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4 Retirement Mistakes to Avoid Thumbnail

4 Retirement Mistakes to Avoid

Retirement is so much more than an office  farewell party and a final paycheck. There are  actions you must consider during your career  to help avoid common retirement missteps  when the time comes.

Here are four of the most common mistakes  to avoid:

MISTAKE 1: FAILING TO SET THE  FOUNDATION

Many of us struggle with balancing fear and  greed -- allowing emotions to drive investment  and retirement decisions. Your financial plan is  the groundwork you must refer to when your  emotions swing with media headlines. A solid  foundation will provide you with your desired  investment allocation and the ability to test  “what-if” scenarios. What if I retire early? What  if we get a vacation home? What if I save in my  Roth 401(k) vs. traditional 401(k)?

When establishing your foundation, include  assumptions like inflation, longevity and tax  rates. Consider using online resources or  working with a certified financial planner to  help you.

MISTAKE 2: BUDGET IGNORANCE

How much do you want to spend in  retirement? This may seem like a fairly  straightforward question, but it is one that  takes careful consideration prior to retiring.  Start practicing five years before retirement  and revisit each year.

For example, your plan allows for spending  of $7,000 per month but when you practice,  you realize you actually want to spend $8,500  each month. This practice runway allows you to evaluate what retirement spending feels like  and make changes (including deciding to work  longer) if necessary. You can’t just wing it!

If you are considering a second home, don’t  forget to include the carrying costs and travel  expenses in your spending plan. It is rarely the  cost of the initial purchase that gets you in  trouble. More often, it is the carrying cost of  the asset that ruins your plan. Another mistake  is omitting health care costs, especially if  retiring before Medicare eligibility.

MISTAKE 3: NEGLECTING YOUR  EMERGENCY FUND

Set yourself up for success by having six  months of your monthly spending in a liquid  emergency fund. Retirees cannot control the  sequence of market returns. Liquidity outside  of your retirement portfolio provides another  option during volatile times. 

Many pre-retirees focus on paying off their  mortgage before they retire, but neglect to  build up their emergency fund. What if the paid-off house needs a new furnace that first  week of retirement?

MISTAKE 4: RETIRING FROM  SOMETHING, NOT TO SOMETHING

You are burned out and want to do something  different from what you’ve been doing. The  problem? Your career and life after retirement  requires purposeful contemplation. If you  retire blindly, you risk your emotional well-being and are more likely to encounter  interpersonal conflicts in relationships.

What will bring you purpose? Do your kids  want you visiting that often? What does  your new social circle look like? Finally, and  importantly, do these ideas of retirement  mesh with your partner’s? Always retire to  something, not from something.

NCA Financial Planners has helped clients retire for over 35 years. NCA Financial  Planners, 6095 Parkland Blvd., Suite 210 Mayfield Heights, OH 44124, 440-473-1115; 440-473-0186 (fax); www.ncafinancial.com

Securities offered through Royal Alliance  Associates, Inc. (RAA), Member FINRA/SIPC.  RAA is separately owned and other entities  and/or marketing names, products or services  referenced here are independent of RAA.RAA does not provide tax or legal advice.  Investment advisory services offered through  NCA Financial Planners.

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