5 Retirement Mistakes Boomers Should Avoid

by Kathryn Tuggle, Yahoo

For many baby boomers retirement is just around the corner, but they may also be headed for some big mistakes when it comes to investing for the long haul.

Managing your money is never easy, but when you're ready to quit the workforce, a mistake can turn your golden years to brass.

We checked in with financial planning experts to find the five mistakes baby boomers fall victim of when planning for retirement and how to avoid them.

DON'T: Think that owning different mutual funds means you're "diversified"

"Some people think that because they own mutual funds through different money managers, they are diversified, but really they are only in one corner of the market," says Ken Kamen, president of Mercadien Asset Management.

Kamen calls this phenomenon as "phantom diversification," where an investor really just has a duplicate set of the same stocks, that doesn't include small-cap stocks or international exposure. He urges people to get out of one corner of the market.

"Many people buy mutual funds from Vanguard, something from Fidelity, but they don't realize the top 30 holdings for all these companies are almost all identical," says Kamen. " With almost all the popular funds, the top 20 or 30 holdings are exactly the same. They just own the same thing in five different places."

"Check under the hood," advises Kamen. Even if you believe you bought different mutual funds, look to make sure they aren't all invested identically.

DON'T: Be afraid of looking "across the pond" for investments

"It always amazes me that people are comfortable buying consumer products from all over the globe, but have an innate fear of investing globally," says Kamen. "If you're buying things made in China and Singapore, why not spend a few of your dollars there with growth potential?"

Kamen says that 20 years ago, stocks in the U.S. offered the best potential for growth, but that's not the case today. He listed China, India, and Brazil as countries that offer strong growth opportunities.

"It only makes sense. The part of your portfolio you want to have growth needs to be invested in an area of the world where there is growth," says Kamen. "Look for countries that have posted significantly greater growth rates in the last five years."

DON'T: Jump on the bandwagon of what's popular

"Don't just narrow your portfolio down to what's making money at the moment," says Rick Salmeron, an investment adviser in Dallas. "When the investment universe shrinks down and everyone is talking about one thing, it pretty much assures you'll be the last person to enter that idea before the lights go out."

Salmeron pointed to the 1999 tech bubble and the recent real estate bubble as reasons why getting into the most popular investments of the day can be dangerous.

While it's good to look for investments that have promise or growth potential, it should be a warning sign if absolutely everyone is talking about an investment.

"If it's the hot topic of the moment, that's the point in time where your alarm bells should be ringing," warns Salmeron. "You've got to step back and conclude, you know what, it's the worst time to get into this area because of its heightened interest."

DON'T: Chase returns instead of planning for income

When it comes to investing pre-retirement, the biggest concern by far is longevity risk, says Curt Knotick, a financial planner with Accurate Solutions Group in Butler, Penn. The worst thing that can happen to a retiree is that they outlive their funds because they didn't plan accordingly, he adds.

"When you're younger, you are investing for retirement by using your paycheck as contributions to your 401(k) and IRA, and you have room to recover if something happens," says Knotick. "When you are retired, you won't have the ability to be as bold as you once were, because the money you were investing, you now need to pay the bills."

The danger is that a boomer will pull out his or her shares during a bear market to use for income, and once those shares are cashed out, they aren't there to grow during the good times, Knotick says. He advises investors leave themselves enough cash on hand so that they don't have to withdraw money from stocks that they will need to mature down the line. While being an aggressive investor is great when you're still in the work force, it can backfire once you're living on a fixed income.

"Really, we're looking at the difference between investing for retirement vs. investing for accumulation," says Knotick. "You've got to position your income in the basement of the house, the most secure place, so it can weather the storm."

He listed annuities, bonds, and more conservative investments that have some type of guarantee behind them as lower-risk places for baby boomers to put their money.

DON'T: Confuse your CPA with a tax planner

One way to ensure you've got more money coming in during retirement is by making sure it's taxed less, says Knotick. Often times, baby boomers will have a certified public accountant working for them, but CPAs do not specialize in tax planning.

