many areas where finances can go sour during retirement. A simple mistake can cost you a lot of money! For more information on how to avoid retirement pitfalls, speak to a Redhawk Wealth Advisor near you today.