If you’re at the age when retirement is more than a distant light, there are some traps you should avoid to make it easier to get .jpg)
there and enjoy the abundant retirement you deserve.
- Lack of a retirement map like the one that John Nelson helps you to create in his book “What Color is Your Parachute for Retirement.”
- Self-limiting attitudes as identified by my good colleague Mary Lloyd, author of “Supercharged Retirement” and Barbara Morris, author of “Put Old on Hold” and and "No More Little Old Ladies."
In addition, the financial services industry has a few major potholes and bunkers for you to avoid.
Deferred annuities. Immediate cash annuities may have a place in your retirement income plan, but the insurance industry is pushing a variety of high cost, hidden risk deferred annuities that don’t belong in most people’s retirement plans. Before you even think about investing in an annuity, go to the SEC website for a helpful Q&A page on this topic. And, if you still want to consider a deferred annuity, please consult with an independent financial expert like a CPA or fee-only financial planner for a second opinion.
Early retirement pitches. Some financial advisers are so anxious to get their hands on your 401(k) or other defined contribution plan account balances, they’ll try to persuade you to retire now and hand the balance over to you to manage it for you. The IRS rules on taking money out of retirement plans early are generally covered by IRS Code Section 72(t) and the rules are complex and tricky. You need to know the rules and how they impact your retirement money before acting. See a qualified financial adviser and make sure you know the ins and outs of this part of the tax code before you consider tapping your retirement money.
Free food seminars. I get an offer for a free lunch or dinner from a financial adviser just about every week. They must not notice the CFP® after my name for some reason. And I cringe every time. The offer makes it sound like an “educational” opportunity. Don’t believe it for a second. You will be asked to part with your money at some point in the “free” food event. My advice: stay away and have a nice lunch with your family or friends when the topic of your retirement money never comes up. It’ll be cheaper in the long run.
Reverse mortgages. Here’s a concise definition of this financial product from the U.S. Department of Housing and Urban Development (HUD) website.
A reverse mortgage is a special type of home loan that lets you convert a portion of the equity in your home into cash. The equity that built up over years of home mortgage payments can be paid to you. But unlike a traditional home equity loan or second mortgage, no repayment is required until the borrower(s) no longer use the home as their principal residence.
A reverse mortgage is not a bad idea in special circumstances, but those situations are rare. There’s a reason that anyone who is considering a reverse mortgage is required to go through special government-required counseling on the topic. If you or someone you know is considering a reverse mortgage, arm yourself with good information from the AARP and the HUD website.
Like playing golf, you’ll score better in the game of retirement planning if you avoid the traps.
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