Your Retirement . . . with Brian & Bob – Avoid eight mistakes to ensure you have money for retirement

Published in the September 19 – October 2, 2018 issue of Gilroy Life

“One mistake does not have to rule a person’s entire life,” wrote author Joyce Meyer. While this is true in many ways, one mistake can be detrimental to Gilroy residents’ future and drastically impact their lifestyle during retirement.

A recent study found that 50 percent of Americans will retire with no savings to supplement social security income. If you fall into that half of Americans who have at least some savings, you’ll need to make sure you sidestep mistakes that can jeopardize your retirement portfolio.

We’ve put together a list of eight mistakes even the most intelligent people sometimes make. Avoid these pitfalls to better your odds of living comfortably through retirement.

Assuming Expenses and Tax-Deductions Will Remain Unchanged

Living expenses in retirement can add up. Inflation, taxes and medical costs can have a substantial impact on one’s disposable income. Remember that tax brackets could be higher, and many deductions (such as child expenses and mortgage interest) may no longer be applicable to you.

Mis-Management of Social Security Benefits

When and how you choose to claim your social security can greatly impact what you receive. Claiming too early or working too much after you’ve claimed can have a negative impact on your spendable income. Carefully consider options for claiming and the impact they have on you or your surviving spouse.

Improper Asset Allocation

As you age into retirement it is important to balance your portfolio. It is important to consider a person’s risk tolerance during all three phases of retirement planning (accumulation, conservation, and distribution).

Inefficient Retirement Distribution Strategies

Strategic retirement income distribution matters. Distributions do not always have to be equal. One should consider tax implications of distributions and also the rate of growth on investments. Drawing from one area of your portfolio versus another could help preserve your quality of living.

Forgetting To Take Required Minimum

For qualified retirement accounts like IRAs and 401k’s, the IRS forces you to liquidate these funds starting at age 70.5 because they have yet to be taxed. The IRS requires you distribute a minimum percentage of these funds based on your age. Failure to comply with this requirement can result in a 50 percent penalty for under-distribution on any amounts not taken.

Overspending and Outliving Retirement Savings

Not setting a budget and using a conservative rate of growth to predict retirement fund values could hurt you in retirement. Make a budget and stick to it. Be conservative with your investment projections. Having too much is a good problem to have. An income deficit could mean retirement is cut short.

Neglecting to Plan for End of Life Medical Expenses

Budgeting for costs such as longterm care and illness are difficult to anticipate. Studies show that most Americans will need some type of chronic illness or longterm care to address medical needs. Obtaining longterm care coverage or a life insurance policy with riders for medical costs can help curb the need to liquidate your estate.

Avoiding Annuities

Being dismissive of this planning vehicle can be costly. While some annuities have bad raps for good reason, there is a proper way to utilize an annuity for balancing your portfolio.

Many annuities have enhanced liquidity features, nursing home riders, and lifetime income riders that can help ease costs during retirement by providing a stream of income you can’t outlive or a lump sum for medical needs.

Brian Harrigan and Bob Price are the owners of Executive Plan Design. Contact them at (408) 767-2572.