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June 2018
Don’t Make These 3
Retirement Mistakes! By Brian Bowen
The big day has arrived — congratulations; you’re oficially retired!
You’ve saved your whole life with the hope that retirement will truly be your golden years. You have a 401(k), an IRA, or a pension (or combination thereof) and iled for Social Security — maybe you even paid off your house. All that’s left is to enjoy the grandkids, travel, or do whatever retirement looks like for you. There’s a reasonable monthly income for you, and as long as you’re careful not to take too much from your nest egg each year, you’ve got it all covered.
Brian Bowen
Except, who knew there were so many land mines and choices to make after you take the leap? If only someone had opened your eyes years ago about what retirement is really like. I’ve seen many clients who have made some pretty big mistakes with their retirement income.
Without careful planning, retirees often make some fatal errors when planning for retirement expenses — here are three I’ve noticed over the years:
You forgot to include health care and long-term care costs.
It’s estimated that the average couple will need $280,000 in today’s dollars for medical expenses in retirement, not including long-term care.1 Even if you aren’t facing major illnesses or disabilities, your retirement budget needs a serious chunk of change to cover those costs. It often comes as a shock to learn that Medicare doesn’t cover everything; today’s average 65-plus-year-old retiree should expect to pay around $5,000 per year on health care premiums and out-of-pocket expenses.1
Long-term care poses an additional dilemma for budgeting, and the costs can be devastating. The U.S. Department of Health and Human Services estimates that a private room in a nursing home costs $7,968 per month.2 That’s nearly $100,000 a year!
Long-term care insurance addresses this, but the premiums can be expensive, and none of us knows if we’ll need it, or how much we’ll need. There are hybrid life insurance policies that provide coverage for such cases, with the comfort of a death beneit, in the event that long-term care is not required.
You forgot to consider taxes.
Imagine you’ve accumulated $1.1 million in your 401(k) or IRA accounts by age 60 — well done! Are you aware that, when you reach age 701⁄2, the government requires you to start withdrawing from your qualiied accounts annually on their timetable, not yours? Failing to take your full distribution amount can result in a 50% penalty.
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