"A tax expert can help reduce a person's tax liability from 15% down to 7% simply by restructuring their portfolios and using a few strategies they might not have thought of," says Knotick. "Taxes have nowhere to go but up, and retirees have to be positioned for tax advantaged income in future."

Baby boomers interested in checking on their current tax structure should go to a financial planner who also advertises for tax planning, Knotick says. Those planners will work in conjunction with your CPA to make sure your 1040 is structured to your advantage. Knotick says boomers may be listing things on their tax return unnecessarily that can put their Social Security benefits at risk for being taxed.

"If you can reduce that tax burden, it's just more money in your pocket," says Knotick.

Jobs After Retirement

Money is a very important factor when preparing for retirement. Many of today’s retirees go back to work because they are either bored in doing nothing on their home, or yearning to go back to work because of financial matters. Retirement jobs impose a significant constructive impact on the finances of a retiree. Below are the four factors of why most retirees prefer to go back to the work force.

Financial Factor - the possibility of earning additional earnings is one of the most significant factors why retirees tend to take retirement jobs. Because not only does retirement jobs extend their retirement funds, retirement jobs can make a retiree have enough money for a few extravagances that they want to experience.

Love of Work Factor – there are some retiree who chose to go back to work because for the love to work. Retirees whose works involves resourcefulness and self-sufficiency, like artists and proprietors, tend to go back to work. It is because their jobs are a great part of their existence.

Friends Factor – there are some retirees who want to go back to the work force because they are bored at staying all day on their homes. These are people who are sociable and are fond of mingling with other people. Retirement jobs offer a flamboyant social moment in their retirement.

Apprehension Factor – people who are devoted completely on their profession prefer working at retirement jobs as much as necessary. The fear of doing nothing but eat and sleep all day renders them to look for retirement jobs.

Some time ago, retirees would not consider going back to work. These days more and more retirees make most of their retirement years by having retirement jobs. If you are a retiree and want to go back to the work force the best place to look for a retirement job is your previous employer. Ask your previous employer if they have any sort of part time retirement job that they could give you. Recent studies show that most of employers allow their older employees to decrease their working hours more willingly than allow them to take full retirement. More and more employers these days are interested in hiring retirees because of their experiences and expertise. There are even some employers that set up atypical recruitment courses for retirement jobs to catch the attention of the retirees. Making some of them consider taking the retirement jobs.

More and more retirees choose to integrate retirement jobs in their retirement. More and more employers are hiring individuals who want to go out of retirement, thus, creating more and more retirement jobs for the retirees.

If you are considering of going out of retirement, it is advisable that you begin planning or start looking for a retirement job that you want as soon as possible.

Your Road to Retirement

Do you know what your retirement looks like? When you want to buy a house or a car or even a special vacation, you probably can actually “see” the goal you have in mind, and that helps you plan and save enough to achieve the goal.

The same should be true for your retirement. If you can’t visualize where you’re heading, it’s hard to plan and save enough money to make sure that you get there.

Retirement is the most important financial goal you’ll ever have. If you can’t afford a car, there’s always the bus. If you can’t put enough money together to buy a house, you can always rent. And while it may be disappointing, you don’t have to take that trip you wanted. But what if you can’t afford retirement? The consequences are a lot more serious.

Planning for retirement now is more complicated than it used to be. Most of us can’t count on a pension from our employer, and many of us are thinking about continuing to work, at least part-time, after retiring from our main job. That makes saving for retirement a lot different than saving for a thing. In fact, it’s not enough to just save money, you need to plot your road to retirement.

First, create your own retirement road map, so you know where you want to go and how to get there. Second, calculate the cost of your retirement lifestyle so you can make sure you have enough money to pay for it. AARP has developed two tools to help you accomplish both steps—the Retirement Roadmap and the Retirement Calculator.

