When you hit your 60s it’s time to consider your upcoming years of retirement. Fidelity Investments says you should have 10 times your final salary saved up by the time you turn 67. Unfortunately, we’re living in a time of financial stress when 84% of Americans believe that their ability to achieve long-term financial security has been affected. This is why it’s such a good time to look at what you have, decide what you’ll need for retirement, and determine what it’ll take to get there. It’s also important to consider some of the most common mistakes seniors make when nearing retirement.
Not Having Enough Stocks
Seniors are often tempted to sell their stocks and buy more fixed-income assets because they aren’t as risky. You don’t want to reduce your investment portfolio’s equity exposure. Remember, your money needs to last for a long time and grow with inflation.
When you’re in your 50s you should start reviewing your retirement plan. While the stock market is volatile today, Treasury yields are also at a very low level. This means that if they heavily weigh in your portfolio, you may not be able to keep up with inflation. Therefore you should consider short-term, midterm, and long-term assets.
Spending too Much Money
As you reach the point of becoming a retiree you should maximize your 401(K) contribution while also decreasing your spending and the amount of debt you’re in. It’s also important for seniors to eliminate anything that has double-digit interest – ideally anything over 5%. This includes your mortgage. It may be time to refinance.
Ignoring Long-Term Care
Retirees may feel great now but you never know what’ll happen in the future. This is why you should consider how you’ll pay for long-term care if you need it. Consider talking to an elder-care attorney about your options. It’s also a good idea to buy long-term care insurance before it gets so expensive you can’t afford it. This is important because the longer seniors live, the more likely it’ll be that they need care. Without a plan, you could devastate your finances.
Not Understanding Taxes
When you turn 72 you’re required to take RMD (required mandatory distribution) from your 401(k) and IRA. As a retiree, it’s important to remember that this income will be taxed. This is something you should think about early, especially if a lot of your savings lies in such plans. After all, you never know when taxes may go up.
Consider converting some of this money into a Roth IRA. While you’ll pay taxes on it now, you won’t pay them when you pull the money out in retirement. Pay attention to the tax rates as you do so to make sure this is still feasible.
Also, if you plan to move when you retire, look at the taxes in different states. Some states don’t have income, estate, or inheritance taxes.
Not Having a Financial First-Aid Kit
Seniors should always be prepared for financial emergencies. Make a list of all your financial statements (e.g. tax documents, Social Security statements, will, insurance policies, phone numbers, passwords). You never know when you may have an accident as a retiree and then someone will need these things so they can help you.
Besides preparing financially for retirement, seniors should also have their hearing checked. The best place to do that is at Countryside Hearing Aids in Clearwater, FL so schedules an appointment today.
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