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“The fantasy of being your own boss and filling your days as you wish is a powerful one. However, if you’re not careful, you could spend those golden years trying to earn more or pinching every penny.”

There are just about as many ways to ruin your retirement as there are light bulbs on Broadway or stars in the sky. You get the picture: it’s easy to ruin your retirement, says Reader’s Digest in the article “15 Retirement Mistakes That Will Ruin Your Retirement“. These useful tips deserve your attention.

  • Using your retirement accounts like a checking account. Treat your 401(k) and IRA accounts like they are pure gold and only for retirement. Only use them in emergencies and understand that you’ll pay a penalty if you withdraw from a 401(k) before age 59 1/2. Every dollar you take out of a 401(k), costs you $10-$20 in lost future retirement income.
  • Forgot to plan for long-term care? This is one of the biggest threats to everyone’s nest egg. One year in an assisted living facility could add up to an average of $43,200, and the cost of a nursing home for one year could easily be double that amount. Long-term care insurance pays for adult day care, respite care, stays in special facilities for Alzheimer’s patients and hospice. LTC insurance also pays for in-home care, like skilled nursing, rehab therapy and personal care.
  • Getting aggressive in the market a few years before retirement. Three to five years before retirement is not the time to bet the house and hope your ship comes in. If you take a big hit, there’s no time to make up for twenty or thirty years of saving.
  • Expect a short and sweet life? You might be surprised at how long you live. However, you may also be surprised at the amount of money you need to live a long life. Create a retirement budget that anticipates a longer life span. You can always find a way to spend or give away money.
  • Make retirement saving a top priority. It’s not easy when you are trying to save for retirement, put kids through college and maybe remodel your kitchen. However, the new kitchen won’t be as much fun if you are struggling to pay bills on a fixed income.
  • Neglecting to diversify investments. The right asset allocation can reduce the overall risk of a portfolio, especially as you get closer to retirement. Focusing on fixed income and value-oriented equities will supplement other income sources, like Social Security and a pension.
  • Being completely conservative. Some of your investments do need to be a little bit risky. You can’t be completely in cash or totally in CDs. There is still a need for growth, and that comes with some risk.
  • Supporting adult children. Putting retirement at risk because of children who aren’t fully independent creates problems for parents and children. The children need to understand that parent’s retirement accounts are not their personal ATMs.
  • Underestimating healthcare costs. A recent study found that the average healthy senior couple can expect to spend more than $275,000 on healthcare in retirement. Look into using a Health Savings Account (HSA) and have some emergency funds set aside.
  • Responding to volatile markets with emotions. A series of down days on the market, or bad news that pushes markets down for a few days or even a few months, is not the time to call a broker in a panic.
  • The impact of state income tax and high property tax rates. Most people have lost the ability to take itemized deductions or are limited by what they can deduct. The SALT limit is $10,000. A move to a lower tax state may be helpful in stretching retirement dollars.
  • Social Security planning strategies. Don’t just take your benefits as soon as you can. There are strategies that can maximize benefits for you and a surviving spouse.
  • Debt during retirement. Before retiring, pay off as much debt as you can. The more debt you have, the more vulnerable you are. That’s when an unexpected expense can derail retirement.
  • Have a realistic budget. Create a budget based on what your income will be during retirement. Do this before you stop working and try living on it. If you don’t have enough, keep working and rework your budget.
  • Procrastination on saving. Save early and save often. The longer you put off saving for retirement, the less time you have to catch up. Time can be your best friend, if you start early, or your worst enemy, if you wait too long.

Reference: Reader’s Digest (October 2019) “15 Retirement Mistakes That Will Ruin Your Retirement

For more information on elder law, retirement planning and estate planning, please visit my estate planning website.

Mr. Amoruso concentrates his practice on Elder Law, Comprehensive Estate Planning, Asset Preservation, Estate Administration and Guardianship.