Yesterday we examined five of the top ten retirement blunders. Now let’s look at the remaining five. If you have any questions on any of these blunders or would like me to take a look at your personal situation, email me at jay at jayperoni.com. READ PART 1
6. PLACING TOO MUCH STOCK IN YOUR COMPANY
THE BLUNDER: Owning too much of your own company’s stock, which could jeopardize your retirement funds. With the fall of companies like Enron and WorldCom, many employees lost some or all of their retirement income. Could this happen to you?
THE SOLUTION: It’s not possible to predict the future, and that’s why a diversified portfolio is generally a wise move for the cautious investor. If you have too much invested in your own company, then essentially your retirement income could rely on the performance of one stock. That’s high-risk investing. If you’d rather not assume so much risk, consider speaking to a professional who can assist you in diversifying your investments.
7. CHOOSING THE WRONG BENEFICIARY
THE BLUNDERS: Naming yourself as beneficiary causes your assets to go to an estate, rather than an individual, in the event of your death … which can cause your family to lose money. Also, rolling over IRA and 401(k) plans to your surviving spouse could be a mistake. If your spouse dies prematurely, this can result in a major tax hit and potential legal dilemmas. Additionally, many people name a special needs child as a beneficiary … but if that child inherits assets, they may be disqualified for government benefits.
THE SOLUTION: Speak with a qualified advisor on how to distribute assets in the most useful way. For special needs children, explore the option of setting up a trust in their name, rather than naming them as a beneficiary.
8. BELIEVING WHAT WORKS TODAY WILL WORK TOMORROW
THE BLUNDER: Putting money away for the future with the misconception that you will require the same amount of money tomorrow as you do today. Ignoring inflation could negatively impact your retirement plans.
THE SOLUTION: When creating a savings plan for the future, you must consider inflation. Don’t forget to consider the inflation rates for health care, too – in the last decade, health care and nursing home costs have increased at a rate dramatically outpacing inflation.
9. RETIRING WITHOUT AN INCOME STRATEGY
THE BLUNDER: Many people plan to save for retirement, but they forget to plan for the distribution and preservation of that money AFTER it has been saved. Some live on their interest, some draw income from the wrong assets.
THE SOLUTION: Be sure you have a plan to distribute retirement income effectively. While many qualified advisors can help you plan to build wealth, it’s important to speak with an income planning specialist for retirement. If you don’t know when and where to withdraw your retirement income from, you could lose some of what you’ve worked so hard to save.
10. THE UNEXAMINED RETIREMENT
THE BIGGEST BLUNDER OF ALL: Thinking that a savings account and a pension plan will get you through retirement, or thinking that because you signed up for a 401(k) years ago, you’re all set. Many people retire without planning, only to learn years later that their money is running out!
THE SOLUTION: Start planning for retirement NOW! Whether you’re five years away from retirement, or you’ve already retired … it’s never too soon, or too late, to create a plan. And there is no better way to see that you keep what you have and don’t outlive your income.