This article was originally published here
Many retirement plans fail because of seemingly minor details that have a significant impact. This article summarizes ten such minor details listed below, then follows up with in-depth articles on each.
1. Just Show Up
The days of “putting in my time” and having a successful financial life and retirement are long gone. This is especially true of the problematic concept of the Minimum Retirement Age (MRA). You’ll need an excellent strategy to make the most of your benefits.
2. Pay Your Bills First, Then Save if You Can
No! That should be reversed. It would be best if you had a barrier to separate your way of life from your income. Throughout my career, those who came out on top created and maintained that wedge. They never lived above their means; they were always slightly below. In this manner, raises and bonuses propelled them forward.
3. Borrow for Tomorrow
Loans from your tax-deferred savings account (TSP) should be your last option. However, experts believe this practice stems from a faulty cash flow plan. Note this right now: debt is not your ally. It’s a tool, but it’s not a solution. Managing and eventually eliminating installment debt is a trait I see in financially successful people regularly.
4. Silo Save
TSP is fantastic, but it is not a strategy. The most successful retirees I’ve seen have assets in traditional plans like TSP. However, they also have money in non-retirement assets. No, I don’t mean a few thousand dollars in a savings account. Once you’ve maxed out your TSP, start putting money into a regular investment account.
5. TSP Underfunding
Please don’t roll your eyes at me. Daily, I encounter individuals who agree with me that those who maximize their contributions are in the minority. A sizeable TSP balance is required if you want to retire before age 65.
6. Lose Your Equilibrium
That one was too simple and does not refer to market fluctuations, but to your TSP allocation. You can’t just set it and forget, even if you’ve established an appropriate asset mix across your TSP’s five core funds. Now, I’m not talking about trying to steer excessively. If you’ve determined that you should have 40% of your portfolio in a C fund based on your age and risk tolerance, don’t forget to review it once a year.
7. Ineffective TSP Strategy
I can hear you sigh. Twenty percent in each core fund or a small amount in all funds (yes, including all lifecycle funds) is not a winning strategy. Neither is it entirely in C (because it’s been doing so well.). Your asset allocation should accurately reflect your ability to tolerate risk in good and bad times. It is disastrous to try to time the market or, even worse, to change your investment strategy based on “what’s happening.”
8. Don’t Forget Your Umbrella
That was a no-brainer. This doesn’t mean getting wet; it means not having enough liability insurance. Nothing can derail your retirement plans more quickly than an accident followed by an adverse judgment. Check your auto and homeowners’ insurance limits today and request a quote for an excess liability umbrella.
9. Ignore the Risk of Long-Term Care
Okay, it’s a dull subject, and the premiums keep rising (even the Fed plan). However, it remains a problem. You must assess your resources and obligations and plan a working strategy ahead of time. Will you look for in-home care? Do you think you’ll need a facility? Right now is the time to ask the tough questions! TSP balance is not a panacea.
The FEGLI is one of the best employer plans available. However, this does not imply perfection. For example, an employer plan must charge all employees the same rates for optional coverage based on age (the unsubsidized part). That means that smokers and nonsmokers, people in good health, and those in poor health all pay the same. Consequently, these plans become significantly more expensive as we age. It’s not a joke. Shopping around and comparing private sector options can save you tens of thousands of dollars over your career. You can contribute every penny you save to your retirement.
M. Dutton and Associates is a full-service financial firm. We have been in business for over 30 years serving our community. Through comprehensive objective driven planning, we provide you with the research, analysis, and available options needed to guide you in implementing a sound plan for your retirement. We are committed to helping you achieve your goals. Visit us at MarvinDutton.com . Tel. 212-951-7376: email: [email protected].