In my last article, I discussed the five of the biggest mistakes I think people make when they’re preparing, or perhaps not preparing, for retirement. But planning for this stage in life can be complicated, and there are many more mistakes clients can make. Here we’ll look at five more mistakes, with the hope that you don’t repeat these with your own retirement strategy.
It makes good sense to review your IRA (both traditional and Roth) designations to make sure they are set up according to your current wishes. Beneficiaries unfortunately die and we also sometimes have ex-sons- and daughters-in-law, so you want to ensure your funds are distributed to the people you currently care about. If you have a living trust, we recommend you have it reviewed by an estate planning attorney at least every five years as situations change, as do the laws. We believe estate planning is more important now than ever.
I can’t tell you how many times I’ve seen clients who have recently retired and unfortunately postpone taking their big dream trip or completing something on their bucket list. If you have the money and are physically able to do it, I say do it sooner rather than later! The key is you need your health also. I always tell my clients if they are physically up for it and it is in the budget, then go for it, because at some point they won’t be able to and you don’t want any regrets. What eventually happens is the money you were going to spend on the fun stuff after age 80 will probably be spent on medical bills. (For related reading, see: Retirement Planning: Complete Your Bucket List on a Budget.)
There was a rule of thumb that came out in 1994 called the 4% rule, and the premise behind it was essentially if you were to withdraw 4% of your assets each year you would never run out of money in retirement. Fast-forward to 2013, and an article was written that warned the withdrawal rate should not exceed 2.5%. This is not surprising given that people are living longer and interest rates across the board have been so low for so long.
There are many ways to prepare for needing a nursing home or in-home care down the road. Certainly self-insuring or paying out-of-pocket is one strategy many people use. However, given that the average stay in a nursing home is about 2.5 years, and the average cost of a private room in Tucson is about $ 90,896 per year, this means you probably need over $ 227,000 in available funds to utilize this strategy. Purchasing traditional long-term care (LTC) insurance is always an option, but you do have to qualify for it, it can be expensive and most policies are use-it-or-lose-it. There are newer strategies that now exist which cover both nursing and in-home care costs without the typical objections people have with a traditional LTC policy. (For related reading, see: Taking the Surprise out of Long-Term Care.)
We all know the saying, “Buy low and sell high.” Unfortunately, human nature has many investors doing the exact opposite. Why, you may ask? Well, many investors tend to sell when the market is performing poorly or is down and they don’t get back into the market until they feel things are looking better, or after the markets have returned to their former highs. The stock market is truly one of the only places I know of that when things go on sale no one wants to buy. The job of a wealth manager is to truly understand their clients’ needs and goals and help them avoid emotionally-driven mistakes. It is also their duty to help them better understand the markets while providing different investment options and explaining the trade-offs of each. I strive to keep my clients up-to-date on their concerns while adjusting their investment strategy to ensure they meet their goals while managing risk.
(For more from this author, see: 5 of the Biggest Retirement Mistakes People Make.)
Silverman + Associates Wealth Management, LLC is a Registered Investment Adviser. Information presented is for educational purposes only and does not intend to make and offer or solicitation for the sale or purchase of any specific securities product, service or investment strategy. Investments involve risk and unless otherwise stated, are not guaranteed. Be sure to first consult with a qualified adviser, tax professional or attorney before implementing any strategy or recommendation discussed herein.
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