This one causes so many people not to have the retirement they’ve always wanted. I don’t think people plan to fail; they simply fail to plan. Take a weekend with your spouse or significant other and just talk through what is it that you want to do in retirement. Make sure you’re on the same page and write down those three things. I like to think in terms of three because it’s easy to remember, easy to implement, and easy to keep you on track. Every quarter, sit down again and monitor your progress. If you do that, you’re much more likely to achieve your goals and not wake up one day wondering what the heck happened.
Think about this. If you were going to climb a mountain, your strategy to climb up the mountain would be vastly different than the strategy for getting back down. We call climbing the mountain accumulation. We call the descent down the mountain distribution. Accumulating money and taking money out of your investments are two completely different strategies. So while you can invest in a variety of tools that defer taxes, which allows your money to grow more quickly while you’re working, the goal in retirement is to generate conservative, predictable income. You’ll want to work with an advisor skilled in income maximization strategies—how to position your money so that it generates income. That might be in the form of annuities or in other vehicles that generate income you can pull out each year.
Real estate, high-dividend exchange-traded funds, and preferred stocks are also considerations. All these may come together to generate an income strategy. Remember, your income subtracted from the amount you’ll need in retirement is the gap that you will need to generate. And keep in mind (I say this jokingly), the government will never give you a loan for your retirement. It’s completely up to you. So begin now to practice living on the income you’ll actually need.
Money has been made so complicated that it causes people to take no action at all. We want to keep money simple. Put the maximum allowable into your company’s 401(k) plan. If you’re self-employed, it’s called a SEP. Whatever the acronym of your retirement account, the bottom line is that the government incentivizes you to save for retirement. Make sure you’re taking advantage of these opportunities. If you work for a company, oftentimes they will match a portion of what you put in. Never pass up free money. Make sure your contributions automatically come out of your paycheck, or if you’re self-employed, set it up so it comes out of your bank account on the first or fifteenth of each month.
Tara and Keith had been married for twenty-seven years. Tara worked full-time in the home managing the house and the children, while Keith was a consultant for a marketing firm who traveled weekly, Tuesdays to Fridays. As we began to plan and talk through what they really wanted to do in retirement, Keith said that because he’d been on the road so long, he wanted to stay at home and watch the grass grow and just relax. His wife, however, because she was home all the time, wanted to do things and see the world. As you can imagine, that created conflict.
The challenge was how to get them on the same page. We talked about a seasonal approach. “How about this?” I asked them. “What if you decided you would take a couple trips a year together, and other trips with friends?” They thought about that and decided it would give them both exactly what they wanted. They both got to travel, they both got to rest. They got time together and time apart.
Don’t be surprised when you retire after a busy working life and suddenly you’re getting to know your spouse all over again. The darker side of that coin is that I’ve seen a few couples divorce once they realized the activity and urgency of daily living had blurred the fact that they had grown so far apart. They weren’t even aware how far they had drifted. I encourage you to talk with your significant other well in advance of retirement to get on the same page, and for each of you to get excited about what you’re going to be retiring to, and not just from. That’s one of the biggest keys to planning for a successful retirement.
Long-term care insurance is this non-sexy part of retirement planning, but picture this: Mom or Dad, while they may be in good health now, might need care in the future that you simply can’t provide. The issue is twofold. First, I like to call this “asset protection insurance.” A long-term care facility can cost many thousands of dollars per month, much of which will have to come right out of their portfolio. A better and more cost-effective way to handle this is to have an insurance company partially offset that risk. This has to be done while your mom or dad are in good health, and that goes for you too.
The key is to determine how much risk you want to keep and how much you want to give away. Some people I’ve helped wanted to protect their entire portfolio, so they purchased a more extensive type of plan that would pay for almost everything. Other people decided that the odds of using this type of coverage were low, so they decided to cover a portion of the risk and consequently paid a lower premium.
These decisions are very personal. You’ll want to have a serious family meeting to review everyone’s particular circumstances. One son or daughter may be home full-time and may be able to become a caregiver to a parent, while another child might be in a position to be more of a financial caregiver. As long as there’s open communication between children and parents, you’ll get through it by making the best decisions for everyone. In any scenario, however, some level of long-term care insurance is likely appropriate.
Smart decisions combined with savvy saving lead to success. These seven retirement mistakes will cost you money and time—two things you need more of. I want to help you live the life you’ve always imagined—and that starts with wisely planning for the future and making sure you’re taking the steps to do what you want, when you want to do it.
(To be continued...)
This excerpt is taken from “Good Money Revolution: How to Make More Money to Do More Good” by Derrick Kinney. To read other articles of this book, click here. To buy this book, click here.
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