5 Hazards to Avoid on the Retirement Tour
Golf is all about preparation, making smart choices and avoiding bunkers. And so is retirement.
As an avid golfer, I can’t imagine going into a serious match without doing a little reconnaissance.
When I compete in a tournament, I want to know what the course looks like, what the obstacles are and what I can do to put myself in the best position to do well.
And that’s for a game.
So I’m always concerned when, as a financial adviser, I run into people who have no plan in place to help them reach their long- and short-term real-life retirement income goals. They’re just swinging blindly and hoping for the best — bragging to their friends about the aces and shrugging it off when they land in the rough.
That’s OK when you’re young and investing is all about accumulation. You can make some mistakes, even take some risks, and there’s usually time to make a comeback. But when you’re close to retirement, it’s time to fine-tune the techniques that can help you attain and maintain the lifestyle you want.
Here are five ways to avoid some common retirement hazards:
1. Find your Social Security sweet spot.
The Social Security Administration reports that, among Social Security beneficiaries, 50% of married couples and 71% of unmarried people receive 50% or more of their income from Social Security — so it’s important to get it right. The claiming rules are complex and, unfortunately, you won’t get much help from the folks at your local Social Security office. Most financial professionals will tell you to hold off on taking your benefits for as long as possible, and for many, that’s good advice. But you should understand your entire retirement picture — including how your claiming strategy will affect your cash flow and your surviving spouse ¬— before making any decisions.
2. Keep your eye on taxes.
Most people believe their taxes will shrink in retirement, but that isn’t always the case. Your income may go down a bit, but that decrease could be offset if you lose deductions you took in the past (mortgage interest, for example, or business expenses). You’ll also need a strategy to deal with all the money you’ve stockpiled in your tax-deferred investment savings accounts over the years. And you may even have to pay federal income taxes on your Social Security benefits.
3. Follow through on a written income plan.
Many people, even those very near retirement, are unclear about how they’ll control their various sources of income in retirement. A solid income strategy can help you track how much you’ll need, how much you can take every month without exhausting your nest egg, and the order in which to tap your income streams.
4. Get a grip on retirement risk.
Most advisers will talk to investors about risk tolerance and adjusting a portfolio to protect against market volatility. But there are other things that can threaten your retirement, including inflation, the premature death of a spouse, the need for long-term care or outliving your money. A comprehensive retirement plan will help you protect yourself, your family and your assets.
5. Be aware of the impact of fees within your retirement accounts.
Every dollar paid for management fees or trading commissions lowers your portfolio’s earning potential. Many fees are hard to find, so read the paperwork. If it doesn’t make sense, ask questions. If you haven’t hired a financial professional yet, or if you’re looking for someone new to help with the transition into retirement, when you’re in the interview process include a conversation about how that person is paid.
If you’re on the “senior tour” and ready to step up your game, consider getting some tips from a pro — a retirement specialist.
Remember what the great Jack Nicklaus said: “The difference between being nervous and scared is being prepared."
Kim Franke-Folstad contributed to this article.
About the Author
Founder, Tremont First Financial Services
Raymond Edwin (Ed) Whitaker is an investment adviser representative and founder of Tremont First Financial Services. He is licensed to offer a wide range of financial and retirement planning solutions. In 2014, he won the title of Illinois Senior State Amateur Golfer.