With the average retiree expected to live at least another 17 years (20 years for women) any decisions on retirement planning and funds can have lasting consequences. With a gloomy global economic outlook, there is a lot to be stressed about. However, if planned correctly retirement will leave you with enough of money to go with the amount of time left. On the other hand, even bad planning be correct if addressed soon enough. Here are two common mistakes to avoid:
Return on Investment
Do not concentrate on the rate of return of any particular instrument. It is natural to want to maximize the returns on your investments but that can also lead to focusing on prior performance. Nobody can predict the future. This is especially true for financial markets. The best way to get around this is to have a diverse portfolio. Look to have index funds, mutual funds, bonds and stocks. Losses in one will balance out the others.
Thomas O’Connell, president of International Financial Authority Group in Parsippany, New Jersey, says that retirement planners invariably forget taxes:
“People don’t typically have the same deductions [in retirement], so their effective tax rate is going to be higher,” O’Connell says. “They are ending up paying more in taxes even though their lifestyle hasn’t changed.”
There are several methods of getting around these. Look at how you can maximize on your investments while minimizing tax payments. Roth accounts are one such example of making withdrawals tax free.