Even though it often seems simple, retirement planning is a very complex and tricky business. Many retirees find this out the hard way when they exhaust their savings or learn that their investments won’t help them when they’re most needed.
Perhaps the biggest mistake retirees make is to not have more than one source of retirement income or savings. Many people assume that because a pension plan was there for dad or their rental property has always made money that this will always be the case. Recent history has demonstrated this is little more than wishful thinking. Many pension funds including some for government workers are in trouble. Any investment including real estate, stocks and mutual funds can lose money.
Another huge mistake many people is to assume that their house or any other real estate they own will always increase in value. The recent collapse of the market has demonstrated that real estate can lose value. Indeed it can lose all or most of its value. The idea of a house as an investment is becoming as outdated as bell bottom pants.
Liquidity or the Cash You Need Now
The most overlooked aspect of retirement planning is liquidity. That is the ability to access your money quickly when you need it. Many people make the huge mistake of not having cash available or an additional stream of income coming in for retirement. This can create all sorts of headaches if a person needs to get cash quickly.
Something to remember is that things don’t stop going wrong just because you’ve retired. Sooner or later you’re going to need extra money. Vehicles break down, additional medical costs appear, taxes go up, the roof leaks, plumbing fails, the price of gas goes up and family members may need extra cash. To cover these costs many people end up tapping into investments and exhaust them.
It is often a good idea to provide an additional stream of income to help cover such costs. Something to remember is that Social Security benefits are limited. It also takes time to tap into investments like mutual funds. This means it is a good idea to have some sort of additional income coming in on a regular basis.
A good way to ensure such a stream of income is to purchase an annuity. This can provide a person with additional funds each month and help maintain a comfortable lifestyle.
The Danger of Longevity
Living longer might seem like a good thing until you realize that you might outlive your money. Many people make the mistake of not planning for a very long life. This means persons should look into annuities and other products that can provide a guaranteed lifetime income.
Another possibility to think about is that a person might reach a point in his or her life when he or she is not able to look after his or her own finances. Diseases like Alzheimer’s and simple old age can make it impossible for a person to do basic things like pay bills or transfer funds between accounts. A solution to this problem is an annuity making payments into a checking account with automatic bill pay.
Another big mistake many people make is to invest in long term care insurance instead of income generating plans like annuities. The money from an annuity payment can be used to cover any sort of expense. Long term care insurance only pays for nursing homes or in home care. Yet a large percentage of older people never use this service. Many of these people would be better off with extra income they can use to pay any bill. If you do decide on a fixed annuity, be sure to lock in your fixed annuity rates before the rates rise.
Something to remember is that long term care insurance or life insurance will not help you buy groceries or pay the electric bill. The payments from annuities can.
When it comes to getting money fast,