Major Retirement Planning Blunders

Major Retirement Planning Blunders

  1. Exposing more than 10% of any portfolio in one holding or stock, be especially diligent to limit your portfolio exposure in company stock. Why is it essential for you today and in the future to financially support your employer?

  2. Failure to regularly diversify all your investment holdings including real estate, stocks, mutual funds, etc. Just because they did well in the past does not mean they are still a good performer today.

  3. Failure to evaluate every investment holding regularly and rebalance your holdings accordingly. Look at the individual performance and suitability of each holding as a part of the whole portfolio. Liquidate and reposition non-performing holdings as needed. The key to investment success is knowing when to take a profit, knowing when to take a loss and knowing the difference.

  4. Failure to adjust your overall portfolio periodically to match your current risk tolerances and overall financial situation. If you are no longer in an accumulation phase, but moving into a distribution stage, you may need to have more in cash for a time to ease into the change in income transition. Likewise if your employment or near future wage level is uncertain, you may need to reduce overall portfolio risk and potential variance until your earnings stabilize.

  5. Failure to plan for a catastrophic illness with disability income protections, Long Term Care coverage, adequate medical insurance and having available a 3-6 month income in reserve to be available until benefits begin to be paid.

  6. Choosing to lock in an adjustable rate debt in a rising interest market to make the payments a little lower for today's cash flow. Adjust your lifestyle over the long term instead.

  7. Inability to resist impulse buying on items you must withdraw amounts from taxable accounts because ?you?ve earned it? if it will blow your budget. Is that $23,000 car worth $32,000 to you? With the taxes on a withdrawal from your IRA it could cost you even more depending on your combined State income tax, local sales tax, local property taxes, rise in auto insurance premiums and Federal Income tax brackets. Plus you lose all those future earnings forever and you may have higher future operating costs than with your old model.

  8. Failure to spend a few dollars to update wills, living wills, trusts, power of attorney and other legal documents to ease the future necessities for difficult medical decisions and estate settlement issues.

  9. Failure to annually develop a realistic budget that includes changing income tax liabilities, insurance costs, home maintenance needs, travel, etc.

  10. Failure to take advantage of all company matching funds on payroll deduction savings plans because you don't think you can afford to save. If you earn $40,000 annually and your employer is willing to match 5% or $2,000 of your wages if you contribute just $2,400 or $200 a month, you potentially threw away your financial future with both hands for a few more meals out each month, or extra clothes in the closet.

  11. Failure to buy adequate life insurance when you are healthy and costs are low. Waiting until a medical crisis forces you and your family to face your mortality is the worst time to address this subject.

  12. Failure to seek professional help with financial and tax issues early. Develop long term relationships that will be an asset for your future and save you thousands of dollars in income tax liabilities and lost opportunities.

  13. Failure to plan for home maintenance costs as you age and can no longer do things yourself easily or as your home ages and needs updating and major structural repairs. Neighborhoods do change too. Never be the last one on the block to sell in a declining area.

  14. Failure to plan for your parents? support needs geographically, physically, emotionally or financially.

  15. Failure to make informed, well thought out lifetime decisions about pension payments and survivor clauses prior to separation from your employer before speaking to a professional about all your options.

  16. Failure to know the limits of your employer's health plan for retirees. If it is an old plan, does it have a lifetime benefit cap of $300,000? Do you know?

  17. Forgetting when your equity line of credit expires. You want to have this available going into retirement and secured when you are still earning wages for the long term in case you need it.

  18. Being to generous with the adult kids or grandchildren when you really can't afford it. Limit what you are able to give them to amounts that do not require liquidating taxable accounts like those listed in #7 above.

  19. Forgetting to give your church or charity appreciated stocks for example before they are liquidated, not after instead of cash to avoid capital gain taxes for you. This strategy enables you to give the same or higher amount of financial support wisely.

  20. Booking travel too far in advance before considering being flexible and willing to travel within a few weeks to garner short term bargain fares or extra perks. Sign up on the internet to travel alert services for some of the best bargains in the areas you would like to travel to. A recent 7 day Caribbean Cruise was a little as $449 a person with a 30 day or less departure date, or consider a 12 day repositioning cruise to the Mediterranean available for as little as $799 a person. A New York to London airfare with a 10 day departure travel window was only $199. Have your passport ready before you need it.

  21. Starting Social Security and then you decide to go back to work. If you earned over $12,480 in 2006, you gave up $1 in benefits for every $2 you earned.

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