In your younger years, you know that you had plenty of time to plan for retirement. You were youthful and full of energy, and you could always take on a second job or find another way to make up for any financial blunders.
But as retirement draws closer, you probably don’t want to risk any major financial mistakes. The last thing you want to do is jeopardize your financial plans or rely upon your children for help. So at this point, it is wise to learn from the past mistakes of other retirees.
Don’t forget about your credit rating. Some older people allow their credit scores to slip. This might be due to forgetfulness in paying bills on time, or the feeling that credit doesn’t matter so much now that they won’t be purchasing another house or car. But your credit score can impact more than just your ability to get a mortgage or car loan. If affects your ability to borrow money in an emergency, and even your car insurance rates. Keep checking your report for errors once per year, and use a calendar or smart phone app to remind you of bill payments.
Don’t carry debt into retirement. Avoid carrying high credit card balances into retirement, because you can’t count on your other expenses to remain fixed. The cost of health care can fluctuate, and other emergencies can leave you short on cash. It’s better to work a little longer, pay down debts, and have more room in your retirement budget.
Don’t count upon the equity in your home. Many retirees have relied upon the sale of their home to at least partially fund their retirements. But what happens when the real estate market stalls or tanks, as it did a few years ago? You shouldn’t count upon your home’s equity to fund retirement, especially if you don’t have time to wait on the market to rebound.
Don’t underestimate the cost of health care. If you’re expecting Medicare to pay all of your medical bills, you’re in for a disappointing surprise. You will still have to pay premiums, co-pays, and a deductible. Sometimes you might need prescriptions or equipment that is subject to limited coverage, and you might even need long-term nursing care which is barely covered at all. Make sure you investigate all options, such as long term care insurance or supplemental insurance, before you retire.
Don’t overestimate your risk tolerance. The possibility of a big payoff is usually not worth the risk of a huge loss. Generally we recommend switching to a lower-risk investing strategy at this time.
Don’t forget to ask a professional. We Americans are dedicated to the do-it-yourself lifestyle. But in some cases, you really should seek professional advice. You probably wouldn’t climb up on your roof and re-shingle it yourself, and you shouldn’t take this approach to your retirement plan, either. Give us a call and we can help you assess your goals and abilities, and put together a retirement plan that is appropriate for you.
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.