One of the worst feelings in the world is to worry about retirement especially after you have retired. Recently, I sat down with someone who kept telling me they worried about running out of money. The fear was so real that it was preventing them from even enjoying the few trips and vacations they were taking during retirement. The reason we plan and track during retirement so often is to ensure that you don't ruin your retirement. If you are in your 40's, 50's or 60's and thinking about retiring soon, here are five ways you can ruin your retirement.
- Carrying Too Much Debt
- A Large Mortgage (Too Much Refinancing) - While refinancing seems like a no brainer where rates are today, you need to consider looking at a 15-year loan vs. 30-year loan so you don't carry a mortgage into retirement. This can be a real problem if you don't have the same level of income to pay a hefty mortgage.
- 401(K) Loans - will you be able to pay back?- Also, some people take 401(k) loans to assist their children's college education. Remember, if you leave your employer, you need to be certain they will still allow you to pay back a 401(k) loan or you will be stuck with a taxable event prior to retirement that will reduce your capital base for retirement.
- Not Checking Your Actual Social Security
- Double Check To See If Income Was Misreported - I know it seems like this could never happen, but I see this all the time. Especially now that we have more 1099 contractors and people who own their business. Make sure to set up an online account at ssa.gov and check your taxable earning on your Social Security statement.
- Figure Out The Best Age To Start Collecting - This is a big trickier to figure out, but whether you are single or married, it is smart to figure out whether to take Social Security early, at full retirement age, or wait until 70.
- Taking Too Much Risk
- What Happens If Your Portfolio Drops 25% In Retirement - Most people work hard on their investments during the accumulation period, but what happens if you take a hit during decumulation period? Can you stomach this in retirement, especially now that the market has been up for so many years in a row.
- Betting You'll Get Income From Your Rental Properties - While renting out properties and buying them seem attractive today, what happens if you get another 2008? Can your retirement handle two properties that go empty for six months?
- You Don't Talk With Your Spouse/Partner
- You Both Say You Like Biking… (Motorcycles or Bikes)?
- You Want To Live In The City/They Want To Live At The Beach - For both of these, one way you can kill your retirement is not discussing with your partner or spouse what you will do in retirement. While goal setting on the emotional side can be difficult to do, the worst thing in the world is to have a ton of money but you don't know what to do with each other…or worse yet you never see each other at all.
- You Don't Plan For Health Expenses
- What Happens If You Retire Before The Age Of 65? - If you decide to make work optional before the age of 65, what happens if you need medical care because you have a catastrophic illness and now you don't carry health insurance? Or, your health insurance is far worse than the one you had at work?
- What Happens If You Need Long Term Care? - While this isn't the most pleasant thing in the world to talk about, the cost of nursing home care is skyrocketing. You should consider figuring out your game plan for the potential of needing skilled care at your home or going into a nursing home for a period of time. Not planning for this has ruined many retirements for spouses and partners because it eats away at your capital base.
