Retirement isn’t a clear goal for most people. Sure, they think about it from time to time, maybe even save and invest toward that end, but few of us really have a plan for getting there. Another problem with retirement is it tends to sneak up on you. Throughout their lives people are so busy with work, family and other demands that many don’t catch their breath until about age fifty, when the kids are grown up and gone.
Making it even trickier, retirement is rarely a well-planned clean break. Some workers nearing retirement age suddenly find themselves out of a job earlier than expected. Ageism in the workplace is a reality, but it’s hard to prove as most companies in the process of laying off employees mix in just enough younger workers to make age discrimination deniable. Other times an unexpected illness, either yours or that of a close family member, sidelines your career sooner than you expected.
For others the short time span to retirement is made catastrophically apparent when the market collapses, and all that money they were counting on disappears. Don’t be that person; here’s how to avoid a disastrous retirement.
Have a Plan, Not Just an Account
In many households one partner or the other handles most of the financial dealings. What passes for retirement plans are vague ideas about travel more suited for a vacation than a post-employment period that will likely last decades; years marked by increasing medical and lifestyle changes. The number of couples who actually have a detailed retirement plan, and regularly consult one another on financial issues, is frighteningly small. For nearly forty percent of Americans their entire retirement depends on a hopefully-adequate 401(k).
Check Your 401(k) Once a Year
If your company-match 401(k) is your only retirement investment, then it’s a good idea to check it once in awhile. What tends to happen is people set them up right when they’re young, then rarely do more than glance at the statements for decades. Over time their investment mix becomes too heavily weighted in equities. Being overweight in equities usually becomes apparent only when the market crashes. Need I point out that that is the worst time to try to adjust your portfolio? At least once a year sell off some high-profit equity funds and shift the money into bonds and less risky investments.
Change Your Asset Mix
The older you get, the less your investments should be based in paper. For most people nearing retirement age there’s a 401(k) and their owner-occupied home. Look what happened to those people in 2008. Not only did equities crash but the housing market as well. Those on the doorstep of retirement found themselves laid off, their 401(k) plans wiped out, and living in a house that was suddenly worth less than half of what it was just months earlier. As you get older your investments should start to diversify away from paper assets tied to the stock market. Sell some of that paper and shift the proceeds into liquid hard assets like investment –grade gold and silver coins. Real estate, not including your own home, and any kind of productive land, especially timber or mineral resources, should be in your mix as well.
Know Your Eligibility Dates
Social Security just did away some of the more lucrative filing options for couples but it pays to know your eligibility dates for Social Security and Medicare. You can apply for Medicare three months before your 65th birthday. You can apply for Social Security as soon as age 62, but that doesn’t mean you want to file that early. The longer you wait, the greater the benefits you get. You can take penalty-free withdrawals from IRAs six months before your 60th birthday. Sometimes it’s better to scale back to part-time work and supplement your income from an IRA than file for Social Security. Knowing your eligibility dates and options is key to working out your largest benefit.
Don’t let retirement be a scary time that’s thrust upon you by circumstance. Talk to your partner, know your eligibility dates and options and start shifting your assets to a more tangible footing as you get closer to retirement age.