The AARP Retirement Roadmap

Start by using the AARP Retirement Roadmap at www.aarp.org/finance to figure out what you want in retirement. The results can help you think about the options available to you, and set your retirement priorities.

The Roadmap asks you 12 questions about your desired lifestyle, personal priorities and general financial status. It reflects the many ideas people have about their retirement and may help you come up with some of your own. Some people dream of leaving work behind to spend more time pursuing a hobby, volunteering in the community, or traveling. Others dream of starting their own business or embarking on a new career. Some people are in excellent health and don’t expect to spend much retirement income on medical care. Others realize that they will have ongoing medical expenses, and may need to budget for insurance to help with the bills.

Answering the questions about these types of issues will help you start to “see” your retirement, and the results will give you a sense of what it might take to get you there.

The AARP Retirement Planning Calculator

Once you have a better idea of the retirement lifestyle you want, you’ll need to figure out how much it will cost. You can estimate how much you need to save by using the AARP Retirement Planning Calculator at www.aarp.org/finance. The calculator contains three sections: an estimate of your retirement income needs, an estimate of the sources of money to fund your retirement, and your prospects and alternatives for meeting your income needs.

Retirement Income Needs

To come up with an estimate of your income needs, here are some things you need to do:

• Estimate how long your retirement will last. There’s no sure way to predict how long you’ll live. But you can make a good guess based on average life expectancy rates, your current health status, and how long your parents or grandparents lived. With this guess, go out on a limb. If you think you’ll live to 85 after taking these things into account, plan for enough money to support you at least to age 90. Don’t underestimate how long you think you will live—otherwise, you may not save enough to make your money last.

• Set a financial goal. Do you expect your retirement to cost you more, less, or about the same as life before retirement? Some expenses may go down a lot. You may have paid off your mortgage, commuting costs will go away if you stop working, you’ll stop contributing to retirement savings, and you’ll probably pay lower income taxes. Other expenses, for health care (Medicare by no means covers it all), traveling, or pursuing other interests, will probably go up.

The calculator asks you to set a goal as a percentage of your pre-retirement income. If you click on the “estimate” button for retirement income, you can come up with a figure by listing your expected retirement expenses for items such as housing, insurance and taxes. Most people need somewhere between 70% and 100% of their pre-retirement income to cover expenses when they stop working. So if you earn $30,000 and you think you’ll need 80% of that in retirement, your financial goal will be to have enough income to pay you $24,000 a year for each year in
retirement. (Check to make sure calculator includes inflation.)

Retirement Funding

This section of the calculator can help you identify all of your savings and other sources of retirement income, including retirement accounts such as a 401(k) or IRA, Social Security, real estate and investments. To figure out how much money you might actually have on your chosen retirement date, the calculator starts with your current savings and investments, then makes estimates based on your plans for future savings and investment returns.

Calculate Results

The last section of the calculator shows how close you can come to your retirement income goal, based on the choices and assumptions you made earlier about retirement spending needs, resources and investment returns. The easy-to-read colored charts as well as numbers make it very clear whether your current roadmap will lead you to your retirement goal.

If your chart shows you falling short of your goal, you can change some assumptions—such as the age you plan to retire or the amount you’ll save every month—to figure out how to create the path you need to take to arrive at your goal.

Marriage After Retirement

Christine A. Price, State Gerontology Specialist, Ohio State University Extension

For many couples, retirement is a long-awaited and exciting event that will result in more time for travel, hobbies, and family visits. Sometimes, however, a couple does not expect that retirement may change their relationship, as well as their marriage. A lot of information is available to help people plan financially for retirement, yet very little attention is paid to how relationships and personal well-being may be changed as a result of it. Despite a common belief that retirement is “easy,” research shows that it can sometimes be challenging and frustrating. For example, leaving the workforce can have long-lasting effects on how we feel about ourselves and how we relate to others, especially our spouse.

