3 Mistakes to Avoid in Retirement
Good planning can make life easy on retirees. Unfortunately, many people wait longer than they should to start planning. If you are wondering where to start or what you should review read about these three key mistakes that you should want to avoid:
1. Investing only in bonds or CD’s to generate income. This mistake could cost you dearly. For starters, the interest you can earn these days in very low. Investing in CD’s or Treasury notes may only yield a return of 0.5-2.5%. That means with a $1 million dollar nest egg you would earn $5-$25,000 per year, hardly enough to live on in this area. The solution may be to create diversified investment portfolio that is able to provide current income and potentially grow over time to keep up with inflation.
2. Overspending in the first few years of retirement. The euphoria of retiring and having access to a six or seven-figure 401k makes it very tempting to go out be frivolous. While it’s true that “you can’t take it with you”, you may want to take a longer term view of your spending plan. Develop a budget by looking at your basic “needs” and then adding in your “wants”. Once that is done, you can compare that to your expected income from social security and a pension if applicable and figure out how much you need to generate from your portfolio. This would be known as “retirement planning” and is the main service our firm provides.
3. Not having a plan for long-term care. It’s easy to skip this area of planning as no one whats to think about ever needing assistance in their old age, but “failing to plan” for this one could be financially devastating. I have seen people spend through their life savings in the last few years of their lives because they did not plan.
If you have not addressed this, you may want to read: Better Alternative to Long Term Care Insurance
If you have these three things completely covered, you are way ahead of the game.
Please feel free to contact us if you have any questions about your retirement planning.