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You get one chance at retiring. There are no do-overs. So, it’s critical you get it right the first time.
If you make a big financial mistake, the consequences are severe, and the penalties are stiff. It could literally cost you a small fortune. Or worse yet, force you back to work.
To make matters worse, mistakes at this stage of the game could be irreversible. The folks on Wall Street, the IRS, and even the Social Security Administration are not the forgiving type.
Below are five common mistakes that could needlessly cost you thousands:
1. You’re taking more risk than you know (or should be) at this stage of the game
The rise in the stock market has been a godsend for many Americans. But this 8+ year bull market has caused investors to become complacent. They don’t know what they own. They haven’t adjusted their portfolio in years (if ever). And they’re taking on more risk than they know, or than they need to at this stage of the game.
So, they could be setting themselves up for a big financial fall.
When is the last time you adjusted your investments inside your IRA, 401K or other investment accounts? And do these investments mirror your appetite for risk?
2. You don’t have a strategy to generate income in retirement
Successful retirements are not built on assets, or the amount of money you’ve saved. They’re built on your ability to generate income in retirement.
But the traditional options for generating income in retirement are dead. Company pensions are all but history. Rates on CDs and savings accounts are a joke. Bond yields aren’t any better. And many people fear investing in a stock market at all-time highs.
If that weren’t enough, we’re also living longer than ever before. And that means you must make your money last that much longer too. Generating income could be your biggest challenge of all in retirement.
3. You don’t have a strategy to reduce your taxes in retirement
Remember the adage — it’s not what you make, it’s what you keep!
You probably don’t realize this, but you have more control over how much you pay in taxes in retirement than any other time of your life.
There are many ways you could unknowingly trigger an avalanche of taxes, penalties and fees that could ultimately cost you tens of thousands of dollars in retirement. Possibly more. You won’t avoid this by simply having a conversation with your CPA at the end of the year. You should work with a qualified financial advisor that is well-versed with tax-efficient investment strategies.
4. Taking your Social Security benefits at face value
Social security remains to be one of the critical pillars of retirement planning. This is the foundation of your income plan.
Unfortunately, most Americans take their social security benefits at face value. And they wind up leaving tens of thousands, if not hundreds of thousands of dollars in lifetime benefits on the table.
You can no longer rely on some traditional rule of thumb, or one-size-fits-all strategy. If you do, you could trigger an avalanche of taxes; double your Medicare premiums, and forfeit additional benefits that are rightfully yours.
5. You don’t have a strategy to withdraw money from your IRA or 401K
Let’s say you saved $500,000 in an IRA, or 401K. But it’s not really $500,000, because you still must pay taxes when you withdraw this money in retirement, right?
This may shock you, but most people will pay through the nose in taxes when they withdraw money from their IRA or 401K in retirement. But a smart and savvy few will legally pay far less.
Don’t make the mistake of randomly withdrawing money from any of your pre-tax retirement accounts without having a plan. Your strategy should consider all your income sources and Required Minimum Distributions (RMD’s).
Summary
Saving for retirement is a great start. But it’s what you do with that money that really counts.
Most mistakes can be prevented by having a careful and comprehensive financial game plan. This plan should include strategies for income; taxes; healthcare; social security; RMD’s; estate planning; and more.
Without this plan, you run the risk of making a huge financial mistake and running through your entire life savings far too soon.
If you have any questions about your investments or retirement, you can call us directly at (801) 829-9797 or visit bossretirement.com.
