Last Week’s Question of the Week: According to the U.S. Census Bureau in 2017, how much on average does it cost in maintenance to own a home annually? ANSWER: $14,448 annually.
HOST: Today’s discussion revolves around the top ten mistakes people make with Retirement Planning. One of those has to do with pension option considerations, correct?
KLAAS FINANCIAL: Being retirement planners, ideally we are helping people avoid these mistakes, so hopefully when our listeners hear these potential mistakes, bells will go off and they will proceed with caution.
MISTAKE # 1 — Not fully evaluating pension options.
- Take these slowly. Really look at options that you have with regards to payout choices as they are usually unchangeable/irrevocable once chosen.
- Give examples of different choices of pension options: single, joint or lump-sum.
MISTAKE # 2 — Staying too aggressive in your portfolio. Talk about possible risks of staying too aggressive in your retirement plans as you approach retirement age.
- Important to consider age, risk, debt and your own situation is what matters.
HOST: What other mistakes are common?
KLAAS FINANCIAL:
MISTAKE #3 — Retiring without considering health insurance costs.
- Remember that you can begin Medicare at age 65. Does spouse have benefits to carry retiree? Keep in mind that medicare will not cover everything there may still be a lot of out-of pocket expense. A 2017 study by Fidelity Investments estimates that the average 65-year-old couple will need $275,000 to pay medical expenses during retirement. That includes Medicare premiums, co-payments and deductibles (or a policy to fill any coverage gaps) and Medicare Part D prescription-drug coverage plus out-of-pocket drug costs over the next 20 years. The Fidelity figure does not include long-term care costs.
MISTAKE #4 — Not looking at S.S. income figures properly.
- Remember that the earliest you can draw is age 62, but Full Retirement age is probably 66-67 for most at this point.
HOST: How about trying to time the market?
KLAAS FINANCIAL: Yes!
MISTAKE #5 — Trying to time the market to make up for lost years.
- Never a good idea, managing for risk becomes even more important.
MISTAKE #6 — Drawing too much out every year from your portfolio.
- Discuss generally appropriate withdrawal rates for retirees. 4-5 % depending on age and circumstances.
MISTAKE #7 — Not being tax-wise in retirement.
- Paying off a mortgage with all pre-tax money in the same year may crush you. Look at situations slowly and get some professional guidance.
HOST: What other mistakes should we avoid?
KLAAS FINANCIAL:
MISTAKE #8 — Failure to be aware of frauds and scams.
- Consult your trusted advisor vs. falling prey to scammers who will prey upon your desire to grow your savings supposedly quicker and safer.
MISTAKE #9 — Supporting your adult working children.
- This can seriously take a dent out of your retirement. Keep in mind they have many years ahead to work and save for their future retirements. Don’t borrow off of your portfolio to pay off their loans.
MISTAKE #10 — Not staying active socially, mentally and physically.
Catch C.J. Klaas and Maleeah Cuevas on Money in Motion every Thursday on Madison's 1310 WIBA from 8:05-8:35am.
