As you imagine going into retirement you might dream of traveling or tending your garden. I think everyone’s goal out of retirement is to be able to reap the benefits of the many years of hard work. Stress should be the last thing on your mind but for many retirees, they have some top regrets like; not saving enough, relying on social security to heavily, and not paying down debt. How does one avoid these issues?
1. Not saving enough
Take advantage of employee sponsored 401(k) is the obvious choice but statistics range from 30%-40% of private sector employees don't have access to a 401(k). In that case, saving a Traditional IRA and Roth IRA wouldn't be enough. Individual accounts for savings are instrumental in creating cash flow. For those who also don't have access to a pension, universal life insurance products widely known by Tony Robbins have become a great savings tool as well.
2. Relying too heavily on Social Security
When discussing cash flow there are many tools out there that retirees and individuals should consider to make up the difference. Dividends from an individual account, annuities, life insurance, and investment properties. All of these have their pro's and con's but if you are able to speak with a professional about products or investments well before retirement in your 40's or even 30's quick conversations can have a lasting impact. In reality, you should also keep in mind that the Social Security benefit will be pushed back later and you may never get it.
3. Debt in retirement
Growing up we were told not all debts are equal and that some are good for tax purposes or to build credit, these rules don't apply when you retire. 10 years prior to retirement you should seriously consider a debt consolidation strategy to co-inside with your retirement date. I say 10 years to make sure you are not caught up in with tax burdens from large withdrawals from an IRA. You will always want to talk to a tax professional about consequences.
Above all the most important action is to put a timeline together. When you are able to review it regularly with a professional they can help guide you to avoid major pitfalls. I think you will look forward to my next post “Retirement Checklist”.