Embed Size (px)
Citation preview
7 Mistakes That Could Jeopardize Your Retirement
BOSTON WEALTH MANAGEMENT, LLC
As you prepare for retirement, it’s helpful to take a look at common mistakes made by other retirees and try to avoid
making them yourself. Here are the seven most common mistakes that could jeopardize your retirement future, and
strategies to avoid making them.
Starting Too Late to Save for Retirement When is the right time to start saving for retirement? Immediately. You should begin saving for your retirement the day
you start working your first full-time job. Improvements in healthcare have increased life expectancy, so your retirement
could last 20-25 years. You simply cannot save for only 10 or 15 years and accumulate enough money to support that
kind of extended retirement. Tackle this head-on by starting to save as soon as possible, which also gives your
retirement more time to accrue compound interest and increase in value. The earlier you invest, the more you will earn
through compounded returns. For example, if you invest $50,000 over the first 10 years of employment, you’ll be ahead
of the person who waits ten years, then contributes $175,000 over the next 35 years.
-
200,000
400,000
600,000
800,000
1,000,000
1,200,000
-
5,000
10,000
15,000
20,000
Year
1
Year
3
Year
5
Year
7
Year
9
Year
11
Year
13
Year
15
Year
17
Year
19
Year
21
Year
23
Year
25
Year
27
Year
29
Year
31
Year
33
Year
35
Year
37
Year
39
Year
41
Year
43
Year
45
Contribute $5K for First 10 Years at 8% Growth
Contributions Value
The opinions expressed in this report are those of Boston Wealth Management and are not intended to be used
to purchase or sell securities or assets.
Contributing Too Little Toward Retirement America is a society of spenders, not savers, and a majority of us have grossly under-contributed toward retirement. The
sooner you start saving, the less you need to set aside to reach your financial goals. Here is a general guideline on how
much you should save; if you are below these guidelines, you should attempt to increase your retirement savings.
Start Saving in Your: Guideline
20s 10-15 percent of Income
30s 15-25 percent of Income
40s 25-35 percent of Income
Over 50 50-60 percent of Income
Failing to Build Your Savings Buffer Retirement savings should be considered sacred and should be raided only as an absolute last resort in emergencies. If you
are living paycheck to paycheck, any bump in the road could put your accumulated retirement savings in jeopardy. (In fact,
if you are living paycheck to paycheck, you need to reevaluate your monthly expenses and trim the excess.) Building a
savings equal to six months of your living expenses will provide a necessary buffer to protect your retirement account.
Failing to Set Retirement Goals In order to determine how large your retirement nest egg needs to be, you first need to decide what you will be doing in
retirement. If you plan to spend your retirement gardening in your own backyard, you’ll need drastically different
resources in retirement than the person who plans to take an exotic trip every year. If you have a partner, it is vital to
discuss your individual and combined retirement goals to be sure you are on the same page. The more detailed your
retirement goals are, the better you can position your portfolio to ensure funds are available to meet them.
- 200,000 400,000 600,000 800,000 1,000,000 1,200,000
0
5000
10000
15000
20000
Year
1
Year
3
Year
5
Year
7
Year
9
Year
11
Year
13
Year
15
Year
17
Year
19
Year
21
Year
23
Year
25
Year
27
Year
29
Year
31
Year
33
Year
35
Year
37
Year
39
Year
41
Year
43
Year
45
Contribute $5K for Last 35 Years at 8% Growth
Contributions Value
BOSTON WEALTH MANAGEMENT, LLC
The opinions expressed in this report are those of Boston Wealth Management and are not intended to be used
to purchase or sell securities or assets.
Retiring Too Early Deciding when to retire is both an art, and a science. First, you should determine how the value of your various income
streams may change at different points in your retirement. Second, assess your current health condition and prognosis by
evaluating family medical history and observing the longevity of relatives. But remember that the advancements in
medical care have extended individual life expectancies and could make a retirement much longer than originally
expected, and you’ll need to plan so your resources meet that lengthened demand. Finally, you need to be prepared for an
altered lifestyle in retirement. A majority of retirees do not have enough funds to continue to support their pre-retirement
expenditures. If you are not ready to reduce your expenses to match your retirement income, don’t retire! Failing to adjust
your expenses will quickly deplete your retirement nest egg.
Failing to Manage Retirement Taxes Most future retirees expect taxes to decrease after they retire. While this is probably true, retirees still need
to take control of their retirement tax situation in order to minimize their tax liability. Here are some
guidelines that will help minimize your tax exposure during retirement:
Reduce Expenses: The less you spend, the less money you will need to draw from your retirement
accounts, keeping you in a lower tax bracket.
Pay Your Mortgage Off Before Retirement: A mortgage payment is usually your largest monthly bill.
If your home is paid off before retirement, you have significantly reduced your monthly expenses.
Minimize Tax on Social Security Income: Did you know that Social Security income is taxed?
Therefore, the lower your retirement tax bracket, the lower the taxes you will pay on this taxable
income stream.
Minimize Long-Term Gains Tax: When liquidating a taxable investment, look for offsetting
investment losses to reduce your tax impact. A financial advisor can help you identify opportunities to
do this.
Invest in Roth IRA and/or Roth 401(k) plans: Roth accounts are a great way to diversify your post-
retirement income stream. Your retirement funds in a Roth IRA or Roth 401(k) won’t be taxed for
qualified withdrawals, which are those withdrawals taken after age 59 ½ on contributions made more
than five years ago. Check the IRS rules and with your tax advisor to verify your qualified withdrawals.
Failing to Prepare for Unexpected Events Even the best laid plans often go awry, and retirement plans are no different. Failing to have a contingency plan or
determining your response to these events could ruin your retirement plans. To protect your retirement future, you
should anticipate at least one “unexpected” event over the course of your retirement. Here are some common
“unexpected” events and potential solutions:
BOSTON WEALTH MANAGEMENT, LLC
The opinions expressed in this report are those of Boston Wealth Management and are not intended to be used
to purchase or sell securities or assets.
BOSTON WEALTH MANAGEMENT, LLC
Event Potential Solution Health Crisis Premium Health Insurance
Long Term Disability Savings Buffer
Job Loss Savings Buffer
Elderly Parent Care Savings Buffer Extend Employment Years Verify Parents Have:
Premium Health Insurance Long Term Disability Savings Buffer
Unemployment of Children Savings Buffer Extend Employment Years Verify Children Have:
Savings Buffer
Unexpected Death of Wage Earner Life Insurance Savings Buffer
Market Declines During Retirement Years Retirement Income Stream Diversification Pension Plan Income Convert Portion of Retirement Savings to an Annuity Flexibility in Retirement Savings Withdrawals Re-enter Job Market
These seven common mistakes can decimate your retirement future. Avoid as many mistakes as you
can, correct the mistakes you have made, and prepare for the unexpected. This will help secure your
financial future.
Boston Wealth Management, LLC | 286 Boston Post Road | Wayland, MA 01778 | 508.276.1098 | [email protected]
The opinions expressed in this report are those of Boston Wealth Management LLC and are not intended to be used to purchase or sell securities
or assets. Securities, advisory and insurance services offered through Royal Alliance Associates Inc., Member FINRA/SIPC and a registered
investment advisor. Boston Wealth Management, LLC is not affiliated with Royal Alliance Associates Inc. or registered as a broker dealer or
investment advisor.
