"You may delay, but time will not, and lost time is never found again." - Benjamin Franklin
Face it, most of us are procrastinators. Procrastination is one of the biggest barriers that we face when it comes to achieving our financial goals. For example, in the best of all worlds, individuals would start saving for retirement with the first paycheck that they receive. And while some of us might have been intelligent enough to actually talk about the idea of a retirement account in our 20s, less than one percent of workers actually start and stay committed to depositing in one their entire work life. Less than one percent! In fact, the most common time for folks to start their pre-retirement savings is in their late 40s and early 50s, when retirement is now a real possibility in the not-so-distant future.
Yet, even with a good income, there are some large mistakes people can make, fouling up their retirement badly. And the effects won’t be realized until it’s too late to make the needed financial repairs. Here’s how a personal train wreck can happen with very little effort:
- Moving without researching for retirement – Americans like to move. As a country, we are more prone to change geographically every generation than most other countries. But that wanderlust has a price, and if we move to a location that doesn’t work for the cost of living and retirement that we envisioned, we can pay dearly in our retirement years. This is the issue where what barely suffices as making it in California could buy a person a mansion and 20 acres in Wyoming. If thinking about moving, even in one’s young years, take the time to see how it plays out for retirement.1 The choice now can pay dividends or hurt you financially later in your senior years.
- Do the math – We’re constantly told to pay down our debt before retirement, and it makes sense if you are on a fixed income. But some debt is good to retain.2 Your money should go where it is treated best. For example, if your home mortgage rate is 3.5 percent and the returns on your investment portfolio are eight percent, you should not automatically give up an eight percent return to pay off a debt that is costing you 4.5 percent less than that. It sounds counter-intuitive, but checking out which interest path pays more is worth the time spent with the calculator. It’s a bit like realizing how much you spend on gourmet coffee by adding up your daily latté buying habit for the year.
- Putting off critical insurance – One thing is for sure: any kind of health or long-term care insurance you buy now is cheaper than 20 years from now when you are older. That’s because you’re a higher risk later on in life.3 If you can afford it, get long-term care and good health insurance coverage now and avoid paying through the nose for it later when you need the coverage and must dig into your retirement savings to pay for it.
- What do you want to do in retirement – A lot of money is wasted in retirement because people don’t have a plan for what they will actually do in retirement. Spend some time now and develop a plan for what you want your retirement to look like. Having a goal will give you purpose and confine your spending to what matters the most to you.
- Do NOT miss Medicare sign up deadlines – A key reason people lose money in retirement is due to not following the law and signing up for Medicare when it is time to do so. Medicare is age-certain, and you have to sign up for it three months before age 65. Waiting longer triggers a premium penalty which you will pay every month for the rest of your life.4
- Don’t leave Social Security on the table – You worked for it, you earned it, so why do so many people forget about their Social Security benefits? This is literally part of your retirement package, and anyone who worked the required number of years is eligible for recovering payments made to this plan during their working years. But the timing matters too; wait long enough and you maximize the benefit, claim your benefit too soon and that benefit is almost half what it could be.5 That could make a big difference in your daily income when you are in your later years and living off of your retirement savings.
A successful retirement takes smarts. Do your research, take advantage of all the benefits that you are due, and check out your options before diving in (including doing the math and figuring out which alternative pays you better in both the short and long runs).
This content is developed from sources believed to be providing accurate information, and provided by Twenty Over Ten. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security.