• What are
  FAVORITES?
  Bookmark any page of our site conveniently in this one area.
  
  Sign In or Register so you can take advantage of all of the features of After Fifty Living

Despite the best of intentions, retirees tend to make the same money mistakes over and over and over again.

1. Being too conservative with money

Treasury bonds, certificates of deposit and other savings instruments with scant yields can give retirees a false sense of security. They guarantee some income, however small, and can provide soothing protection from dizzying stock market volatility. But they don't provide even a fighting chance to keep up with inflation in the long term.

Most financial planners say the safer move for the long haul is to devote a healthy portion of your portfolio to stocks.

Inflation's impact is real, and ravaging over time. To illustrate its effect to his clients, financial adviser Allan Flader of RBC Wealth Management in Phoenix reminds them of the change in the price of a stamp over the past three decades. The cost of mailing a letter has gone from 18 cents in 1981 to 34 cents a decade ago to 45 cents today.

FIX: A rough guideline for asset allocation is to own a percentage in stocks equal to 110 or 120 minus your age. In other words, a 70-year-old would have 40 or 50 percent of his or her portfolio in stocks.

2. Putting off planning

Failing to create a financial or estate plan isn't just a matter of missing out on investment opportunities or tax advantages. It can get you in trouble later in retirement when you're no longer at the top of your game mentally.

About half the population over 80 suffers from significant cognitive impairment. And a decline in financial and investing skills can start much earlier.

FIX: Prepare thorough financial and estate plans and discuss future aging-related scenarios with an adviser.

3. Bailing out the kids

It's possible to be too selfless and charitable in retirement if it means putting your own financial security at risk.

Financial advisers cite many instances of overly generous retirees. Kelley Long, a personal finance expert with the National CPA Financial Literacy Commission, says too many retirees are overly concerned about leaving a legacy "when in fact their children would trade their inheritance for the knowledge that their parents were living out their days in comfort."

FIX: Put your financial needs in retirement first. Make sure you know how much you can safely spend from your savings each year.

4. Paying too much in taxes

Retirees usually are in lower tax brackets than in their working years. But they often fail to make adjustments that could lower their taxes.

Putting off taking withdrawals from an individual retirement account until they are required at age 70 1/2 also can be costly. That's because such amounts are taxable and often bump retirees into a higher tax bracket. A plan of gradual withdrawals starting in your 60s can be a more effective strategy.

Seniors who do regular volunteer work tend to leave tax deductions for mileage and out-of-pocket costs on the table.

FIX: Have a plan to minimize the tax impact of withdrawals, keep your receipts for volunteering costs, don't miss out on any deductions.

5. Following financial advice from friends and family

Many seniors living on fixed income wouldn't consider paying a planner to help organize their finances. But enlisting a financial professional can pay off in the long run.

Julia Valentine, a financial adviser in New York City, hears it over and over when she gives seminars at nursing homes: Retirees rely on families for advice about buying or selling homes, estate planning, wills. Not only is that risky, the willingness to follow off-the-cuff advice increases their vulnerability to financial scams targeting the elderly.

FIX: Validate any advice from friends and family with objective materials from somewhere else. If not an adviser, that means at least credible online resources or organizations, notes Jean Setzfand, director of financial security for AARP.

6. Underestimating the costs of health care

The ability to pay for health care is an increasingly critical part of retirement income security. What was once referred to as the three-legged stool of retirement security - with legs for pension, savings and Social Security - now effectively needs a fourth pillar in health-care savings.

A typical 65-year-old couple retiring now needs roughly $230,000 to cover medical expenses in retirement, not counting long-term care, according to Fidelity Investments.

FIX: Buy Medigap supplemental insurance that fills in benefit gaps in traditional Medicare. And strongly consider buying long- term care insurance, which pays for in-home care and nursing home care, unless your health or age make it unaffordable.

7. Underestimating how long they'll live

This may be retirees' biggest mistake of all. With all the advances in medical technology, life expectancy is growing faster than ever before. The downside is most seniors don't have nearly enough savings or income to stretch over a retirement that could last 30 years or more.

FIX: Ideally, financial preparation for a long life starts during your work career with the creation of a financial plan that will provide income deep into retirement. Failing that, working past your anticipated retirement age, even part-time, will allow your existing savings additional time to grow.

(c) 2012 Tulsa World. Provided by ProQuest LLC. All rights Reserved.

Beachgrammy The only thing in the article that makes sense is the NOT bailing out the kids/grandkids, financial planner and the Medigap supplemental insurance.
Tue Feb 21, 2012, 6:28:14 PM EST

Leave a Comment -

Guidelines: We welcome your thoughts, but for the sake of all visitors to AfterFiftyLiving.com, please refrain from the use of obscenities, personal attacks or slurs. All comments are subject to our terms of use and may be removed. Repeat offenders may lose commenting privileges.