Top six ways to ruin your retirement
By Mark P. Cussen, Investopedia.com, in GlobeandMail.com
Despite the plethora of websites, books, magazines, advisers and other financial information and services available for retirees, there will always be a contingent of people who fail to make their retirement savings last for the rest of their lives. There are many ways to avoid this, some of which are more proactive while others are reactive in nature. But none of them are particularly difficult; all any of them really require is discipline and common sense. Here are a few ways you might be endangering your retirement.
1. Too Much Risk
You worked and sweated for years to accumulate enough money to be able to live a comfortable retirement. Therefore, this is probably not money that you want to use to start trading commodities futures contracts unless you are very experienced with them. Derivatives, small-cap stocks and other high-risk ventures should be approached with caution and used judiciously as part of a well-thought-out investment strategy.
2. Too Little Risk
This mistake can be every bit as costly as the previous one; those who invest their portfolios too conservatively may find that their expenses are outgrowing their income. Treasury securities and CDs can be great foundations for any retirement portfolio, but virtually all retirees need to have at least a small portion of their assets invested in either equities or real estate in order to provide themselves a hedge against inflation.
3. Retiring Too Early
Early retirement has become something of a status symbol among the upper-middle class. However, early retirement can be disastrous for those who are not adequately prepared for it. For every five years that one wishes to retire early, at least $100,000 of additional assets should be saved (assuming a payout of $2,000 per month and a rate of 6 per cent).
Those who choose this path should therefore be prepared to accept a reduced payout and a smaller Old Age Security cheque every month if they have not done this. (For related information, take a look at a U.S. article, How Much Social Security Will You Get?)
4. Failure to Plan for Long-Term Care
Nothing can destroy a retirement portfolio like having to pay for the cost of a nursing home or other long-term care without any kind of insurance protection. Nursing home care can easily cost up to $60,000 a year, depending upon various factors such as the level of care needed and your geographic location. Do not count on the government to cover long-term care expenses.
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