Texas Retirement Planning Specialist
Five Critical Retirement Mistakes
dismal lately. Recent studies show that less than 15 percent of
workers are very confident in their ability to save enough to retire
comfortably and almost 63 percent say it would be impossible for them
to save the amount of money needed for a comfortable retirement.
"Consumers' confidence in their ability to retire is down
dramatically," said
Kinney, ChFC, CASL, and CLTC, principal of
(http://www.derrickkinney.com), a
advisory practice specializing in retirement planning. "Yes, the
recession played a large role in decreasing confidence, but there are
also several mistakes I see retirees making that can negatively affect
their finances and make their situation worse."
Five Critical Retirement Planning Mistakes:
Mistake #1 – Not having a defined and practical retirement plan.
One of the most shocking finds of the 2011 Retirement Confidence
Survey was that 42 percent of people admitted they determined their
retirement savings needs by guessing. While the most accurate way to
determine the amount of retirement savings you need is to meet with a
financial advisor, there are numerous websites that can help you
create an estimated retirement goal. A general guideline is to plan to
live on 80 percent of your pre-retirement income.
"Before my clients retire, I recommend they practice living on their
retirement budget for at least a year," Kinney said. "This lets them
test it. If it's not enough money, they may need to work a little
longer."
Mistake #2 – Underestimating the increased cost of health care-related
expenses.
In retirement, most of your expenses will decrease except, of course,
healthcare-related expenses – which can skyrocket. Most people realize
this, but few realize just how high the cost can go. Many seniors find
themselves spending unplanned thousands of dollars out-of-pocket on
medical care and prescriptions.
"An extended stay in a long-term care facility can eat up retirement
savings quickly," said Kinney. "Current data show that roughly 70
percent of adults over the age of 65 will need long-term care at some
point in their lives. The reality is that
little coverage so most adults may have to cover the expenses
themselves."
Mistake #3 – Not having a valid will.
When you die without a valid will, your state will create one for you.
The state's will may or may not be consistent with your intentions or
desires.
But there's also one more frequently overlooked consequence of dying
without a will.
"Failing to leave a proper will increases attorney's fees and other
costs related to probate in a dramatic manner," said
planning attorney
properly prepared will can usually be admitted to probate for a total
cost of approximately
not having a will are at least three times and often six to ten times
greater than if an individual had prepared a valid will."
And just because you have a will, doesn't make it valid.
Burdette said one of the most common mistakes he sees are people who
create their own will in a manner that makes it invalid. Therefore, it
has the same effect of not creating a will at all.
Mistake #4 – Not understanding the tax implications of retirement.
"Before you retire, you must understand that every financial decision
has both an economic and an income tax implication,"
certified public accountant
said.
"There are two common mistakes I see people make during retirement,"
said Brackeen. "The first is that they don't fully understand how and
when to calculate required minimum distributions. They just assume the investment fund will do it for them. The second is that retirees and
recipients often get confused about the tax implication of gifts, both
to the donor and the recipient."
Brackeen recommends retirees discuss the tax implications with their
advisers before making any major financial decisions.
Mistake #5 – Not setting financial boundaries in advance.
"Knowing what your financial boundaries are can help you set
expectations for your kids and grandkids," said Kinney. "Your first
priority should be to ensure you have enough money to retire
comfortably, and then consider helping your family with what is left
over."
Be up-front with your children about how much, if any, financial
assistance you can provide.
Kinney noted that having worked with clients for seventeen years,
clients who avoid these mistakes have a higher likelihood of reaching
retirement goals, preserving financial security and feeling more
confident about their future.
SOURCE
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| Copyright: | (c) 2012 The Associated Press |
| Source: | Associated Press |
| Wordcount: | 810 |
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