Tag Archives: Retirement Mistakes

How Couples Sabotage their Retirement Plans

How Couples Sabotage their Retirement PlansThere are lots of ways that couples sabotage their retirement plans. When they do they have to resort to solutions that are brought out in the picture. some have to down size, some have to move in with their kids. Many have to cut back on their lifestyle drastically. They even need to keep working well past their retirement years just to maintain the standard of living they like to have. There are lots of reasons why this sort of thing occurs, however we are going to focus on how couples sabotage their retirement plans in this post.

How Couples Sabotage their Retirement Plans

There are lots or reasons, however most can be narrowed down into three main categories. The first one being one of the most important.

Lack of Communication – do both partners have the same objectives about retirement? Travel, annual vacation, spending time with the grand kids? What do you want to do in retirement and does your spouse agree? These are just a few of the items that many couples just do not talk about these things and receive a surprise. Set some joint goals now and begin to make plans on how you will achieve them.

Savings in the Wrong Account – Are you placing your savings in the right account? do you obtain the appropriate tax advantages which help save even more funds? A regular savings account is to easy to access, generates too little income and is taxable. Consider a retirement account that protects your gains and income from the tax man.

Not Matching Savings with Dreams – Planning for a new car, saving for travel, matching your retirement income with your retirement plans? These are just a few of the ideas that need to be considered. Develop a plan around when you want to retire. How much money you will need saved and when you will achieve this goal.

A financial advisor can help you with all of these questions. You may need to spend a few sessions with them as you develop your plan. Make adjustments based on the reality of your situation.

Financial Mistakes Retirees Make

Financial mistakes retirees makeWe all make mistakes from time to time when it comes to our finances regardless of what age we are. For those who are younger and still working, they have time to recover from their mistakes and prepare for retirement. Retirees on the other hand have limited room for mistakes. They do not have enough time to recover from any mistakes that they may be involved with. We have summarized a number of areas that retirees will make a mistake when it comes to managing their money approaching and during retirement. As we mentioned if you are younger and just starting to think about retirement, these items are worth reading about as well. They might save you a great deal of money over your life time.

The basic guideline for anyone is to invest in blue chip companies, that are managed well, pay dividends on a regular basis and have a history of increasing their dividends over time. Diversity is also extremely important. Never place all of your money in the same investment no matter how good it sounds. In fact no more than 10% of your savings should be in one investment. If you are above 10%, it may be time to re-balance.

Financial mistakes retirees make

These are some of the more significant mistakes people make.

  • Timing the market,
  • Trading too often
  • Reacting to the market
  • Making emotional decisions
  • Working with the wrong adviser

More Details

Timing the market – is next to impossible and many people lose money every year trying to time the market. Long term charts of the markets show that the Dow, the TSX etc have all been on a steady up word trend. Sure there has been some dips, however if you are in the blue chip companies, those that are here to stay, then you will survive those dips and also participate in the market gains as well along with sustaining dividends over the long term.

Trading too often – every time you trade, there are fees to your adviser which can be very expensive. These fees can eat into any gains or income you may receive. Trading often can even cause your portfolio to head into negative territory. Buying good quality stocks as we mentioned and holding them to collect increasing dividends will not only maximize your income, it will also minimize your expenses as well.

Reacting to the market – the market is volatile at the best of times. Swings or 1 to 5% are the norm and swings of more than that can send shivers through the investing public. The thing to remember is that the market has shown that it will always recover and if your invested in dividend paying stocks, you will continue to receive stocks even though the value of the stocks is down for a temporary period.

Making emotional decisions

Always go by the numbers, never by emotions when making decisions. You might get lucky, but then if you are reacting to a volatile session in the market or to a speculative tip, the majority of investors are going to lose.

Working with the wrong adviser – work with one that you trust, that gives good advice and one who has a good track record. If it sounds too good to be true then it probably is and if he or she is trying to push you into investing or doing a lot of trades, ask for a second opinion. In fact if you have sufficient money, it might not be a bad idea to diversify and have two advisers to compare their recommendations.

This is your money and it needs to last you in your retirement. don’t make mistakes and decrease your chances of having the retirement you always dreamed of.

