Some mistakes you make in life, carry greater consequences than others. Unfortunately, when it comes to planning for your retirement, some decisions you make [by not being educated] can have dire consequences on your future. This is particularly true, as you get closer to your desired retirement age. So in an effort to get your retirement planning into tip-top shape, here are common mistakes people make with retirement planning that you should avoid, and the things “to” do in planning for your best years to come.
T0 do’s for retirement planning
- Wait until full retirement age to take benefits. Full retirement age is 66 for those born between 1943 and 1954 and gradually increases until it reaches 67 for people born after 1959. If you take retirement at 62, you lose 25% of your benefit-if you wait until age 70, your benefit will have grown up to 8% at year. Another startling fact is that if you do take benefits at 62 and continue to work, you lose $1 in every $2 of benefits after earning over $17,040. The year you reach full retirement age, you lose $1 in benefits for every $3 earned above the $45,360. annual limit. This will continue until you reach full retirement age, which has no limits.
- Pay off debts before you retire. Focus first on your mortgage which is typically the largest payment in your budget every month. People forget they will be living on a fixed income after retirement. If you go into retirement with debt, you will not have money for unexpected expenses. Setting a deadline to get rid of debt allows you to establish a date for when you can comfortably retire.
- Financial planner/investing. Most people are just too conservative with investing while they are working. Having a good financial planner to guide you into the best investments and leaving your money in your portfolio [without early withdrawals] will ensure you a nest egg outside your benefit of Social Security. Financial advisers believe that stocks outperform bonds. On the other hand, you don’t won’t to be too aggressive with investing in stocks because your portfolio may have a greater propensity for loss. Be cautious of having all your investment in just your employer-be diversified-having it all in one place is dangerous for tanking your portfolio. In order to assure you have a secure nest egg-avoid taking more than 3% out of your savings every year. Review your portfolio every few years with your planner to assure you are getting the most for your money.
- Be frugal during the first years of retirement. A lot of people make a dent in their retirement savings by taking too many trips after they retire and making home improvements that just aren’t necessary. Stay more frugal in all you do to avoid the pitfall of possibly having to go back to work.
- Home equity can be your friend. If you are struggling to pay off debt and live comfortably, or have an urgent need, your hard-earned equity can be given to you as a reward for your retirement years. Too many times, people choose to turn in stocks that are crashing [which will probably return] and not using resources such as a reverse mortgage or an equity line of credit. Keep your portfolio safe.
- Long-term care. The average cost of assisted long-term care is $43,000 a year. Nursing homes are twice that much. Medicare will not pay the complete costs. Plan now for having this care by buying long-term care insurance.
- Create an estate plan. In the event you need someone to care for you, it is imperative you have your wishes outlined. In the event of your death, you need a legal will to assure your wishes are carried out. This will avoid your loved ones from dealing with legal issues.
Small wonder that recent research shows that far too many people simply don’t have a very accurate sense of whether they’re actually on track to a secure post-career life. The important thing is to act immediately to correct any issues with your retirement plan. The sooner you get started, the easier it will be to get back on track. Being smart with your investments, and keeping spending in check, will ensure your retirement years will truly be golden.
The TODAY show gave us reasons to continue to find some type of work after you reach full retirement age for better over-all health.
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