Ready to retire? I know I am. My wife and I recently sat down and went over our finances. And after lots of creative money management techniques, we found that we could plan to retire as soon as the year 2097. (That is, if our great-great grandchildren decide to help us out financially).
But, for the lucky few of you that are ready to retire, be careful. Retirement is a land filled with scary unknowns, and pirates ready to steal your booty. And, if you are not careful you can easily outlive your money and then it’s back to work you go.
Back in the early part of the 20th century, it was commonplace to continue working until you were disabled or too sick to work. Retirement was a thing for the rich. And even if you were planning to retire, you only needed to cover 5-10 years, but thanks to advances in medicine we live considerably longer and now need to plan for a retirement of 20 or more years.
Don’t count on Social Security saving the day either. From the sounds of things, the Social Security Administration will be out of money within the next 10 years. So scrape and save. Put as much money as you can into your 401(k) and do not borrow against it or cash it out. As I stated earlier, I think my 401(k) will be enough for me to retire on in about 95 years at the rate I am contributing. But I digress.
There are several things to be aware of as you begin your retirement years. Most are common sense, but it is sometimes easier to prepare for it rather than trying to deal with it at the moment. And even if you are not planning to retire in the immediate future, it is not too early to consider your options and the potential dangers that are out there.
Long-term Health Care Insurance
It is a sad reality that many of us will end up at a “Heath Care” facility. And if you have assets, such as a house or retirement account, you will not get financial aid (if it is still available at that time). Even at the cheap end, plan on several thousands of dollars per month for this kind of care. And like most things, there is an insurance to cover it. It may not be for everyone, and it is certainly not a very happy thing to have to consider, but it must be considered. Speak to an insurance agent and see if it is right for you.
Somewhere along the line, life insurance has changed. Rather than helping the surviving spouse or family with their financial needs after your passing, it now being used as an inheritance for your children and grand-children. There is nothing inherently wrong with that. But be careful. I have heard of people paying over $7,000 per year into their insurance with the promise of a $50,000 benefit upon your passing. If you took that $7,000 per year and instead put it into a money market account, after 10 years you would have over $70,000 plus the accumulated interest to pass on to your children. Of course tax laws may be different from life insurance proceeds to inheritances, so talk to a tax professional and do the math. Figure out your best options before signing the life insurance paperwork.
Okay, I must admit, I do not fully understand the in’s and out’s of annuities. While they do provide some sort of tax shelters for things like death benefits, they come chock full of fees. Speak to a financial advisor to see what is best for you. A “fee-only” investment advisor may be the best way to go as he only does one thing, financial advice. You can pay him as you go rather than staying on a retainer.
On the surface, this sounds like a great idea. But remember what happened back in 2006 and 2007? Lots of people began using their house as there own personal piggy bank. And before they knew what was happening, the house was “underwater” and they could no longer afford the monthly payment. Reverse mortgages are a little different in that you do not need to payback the loan until your death, but consider the kiddies. They really want your house. Or the money it represents anyway. But if that is not your concern, then a reverse mortgage may be right for you. But as before, be careful, you can start too early to begin the process of a reverse mortgage. It is a highly regulated field, and you will be required to take counseling before you are approved. You may want to do some research before you commit yourself. Check the AARP’s website, or the Department of Housing and Urban Development. Both of these websites can offer information regarding reverse mortgage and their potential hazards.
Reverse Pension Plans.
What’s that you say. Reverse Pension Plans? As I stated before, there are a lot of people ready to take your money, especially when you retire. From what little I have heard about these types of plan, the only word I can think of to say is “RUN”. Run far, and run fast. Do not consider this type of scam. The old adage is “If it sounds to good to be true, it probably is”. Scams like this seem to run rampant in the retirement community. Which brings me to my final and probably most important thought…..
Phone scams/Internet scams
I recently spoke to an older couple considering filing for bankruptcy protection. What brought them to it? Nigerians! If you don’t know what I am talking about, this might sound rather silly. But it is true. Commonly referred to as “Nigerian scam”, as most of these scams seem to originate out of Nigeria, these scams sound relatively realistic (I guess) but once you know it for what it is, it is easy to recognize. It will go something like this; “Greetings…. My name is …….I work at a large banking institution here at……a client of mine recently passed away leaving $12,000,000,000,000.0 and I need a partner to help me get it out of my country…..I need your bank account number to transfer the money to………you send back 75% of the money to me and you keep the remaining 25%….” Really? This is almost too ridiculous to believe, but many many people fall for it and end up giving their bank account information to a complete stranger only to find their accounts empty the next day.
Beware unsolicited calls or emails. If you get an email from paypal stating your password needs to be verified, DO NOT click on the link. Log out and go directly to paypal to verify your status.
If you get an unsolicited call from someone do not be afraid to ask questions. Who are you calling on behalf of? What is your return phone number so that I can call you back? What is your name and/or ID number. Before I give ANY personal information to a caller I will get their number and then call them back directly. 9 out of 10 times it is a wrong number or goes to some switchboard that has nothing to do with the company they said they were from. BE CAREFUL !!
Most of this is common sense. But common sense can sometimes fade with the promise of money or a concern about your money. Think things through, slowly and carefully, never let anyone rush you to make a decision. Even if you are interested in a product, never sign or do anything on the spot. Sleep on it. You will see it a little more clearly the next day and it will probably not seem as important as it did the day before.
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