Five Big Retirement Mistakes

Five Big Retirement MistakesWe all make mistakes in our lives. However as we near retirement age, we really want to be cognizant of the mistakes that can affect us during retirement. There are many mistakes we can make. This post is focusing on the five big retirement mistakes that many people about to retire make.

We are assuming that you have the rest of your life in order. We will just focus on the preparation for retirement. Company downsizing, health issues and accidents can also have huge impacts on people during retirement or while you are working. Let’s focus on some of the things that we have control over and not on those that we do not have control over.

Five Big Retirement Mistakes

Leaving money on the table that may be offered to us in a variety of ways. For example dividend reinvestment plans where your company matches contributions to the plan, either as part of your retirement plan or a company savings plan is a good example. Always take advantage of these offers to augment your savings. Another example is leaving a company too soon and not being able to take your retirement plan with you. This is your money and you need to make sure that your money comes with you or gets locked in by a 3rd party.  Anytime you leave money on the table, you impact your overall financial situation.

Not saving enough money for retirement is another big mistake. Most people do not even know how much money they will need. The right thing to do is to meet with a financial adviser and work with them to calculate just how much money you will need. The simple way and not too accurate is to make your own calculations. If you make $50,000 today and want to have the same amount in retirement, you will need to have $1.0 million that generates 5% income every year to sustain your retirement. We happen to believe you need less than that, but that is a much more complex calculation.

Saving on auto pilot is a great way to make sure you have saved some money for retirement, but most people do not follow this approach. All you need to do is have your bank or financial company deduct from your account a fixed amount every month and place it in a savings account, financial investment etc. It is a form of savings and it is a start towards saving for retirement.

Paying Fees

Paying high fees for banking services, for financial advisers, for trades on investments etc. Anytime you can reduce these fees means more money in your account. With compounding over the years these fees can add up and make a real difference in your retirement.

Retire too early before you have saved enough to last your remaining life time. Follow the first step and find out how much you need to save for retirement. Once you reach that objective you will know that you can safely retire and know you have enough for retirement.

These Five Big Retirement Mistakes can make a huge difference in your lifestyle during retirement.

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Six Significant Retirement Mistakes

Six Significant Retirement MistakesMany people worry about their retirement, even those who are relatively secure with defined pension plans or large retirement savings. They worry about making mistakes with their retirement that would cause them to lead a retirement life that will be less than satisfactory. They worry about whether they will have enough money during their retirement. What are the six significant retirement mistakes that consumers make while planning for their retirement or during retirement?  The following is our list of significant mistakes that many people make and you should try to avoid.

Six Significant Retirement Mistakes – The List

  • Getting taken in by a Scam or Fraud situation
  • Not Managing Cash Flow Properly
  • No Plan for Retirement
  • Avoid Planning for Inflation  During Retirement
  • Not Managing Your Health Insurance
  • Not Planning for Risk e.g. Forced Early Retirement

Six Significant Retirement Mistakes – The Details

Getting taken in by a Scam or Fraud situation – Protect yourself from scams and frauds by always seeking a second opinion from trustworthy people such as a bank manager or financial adviser. Fraudsters and scammers are everywhere, so always investigate on your own without just accepting what someone is telling you.

Not Managing Cash Flow Properly – we all have cash flow issues  from time to time. Managing your cash flow will ensure that you never get into a situation where you cannot afford to pay the bills.

No Plan for Retirement – Planning for retirement a year before you retire is a hug mistake. Start early with a plan and saving for retirement. Develop a plan so that you know exactly how much you need to set aside every year to have the quality of life you would like during your retirement years.

Not Planning for Inflation  During Retirement – inflation will always be around, it just varies from year to year. The average inflation rate appears to be around 2.5% to 3%. This means that every year prices are going up by this amount and you need to have the income to pay for it.

Health Insurance!

Managing Your Health Insurance – health insurance can be expensive and if you have not planned for it, then this could be a huge drain on your savings. Ensure you have the proper amount of health insurance in place to cover you and your family.

Not Planning for Risk e.g. Forced Early Retirement – as with all plans, they do not always turn out the way they were planned. Evaluate the risk issues with your plan. Early retirement, health issues, inflation rates, lower levels of income, major repairs to your home etc are just a few of the things you may want to consider in your risk assessment of your retirement plan.

