Four scary retirement mistakesWritten by Nolan Baker Mark Clair | | firstname.lastname@example.org
The first wave of baby boomers will soon start turning 65. For many baby boomers, the thought of retirement is here. Imagine all of the fun in store — turning off the alarm clock and sleeping in, getting up and being on your own schedule; getting to spend time with grandchildren and other family members can now be something there is time for. Although many people look forward to these days, still the thought of retirement can be scary. Reduce your worries by avoiding these scary retirement mistakes.
Unexpected health care costs
We do a lot of public speaking locally and nationally, talking on the topics of how to manage money, protect assets and plan an estate. Oftentimes when we are speaking to a group of boomers or retirees, we ask people to raise their hands if thet have long-term care insurance. Usually it is less than 10 percent of the room. Yet an unexpected health care crisis can easily wipe a family out. Also, when we talk with many retirees we hear them say their health insurance is covered by their company for their lifetime. In reality, in most of these cases, health insurance in retirement time is a luxury, not an obligation. So be prepared to have plenty of money set aside to cover unestimated and unexpected health care costs.
Too much debt
Try to eliminate as much debt as possible before retiring. Just this week, we met with a couple in their late 50s. They came in to talk about being in a position to retire if the union contract deal didn’t go the way they wanted. It is not normal to see people in their late 50s retiring. The common theme among those who do is they are almost always debt-free. If all of those outgoing debt expenses are eliminated, there should be more cash flow for enjoying retirement. For many, the number can be huge. Don’t rely on investments to cover debts in retirement; instead, have as many paid off as possible before retiring.
Loaning money to family
At retirement, people are often in control of the biggest amount of money in their lifetime. This is because a retiree now has access to their 401(k), possibly a lump sum pension and many other investments. Children may sometimes ask their parents for a loan. That loan could be to start or support a business, it could be to cover a job loss or a variety of other reasons.
Loaning money can not only be dangerous to a retiree’s own financial future, it can create unhealthy relationships. If the loan doesn’t work out, it can quickly ruin a family. We believe in helping family when they need a hand to get back on their feet, but only if you can afford it. Instead of loaning money, if you have the financial resources give the money as a gift. If you can afford to give the money away, that’s great. If not, a loan can be dangerous.
Forgetting Plan B
Shift the mindset and have a Plan B. For years and years the plan has been saving and growing the nest egg. Retirees should consider shifting their mindset to a distribution mode. No longer will retirees be putting money each and every paycheck into their retirement savings.
Instead, they now will be relying on those retirement savings to fund their income needs. Plan B involves looking at retirement money differently and having a backup plan in place.
For more information about The Retirement Guys, tune in every Saturday at 1 p.m. on 1370 WSPD or visit www.retirementguysradio.com. Securities are offered through NEXT Financial Group Inc., Member FINRA / SIPC. NEXT Financial Group Inc. nor its representatives provide tax advice. The Retirement Guys are not an affiliate of NEXT Financial Group. The office is at 1700 Woodlands Drive, Suite 100, Maumee, OH 43537.