Most retirement mistakes are made long before retirement. The pre/post-tax box checked nonchalantly by 20 year old’s in the haste of youth comes back to haunt the baby boomer 30 years later. And while the mechanisms to mitigate these retirement errors may vary, the timing does not – that time is now. Retirement planning has never been more important than it is now. Research at Boston College shows that more than 50% of retirees will be unable to maintain their standard of living with the only practical solution being to delay retirement. There are a several common errors in retirement and solutions on how to avoid them.
1. Not heeding expert advise – Everyone is an “expert” it seems. The guy walking on the treadmill next to you at the gym knows all there is to know about timing the real estate market. He knows how to handle the financial crisis, and he could probably solve world hunger as well. As a real estate broker and financial adviser I am always amazed by the confidence displayed in this “free advice” given by these “experts” who clearly have no understanding of what they are talking about. No less surprising are the number of people who take them seriously. Prospective retirees need to consult true retirement professionals who understand the consequences of the financial devices specific to their retirement needs.
1. Planning to late – Being optimists we love terms like “it’s never too late”, “better late than never” and others that help to justify our procrastination. Retirement planning after retirement is not planning – it’s survival. Most prospective clients come to me long after the opportunity for real lifestyle changes have passed. Getting professional advise right now will prevent this from happening to you.
3. Tax-deferred Exchanges – Coming into the possession of commercial property isn’t particularly uncommon. Neither is its mis-management and typically missing the 45 day ID period. 1031 exchanges are a tool often misunderstood by those coming into property via inheritance and can have a profound effect on ones retirement. Prospective retirees need to put these somewhat esoteric transaction into hands more capable than their own. If you come into possession and don’t know the differences between a net lease and reverse exchange – your asset is being poorly managed.
4. Forgetting what you own – You get your 401 statement every quarter. It’s got a pie-chart, some numbers, some pluses, some minuses. You put it in your file and do the same thing the following quarter – wrong. The world is changing. Have you considered future trends against your investment portfolio? Think about each of your stocks and funds and ask yourself: do these investments still make sense?
5. Risk Management – The portfolio of a 25 year old can afford greater risk than that of a 45 year old. Always surprising are the number of clients whose portfolios have failed to account for increasing risk over the past 20 years. Many of them have paid hard for this negligence over the past 5 years. Your risk should reflect your age and health. There comes a time when the focus of your portfolio should consist of nothing greater than asset preservation.
With longer life expectancy many retirees are choosing to continue working. In the U.S. 10,000 people turn 65 everyday. Whether or not continued employment is the right decision for them – only they can decide. Planning your finances now is the only way to ensure freedom of choice when that day does finally comes, and now is the time to plan.