As you approach retirement age (of if you are already there), it’s easy to overlook a few important details about your finances. Overlooking some of these items can be detrimental to your future, so make sure to check yourself carefully to ensure your financial situation is in order before you celebrate your last day of work.
Failing to update investment portfolios: Keep regular tabs on your investments and consider changing up your investment strategies a few times prior to retirement. This helps ensure you maximise your income. Do not just rely on the safest investment for 40 years. As you get closer to retirement, it is wise to rely on safer options so you lose as little money as possible.
Many retirees do not even know what is in their retirement account or investment portfolios. Stay up to date so you can properly prepare for your retirement.
Not using a financial planner: It is great if your grandson “knows how to handle money.” Do not feel guilty relying on family members to help you with basic financial information. However, you should not rely only on family when it comes to your long-term finances. Consider working closely with a financial advisor to ensure you have enough saved up for retirement, your estate is up to date and you have all the information you need to apply for assistance programs (if necessary).
Ignoring the risk of scams: Did you know that retirees and elderly folks are prime targets for scam artists? Between fake phone calls, emails and letters, many older people lose a lot of money. Do not fall prey to these money-grubbers. If you receive an email or phone call that seems suspicious, talk you a financial advisor or a family member.
Warning signs include asking for personal information, making outrageous claims and threatening to toss you in jail for refusing to do what they ask.
Not having a plan: Before you retire, you need to have a financial plan in place. Before you retire, you should know how much money you have available to you through retirement accounts (IRAs etc.) and investments. Create a budget based on your expected income and stick to it. If you do not plan accordingly, you could end up leaving retirement behind to put in more hours to cover your bills.
Not understanding taxes: Your retirement income is taxable (usually). Most of the money that went into your retirement funds did so pre-tax. This means that you did not pay taxes on the money before, but you will have to pay for it now. Each type of account taxes differently so you may need to plan withdrawal tactics carefully. Talk to your financial planner to figure out how to withdraw funds. A simple trick to remember: start taking money from the account that is earning the least amount of interest first. This allows higher-interest accounts to continue earning money.
Taking funds too early: Many retirees begin taking retirement and/or other benefits too early. If you can wait until your accounts fully mature, you do not have to worry about paying early withdraw fines.
Responsible financial planning will help ensure your retirement is an enjoyable time, instead of a frantic race to find more money.