On a scale of one to ten, how prepared are you for retirement? A five? An eight?
Do you know the amount of money you really need to retire?
Do you understand all the rules concerning your pension (if you have one)? What about your 401(k), IRA, and other retirement accounts in your nest egg? You also need to have a grip on when to claim Social Security benefits. These are some of the issue you need to address in the days and months ahead of your retirement. However, don’t wait too long to do your research and ensure that you’re making the right moves.
Kiplinger’s recent article, “Retirement Planning Mistakes You'll Regret Forever,” compiled a list of the greatest retirement planning mistakes and how to avoid making them.
Spur-of-the Moment Relocation. If you’re thinking of moving to Arizona or another warm weather spot to get out of the cold, test the waters before you make a permanent move. Consider renting before you buy a home.
Not Saving for Retirement. The single greatest financial regret of Americans surveyed by Bankrate was waiting too long to start saving for retirement. Those who responded who were age 50 and older expressed this regret at a much higher rate than younger respondents. Many people don’t begin aggressively saving for retirement, until they reach their 40s or 50s. While these investors may still have enough time to change their savings behavior and achieve their goals, they’ll need to take action quickly and be extremely disciplined about their savings. Morningstar calculated the amount required to save each month to reach a goal of $1 million saved by age 65. Assuming a 7% annual rate of return, you’d need to save $381 a month if you start at age 25; $820 monthly, starting at 35; $1,920, starting at 45; and $5,778, starting at 55.
Taking Social Security Too Soon. You can start taking retirement benefits at 62. However, you should consider delaying this if you can afford it. Most experts recommend that you wait at least until your full retirement age–67 for anyone born after 1959–before tapping Social Security. If you can wait until 70, it is even better.
For example, if your full retirement age (when you’d get 100% of your benefit amount) is 67, but you claim Social Security at 62, your monthly check will be reduced by 30% for the rest of your life. If you can wait, it’s an 8% boost in benefits each year between ages 67 and 70 because of delayed retirement credits. Talk with an elder law attorney, because the strategies can differ for couples, widows, and divorced spouses.
Avoiding Estate Planning. It is not just for the super-rich. Estate planning is for you. This is true, even if you just own a car, home and bank account. Your estate plan will instruct who you want to want to get what and who will be in charge of dispersing your money and possessions (the executor). If you pass away without a will, your estate is subject to your state’s probate laws. You should also have a durable power of attorney that names someone to manage your financial affairs, if you become incapacitated. There are also advance directives such as a living will, which spells out the treatments you do and don’t want, if you become seriously ill, and a power of attorney for health care, which names someone to make medical decisions for you, if you can’t make them yourself.