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Retirement Saver’s Worst Mistake

Retirement Saver’s Worst MistakeWhat is a retirement saver’s worst mistake? Many people are saving for retirement. In fact our government encourages us to save for retirement. Their sole objective is ensuring that we do not end up in poverty once we retire. They also have a variety of programs that allow consumers to borrow against their retirement savings. They can be use the money for a down payment on a home. In some cases 1st time buyers can withdraw money from a savings plan. They can use the funds as a down payment for a home. Home ownership is an important thing to do for many consumers. But taking money from your retirement savings plan could be one of your worst mistakes. Can you replace the income that this investment would generate once you retire? This is the key question that many people do not give much thought to.

Retirement Saver’s Worst Mistake

If you borrow or remove money from your retirement savings plan it can become a mistake. If you are unable to repay this loan you are jeopardizing your retirement. When you repay the loan from your retirement savings plan, savers lose the interest / dividend income that you would have accrued if the money had been left in the plan.

Savers who borrow money from retirement savings plan should treat it as a real loan. Repay not only the principle, but also the income that they lost as a result  of the investment not being available to earn income.

Even just borrowing ten thousand to use as a down payment for your home purchase can make a huge difference in your total savings especially if you have a long time to retirement. The miracle of compounding can make a huge difference to savers. The total amount you have for retirement when you finally do retire will increase substantially.

If you must borrow from your retirement savings plan for a down payment on a home or some kind of emergency, develop a plan to repay the loan along with interest. Sometimes people are better off just arranging for a regular loan instead of borrowing from their retirement savings plan.

Discuss your options with a financial planner before making this decision to ensure that you consider a number of options. If you are good with spreadsheets, you can model the impact of borrowing the money vs. taking some of the money from your retirement plan. Completed properly this will quickly show the impact of both scenarios for your particular situation. If you are not good with this sort of thing, your investment adviser may be willing to help you with these calculations.

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Top Retirement Mistakes

Top Retirement MistakesThe writer came across this list of retirement mistakes in an article that he was reading and decided to write a post about these mistakes from our own personal perspective. This list is not scientific or based on statistics of any kind. Instead it is based on the real experience of the writer and what the impact is or will be of making one of these mistakes. We would be interested to hear from readers about their thoughts on this subject and anything they can add to this thought process.

Here are the Top Retirement Mistakes

  • Spending too early
  • Start saving too late
  • Withdrawing from retirement fund
  • Forgetting about health care
  • Turning down free money
  • Ignoring your investment savings

 

More Detail about Retirement Mistakes

Saving without a plan or goal – this is akin to going on a trip with no particular destination in mind. If you are saving for retirement, emergency funds or a new car, have some idea of how much you will need to meet your goal. You could be saving too much or you could be saving too little and receive a nasty surprise. Talk to a financial adviser to discuss what you will need when you will retire to meet the lifestyle that you desire for you and your family.

Spending too early– any money in a savings plan will compound and if you spend it too early, you lose the interest or dividend income that was generated by the plan that was reinvested and contributed to meeting your goal. Remember that you need to have sufficient savings to get you to your goal which for most people is a satisfactory quality of life during retirement.

Start saving too late – compounding works wonderfully especially over a long period of time. Someone who starts saving in their 20’s will need to save far less than those who start in their 40’s. you may have lost 20 years of compound interest or dividend income which can only be made up by larger and larger savings from your income during your 40’s and 50’s. it is just so much easier if you start early!

More Items about Retirement Mistakes

Withdrawing from retirement fund – to pay for a car or a mortgage repayment has the same effect of not contributing. You have less money towards your goal. You are not reaping the rewards of the interest and dividend income your savings generate. Are you  saving the interest cost of your mortgage for example, however if you withdraw from a tax free savings plan, you may be giving up for more long term tax free income than you think. Talk to a financial adviser for assistance before making that decision.

Forgetting about health care – can make a huge difference in your plans. Paying ever increasing premiums. Paying for the deductible portion of the health bill can devastate a person’s savings. Plan for this requirement and make sure that you always have money set aside for your health needs. Many people forget that one spouse could end up in a nursing home due to the care that is needed while the other lives at home. Now you have the cost of both residences plus the health cost of maintaining the nursing home charges.

