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Did The Devil Make You Do It? 8 Retirement Miscues

We're all human, and we all make mistakes.  Yet some errors are worse than others, and it's important to try to avoid the kinds of miscues that could derail your retirement.

What sort of mistakes?  Of course, these will vary from person to person, but here are eight common foul-ups that often bedevil soon-to-be retirees:

Mistake #1 - You have no financial plan for retirement. 
Although your plan doesn't have to be carved in stone - and in fact it needs to be flexible - it at least should provide some basic guidelines for your future.  A bare-bones plan will look at your potential sources of retirement income and approximate what you can expect to spend - and rough estimates are better than no estimates at all.  Figuring out what it may take to live comfortably during retirement is the first step toward getting there.

Mistake #2 - You have too much debt. 
Perhaps nothing can be more damaging to successful retirement than crushing debt.  Avoiding high-interest-rate credit card charges can help you head off the problem.  If you spend within your means and borrow judiciously, you'll be able to save more for retirement and won't be burdened by the need to pay off compounding debt.

Mistake #3 - You sacrifice retirement planning for education planning.
Saving money for your children's college education is obviously a lofty and worthwhile goal, and starting early can help ease your financial burden when tuition bills come due.  But you may not want to make education saving your primary financial priority.  Often, parents are able to help pay college bills while still putting away money for retirement, and your kids can help by taking low-interest loans to cover part of their costs.

Mistake #4 - You don't keep an emergency fund. 
Even if you've been diligent about saving for retirement, remember to expect the unexpected.  You might lose your job or face another financial or medical emergency, and having a cash cushion to fall back on can help you avoid dipping into retirement funds - an option that could have short- and long-term tax and financial consequences.  The usual rule of thumb is to try to set aside at least six months worth of salary in a rainy day fund.

Mistake #5 - You don't have a long-term investment strategy.
You're likely to fare better if you establish a long-range investment plan for retirement rather than trying to boost your portfolio by chasing hot stocks.  Time-tested principles such as asset allocation and diversification can help you make steady progress toward your goals, whereas playing investment hunches is likely to produce more losers than winners. And taking a smart, deliberate approach is as important for investing the assets in tax-sheltered retirement plans, such as 401(k)s and IRAs, as it is for taxable accounts.

Mistake #6 - You underestimate health care costs. 
As people live longer and longer - and as growth in health care costs continues to outpace overall inflation - you'll need to allocate a healthy portion of your savings to personal care.  Often, health insurance plans and Medicare will cover much less than you've counted on and you'll need to use your savings to make up the difference.  What's more, an extended stay in a nursing home could destroy your retirement nest egg.  Consider buying long-term-care insurance to help ward off future disasters.

Mistake #7 - You don't factor in taxes. 
People often disregard the impact that federal and state taxes can have on their retirement savings.  For instance, if you've been accumulating funds in a 401(k) plan and traditional IRAs, when you withdraw money from those accounts to pay your retirement expenses those distributions normally will be taxed at ordinary income rates.  In addition, whether you want to or not, you'll have to start taking money from those accounts after you turn age 70½.  Your long-term plan for retirement needs to take these taxes into account.

Mistake #8 - You count too heavily on Social Security benefits. 
After you've paid into the Social Security system during your working career, it's only fair that you reap the benefits.  But those monthly payments usually aren't enough to live on comfortably, not by a long shot.  It's important to view Social Security as only a supplement to other sources of retirement income - from your investments, company retirement plans, and IRAs.

Making any of these mistakes could cause trouble when it's time to retire.  But if you know what to look out for you may be able to avoid problems - and the best time to start fixing things is now.



INDEX
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  • Watch Out For These 7 Retirement Ups And Downs
  • Why Would Anyone Take Their RMDs Sooner?
  • 10 Frequent Retirement Mistakes You Should Avoid
  • Tax Rewards For Year-End Generosity
  • Meeting With The Family For Elder Care Planning
  • 20 Questions On Required Minimum Distributions
  • Tie The Knot For Retirement With A Spousal IRA
  • Four Retirement Planning Rules Of Thumb To Bend
  • When Will New College Grads Be Able To Retire?
  • Last Chance To File-And-Suspend Retiree Benefits
  • You Know You're Getting Old When You Get RMD Notice
  • 10 Steps To Take On The Path To Early Retirement
  • How To REALLY Get Ready For Your Retirement Years
  • Can You Skip Over The Special Tax For Generation-Skipping?
  • What Do You Think Your Life Will Be Like In Retirement?
  • Raiding A Roth Early? No Woes
  • Live Long And Prosper: Roll Out A Stretch IRA
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  • 10 Ways To Skirt A Penalty Tax On Plan Payouts
  • Why Give Securities To Charity Instead Of Cash?
  • Will You Have To Lower Your Sights In Retirement?
  • What Will $2 Million Get You In Your Retirement?
  • Figuring Out How Much You Need In Retirement
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  • Five Ways To Plan Smarter And For The Long Haul
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  • Generation X Members Have Retirement Work Cut Out For Them
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  • Roundup Of New Estate Tax Changes
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  • Two More Important Choices For Retirement Living
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  • The Benefits Of Working With An Advisor
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  • A Case Study: Retirement Planning In Your Fifties
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  • Giving Up Control Of Your Finances
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  • The Importance Of Year-Round Tax Planning
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  • To Reinvest Or Not To Reinvest
  • Why Not Alternative Fixed Income Investments?
  • Just How Expensive Is The Market?
  • Beware of Brokerage Firms' Misconduct
  • Identity Theft : Correct Those Credit Reporting Errors
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  • Q & A With Robert Arnott
  • Identity Theft : Applying For Credit? Better Check Your Credit Report First
  • Indentity Theft: Help Is On Its Way
  • Identity Theft: Everyday Prevention
  • Indentity Theft: Tips to Protect Yourself
  • Identity Theft : Tips to Protect Yourself
  • Identity Theft: A Note About Social Security Numbers
  • Identity Theft: Which Documents Should You Shred or Store?
  • Identity Theft : Don't Fall For That E-Mail!
  • Identity Theft : One More Reason To Protect Your Credit
  • What Do Rising Interest Rates Mean For Money Market Yields?
  • Exit Gracefully: How Business Owners Should Plan For A Comfortable Retirement
  • Section 529 Plans Are Popular But Not The Only Way To Go
  • The Importance Of Commodities In A Portfolio
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  • Bank Loan Funds: A Great Fixed Income Investment As Interest Rates Rise
  • REITs: A Great Diversification Investment
  • What Is Risk?
  • How To Find A Great Financial Advisor?
  • Is It Time To Find A New Financial Advisor?
  • Year-End Tax Planning Can Help Generate High Return On Investment
  • 4 Steps To A More Secure Investment Portfolio For Your Retirement
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  • Understanding Deflation
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  • Retirement Plan Contribution Limit Changes
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  • Home Office Deductions: Hoops To Jump Through
  • Income Tax Effect On Single And Married Taxpayers
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  • The IRS Will Follow Your Wealth To The Ends Of The Earth
  • Under New Law Taking Social Security at 65 Makes Sense for Most
  • When Do You Need Life Insurance
  • Year-End Tax Defferal Planning



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