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6 Common Pre-Retirement Mistakes that Cost Dearly

In the best of worlds, individuals start saving for retirement the first paycheck they receive. And while some of us might have been intelligent enough to talk about the idea of a retirement account in our 20s, less than one percent of workers start and stay committed to depositing in one their entire work life. In fact, the most common time for folks to start their pre-retirement is in their late 40s and 50s, when retirement is now a real possibility in the not-so-distant future.

Yet, even with a good income, people can make big mistakes, fouling up their retirement badly. And the effects won’t be realized until it’s too late to make financial repairs. Here’s how a personal train wreck can happen with very little effort:

costly retirement mistakes

1. Moving without researching for retirement

Americans like to move. As a country, we are more prone to change geographically every generation than most other countries. But that wanderlust has a price, and if we move to a location that doesn’t work for the cost of living and retirement, we can pay dearly in our retirement years. This is the issue where what barely suffices as making it in California could buy a person a mansion and 20 acres in Wyoming. Consider how it plays out for retirement if thinking about moving, even in one’s young years. The choice now can pay dividends or hell, later in senior years.

2. Do the math

We’re constantly told to pay down our debt before retirement, and it makes sense if on a fixed income. But some debt is good to retain.2 If your home mortgage is 3.5 percent and your investing returns eight percent, why would you lose out on 4.5 percent in gains paying down debt now? It sounds counter-intuitive, but checking out which interest path pays more is worth the time with the calculator. It’s like realizing how much you spend on gourmet coffee, adding up your daily café habit buy for the year.

3. Putting off critical insurance

One thing is for sure: any kind of health or care insurance you buy new is cheaper than 20 years from now when you are older. That’s because you’re a higher risk later on. If you can afford it, get long-term care and good health insurance coverage now and avoid paying for it later when you need it. Then, dig into your retirement to pay for it.

4. What do you want to do in retirement

A lot of money is wasted in retirement because people don’t have a plan for what they will actually do. Spend some time now and develop a plan for what you want your retirement to be like. A goal will give you purpose and confine your spending to what matters.

5. Don’t miss Medicare sign-up deadlines

People lose retirement money by not following the law and signing up for Medicare when due. Medicare is age-certain; you must sign up three months before age 65. Waiting for longer triggers a monthly premium penalty you will pay for the rest of your life.

6. Don’t leave Social Security on the table

You worked for and earned it, so why do many people forget their Social Security benefits? This is part of your retirement package; anyone who worked the required number of years is eligible for recovering payments from their paychecks. But the timing matters too; wait long enough, and you maximize the benefit; pull too fast, and your benefit is almost half what it could be. That will make a big difference in your daily income when you’re in your late years and on a fixed income.

Invest In a Life You Love,

Donovan Carson - founder of Carson Capital



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