There are multiple concerns to think about as you head for retirement. Some are very legitimate while others, although important are very inaccurate. Here are a few to think about:
FEAR: Outliving Your Money
There is a 50% chance that one spouse of a 65 year old couple will live to 91. Are your retirement assets set up in a fashion that you will not outlive some of them?
FALLACY: Medicare will take care of most of your healthcare needs after age 65.
Medicare will cover a large part of your medical expenses, but there is no coverage for dental, vision and long term care.
FEAR: Rising inflation
This is a near certainty – The question is how much and when? Since 2008 our national debt has matched the total we have incurred since 1792!! Inflation from 1995-2014 has averaged 2.4%, but there were several years of double digit increases in the 1970s.
FALLACY: I don’t need to take a Required Minimum Distribution (RMD) at age 70½.
Well, you can skip it, but you won’t do it but once. Your first RMD has to be taken by April 1st following the year you turn 70½. If you don’t take that RMD, the automatic penalty is 50% of that amount plus ordinary income tax on the same amount. That could reach 80% !
FEAR: Interest Rate Risk
If a lot of your funds are in fixed rate vehicles, the returns can’t get much lower! The concern is how long will it continue? Over the years, real rates of returns on CDs after taxes and inflation are usually negative.
FALLACY: You can claim Social Security early and get full benefits later.
If you are eligible at 62 and claim benefits, your reduction is 25% less than at age 66 and should be considered permanent.
FEAR: Investment Risk
Whether your money is in stocks, bonds, CDs, annuities, real estate, hard assets, collectibles or third world country IPOs, you are exposed to investment risk. If you withdraw 5% annually from your retirement account and sustain significant losses such as happened in 2008, 2001 and 1987, your plan needs to be reviewed.
FEAR: Significant damage to your home due to fire or other covered loss.
FALLACY: No problem – My coverage was written 1n 1998, so everything is covered!
That’s not a sure thing as co-insurance is different than replacement cost coverage. If you’re not sure, visit your agent or obtain comparisons from another agent. It’s too later after the fire.
FALLACY: You will need much less income in your retirement years.
Don’t “bet the ranch” on this. When you consider the previously mentioned risks of investment, interest, inflation, medical and longevity, keep your piggy bank as full as you can.
FEAR: Making Savings and Investment Mistakes
It’s natural to be concerned about your retirement plan, particularly with all of the media negativity and criminals like Bernie Madoff. Who can you trust? If you haven’t had your plan reviewed by a fee only advisor who will provide a fiduciary relationship for you, please think about doing so.
Mike Lassiter is a Chartered Life Underwriter and Chartered Financial Consultant. He is a Licensed Insurance Counselor and a Registered Investment Advisor. He can be reached locally at 770-786-2781.