Turning down free money – Always take advantage of free money from your employer for retirement plans, matching investments etc.. Some employers will match contributions to retirement savings plans and investment plans. This is really extra income which can add up significantly over time.

Ignoring your investment savings – Once you have savings whether it is in a tax free savings plan or otherwise, pay attention. At least once every six months meet with your adviser. Determine if any changes are needed to rebalance your portfolio. Invest for the long term and focus on high quality investments with diversity in mind.

The Bottom Line

Saving without a plan or goal – to reiterate, establish a savings plan and a goal. Determine how much you will need to maintain your lifestyle during retirement. This includes pay for trips, look after the house and pay for your health care. Then start saving for this long term goal as soon as possible. It can mean a huge difference for you and your family, especially if you begin early in your life!

Biggest Money Mistakes

Biggest Money MistakesWe recently read an article online that discussed the standard money mistakes that the average consumer makes over their life time. Although this was a great article, we decided to write our own biggest money mistakes with some of our own real life situations that we have encountered. Here are our list of biggest money mistakes.

Biggest Money Mistakes

Selling an Investment Property too Soon:

Buying an investment property is probably the second biggest money decision most people make next to the decision to buy their own home. We purchased an investment property back in the 80’s with the idea of renting it out and watching the investment grow. Well after about 6 years and no appreciation we decided to sell. Had we waited another 5 years we would have tripled our original investment. Real estate is a long term investment!

Paying for Something Before it was Delivered:

We all have done this. We have paid for something that will be delivered in a few days or weeks in good faith. More and more often now, goods are not coming though on delivery due to delays are at worst companies going bankrupt. Now I always go for the 10% down and the rest on delivery. At least this way I only lose 10% if something happens.

Not Selling High: Classic greed is all this is:

Holding a stock that has gain like crazy, expecting it to go higher and then it cracks and nosedive. Nortel is the classic case in recent memory. Sell at least half of your stock so that you capture some of the profits and lock them in. Sell them all when you have made a decent amount of money. Avoid being greedy!

Buying a Vacation Home as an Investment:

Some vacation homes will be a good investment, however it is the old issue of supply and demand. Vacation homes can fall into over supply and or low demand depending on the economy. If you can buy a place such as a cottage were no additional building is allowed, then you may be ok. Buying a vacation home in Las Vegas is the other extreme and really follows the over supply and low demand phenomenon at the present time.

Keeping too Much Money in Employers Stock:

We have all heard the horror stories were someones total savings are locked up in company stock which is losing ground.  Never do this. Diversify your savings or retirement portfolio to protect yourself from the troubles a single company may have.

Too Risk Adverse for My Age:

Common theory these days is to move from high risk investments to safer investments that are income driven as we get older. If you have a company pension then you can afford to take more risk, while people who depend on their savings for income should move to lower risk investments as they get older.

Trusted an Advisers Guidance, and Ignored Fee’s: 

Following an advisers guidance to invest in a high load mutual fund is probably the worst you can do. There are high fees that the mutual funds pay to the advisers. Also trading stocks often is another way the advisers make their money. Always look at the investment and don’t blindly follow the investment advice.

Chased Hot Stocks:

Sometimes you win, but most times you lose. Most of us are to far removed from the investment to be able to react quickly enough to a hot stock that has suddenly gone cold. Unless you can follow a stock almost 24 hours a day, stick with blue chip stocks that pay a good return.

Short Term Money into Hot Stocks:

Short term money should be put in something that is guaranteed to return your original investment. Never go with short term hot stocks for money that you will need soon. It may not be there when you need it.

Failed to Re-balance:

Re-balancing stocks and funds in your savings plans should be reviewed on a regular basis. Make sure that you continue to follow a diversified portfolio investment plan. This approach lowers your risk and ensures that you are not overexposed in one sector.

Panic When the Market Dropped:

I just spoke with an adviser who is a friend of ours. He mentioned that out of 400 clients, 2 sold and got out of the market when it crashed in 2008. The rest stayed pat and recovered all of their investments and then some. Once you get out of the market at a low point, that money that you lost is gone and can never be gained back.

Good luck with your investments and hopefully these ideas and money mistakes can be avoided in your future. Comments welcome.