Perspectives on Money: Mistakes That Could Make Retirement Challenging

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Making any of these common mistakes could mean you will have to struggle more when you no longer get a paycheck.”  Brad Pistole

The road to a successful, stress-free retirement often has potholes more challenging to navigate than you may believe. There are numerous critical issues to address, complicated money concepts to understand, and a bewildering array of products to consider. That’s why you must exercise extreme diligence and avoid making mistakes with your retirement planning from which you will never have time to recover.

Some of the most common errors that can destroy your wealth are, thankfully, the easiest to avoid. With a bit of awareness, education, and creative planning, pre-retirees and retirees can sidestep some common errors in retirement and income planning, such as:

Trying to predict future EXPENSES instead of focusing on future income. Given the current inflationary environment, it’s understandable that many seniors have become obsessed with figuring how much things will cost as they age.

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·  Pre-retirees and retirees expend a ton of mental energy worrying about things such as long-term care, health care, and getting rid of debt. While these things are essential to address, I believe that concentrating your efforts on building retirement income is a wiser use of your brainpower. After all, with adequate income, you’ll be better equipped to handle anything life sends your way.

·  Not understanding fees that are both obvious and hidden. Financial products and services are packed with both disclosed and hidden fees. Many people are eager to get their financial houses in order, so they deploy each strategy their advisor suggests, often without adding up the costs. Many seniors are shocked to find out that after paying an advisor and paying trading costs and product charges, they’ve lost 3% or more of their wealth. If you don’t go over your plan with a fine-tooth comb, question every fee, and ask questions, you could wind up losing money unnecessarily.

·  Not being realistic about risk. No one can accurately predict the stock market, no matter how much data they may have at their disposal. The unpredictability occurs because investing is often an emotional exercise based on fear, greed, and perception. There are no real means of determining if a shift in the political or economic landscape will scare people and send them to the exits. While many advisors will ask their clients about their risk “tolerance,” most won’t tell you that there is often a disconnect between how much risk a client will tolerate and the amount of risk they can afford. In the second part of your financial life, can you afford to lose money?

·  Leaving a qualified plan to your heirs. At first glance, it seems reasonable to pass an IRA or other qualified plan to a loved one. In reality, however, leaving your IRA or 401(k) plan to a loved one may subject them to some unpleasant tax consequences. Before deciding to bequeath your plan, be sure to contact your tax expert to help you discover potential tax issues and suggest alternative strategies such as trusts or life insurance.

·  Not considering tax implications. Many seniors are astonished to discover that taxes have followed them even into retirement. Most income sources you have in retirement are subject to taxes. For example, unless you have your money in a Roth IRA, withdrawals from qualified plans are taxable. Social Security benefits may be taxable as well, especially if they are your only source of income. Your trusted advisor, CPA, or tax professional can help you create the ideal strategy to help you avoid paying more in taxes than is legally mandated.

Summing it up. Although it is entirely feasible to create a prosperous and stress-free retirement, you must direct your energy into focusing on the future. Ideally, retirees and pre-retirees should partner with a competent, client-centered advisor who can help you avoid money mistakes and guide you to your ideal financial future.

Trinity Insurance & Financial Services Inc. 5511 N.Farmer Branch Rd., Suite 101, Ozark MO 65721. 417-581-9222 Register for Brad’s FREE Newsletter at 888-998-3463 or click his newsletter link:  Brad Pistole Newsletter   Brad is a member of Syndicated Columnists, a national organization committed to a fully transparent approach to money management.

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