5 Things You Don’t Want To Do-
1) Cracking your nest egg before retirement
A recent study by Hewitt Associates finds that 45% of workers cash in their 401ks when they switch jobs – meaning they pay taxes and a 10% penalty if they’re not 59 1/2 yet. I recommend that you roll that into an IRA or transfer it into a new company plan. The IRA will offer more choices and fewer restrictions than a corporate plan, but it’s important to seek out professional guidance as it’s easy to get penalized.
2) Having no clue about how much to save
According to 2007 Retirement Confidence Survey from the Employee Benefits Research Institute, only 43% of workers have actually calculated how much they’ll need to retire on. We’ve always said you can’t hit the bull’s-eye if you don’t know what the bull’s-eye is – you need a plan and a goal. The goal is not a number, but rather the lifestyle you desire. Part of my job is to assess a client’s needs to attain that goal.
3) Not caring about asset allocation
We talk about this all the time on the radio show – we believe in efficient asset allocation. This means broad diversification, exposure to multiple asset classes and money managers simultaneously, and proactive management on that portfolio. Oftentimes people have over half of their stock in one company – this is not diversified enough and creates a great amount of risk. We always tell people that if you have more than 10% of you investible assets in any one company, that’s too concentrated.
4) Letting Uncle Sam eat your retirement
There are lots of different types of investments and they all have quirks when it comes to taxes. Some are tax-deferred, some are fully taxable, some, like Roth IRAs, avoid taxes altogether. What we talk to our clients about all the time is that you want a mixture of all three of these.
5) Retiring permanently when you just need a break or to do something different
If you love what you do, you never have to retire – but a lot of people have other passions and other things they want to do. There may be things that you could do that are intrinsically rewarding and you enjoy that might also give you a paycheck. Retirement may not mean the end of working, but having the choice to do something you love which may include still working, and brings in some income.
Securities offered through LPL Financial, Member FINRA/SIPC. Advisory services offered through Wealth Enhancement Advisory Services, a registered investment advisor.