For the most part, retiring couples adjust to this new life stage with few problems or difficulties. Patterns of communication and interaction in the marriage prior to retirement are important. For example, couples who get along and are able to talk openly with each other before retirement are likely to have an easier adjustment experience and report high marital satisfaction in retirement. On the other hand, couples who have always had marital problems or feel dissatisfied with their marriage before retirement, are likely to continue having these feelings after they retire. In fact, spending so much time together in retirement may cause unhappy couples to finally change aspects of their marriage with which they have not been comfortable. Even couples who have a relatively happy marriage can experience “bumps” on the road to retirement bliss. In fact, research has shown a number of different factors that can affect marital quality for retired couples.

Here are a few examples:

Timing of Retirement: The decision about when to retire and who retires first can have important consequences for married couples. Research shows that one spouse retiring too early can lead to feelings of resentment and regret, especially if he or she feels pressure to retire. Marital quality suffers the most when wives continue working after a husband retires. Often wives continue their homemaking responsibilities, in addition to work, which causes conflict. When the wife retires before the husband, husbands usually aren’t affected. Wives, however, are not as satisfied with this arrangement. Finally, couples who retire at the same time appear to adjust to retirement the most smoothly. However, these couples do have to get used to spending so much time together.

Retirement Goals: Couples who have different plans for retirement often experience more disagreements than those who share the same retirement goals. For example, if one spouse wants to spend his or her retirement crossing the country in an RV but the other spouse prefers to garden at home, negotiation or compromise will be necessary.

Household Chores: Research shows that deciding who does what household tasks in retirement can be very important to a couple’s happiness. Overall, retired husbands do not do an equal share of the housework no matter if their wife is still working or if she’s retired. For many women, especially those who have worked outside the home, retirement means household chores can now be shared with a retired husband. When husbands fail to do their share of the housework, wives often feel resentment and disappointment. Other retired women resent their retired husbands invading their “territory.” These women report feeling “smothered” when their husbands are at home all the time. The “underfoot syndrome” occurs when a husband interferes in his wife’s household routine. All of these situations can lead to marital conflict in retirement.

Suggestions for Preparing Your Marriage for Retirement

• Communicate Openly. Communication is essential to the preparation of a marriage for retirement. It is important that couples discuss their expectations for retirement both from a personal perspective (personal goals, interests, dreams) but also from a couple perspective (joint activities, mutual goals, issues of sexual and emotional intimacy). By talking openly about retirement expectations, couples can avoid future conflict. Communication will also enable couples to work together to plan a mutually satisfying and fulfilling retirement experience.

• Set Boundaries. Setting boundaries in retirement is necessary to protect personal time and “couple” time, and can also provide a sense of structure and control. A critical issue in retirement for many couples is establishing a balance between “separateness” (personal privacy, pursuing individual hobbies, spending time with friends) and “togetherness” (participating in joint activities, maintaining intimacy, and socializing as a couple). In addition, it is critical that couples agree on how much time they want to spend with family and friends, engaged in community activities, and responding to the needs of others (i.e., caregiving tasks). Mutually agreeing on how to balance individuality and togetherness is important to maintaining marital satisfaction in retirement.

• Prepare for the loss of the work role. Preparing for the loss of the work role may be necessary for spouses who were considerably invested in their professional careers. The loss of the work role can lead to feelings of depression, a sense of having no purpose, and a loss of identity in one or both spouses. These emotions frequently impact the marital relationship and can lead to decreased marital quality. Couples who recognize the significance of this loss and the importance of replacing this source of fulfillment with alternative roles and activities are likely to avoid negative emotions associated with this loss.

• Designate household tasks. Deciding on who does what household chores in retirement is more important than many couples realize. Research shows a common source of conflict for retired couples surrounds the division of labor in the home. Couples who have previously practiced a traditional division of household chores (wife doing cleaning, cooking; husband doing household maintenance and yard duties) may either choose to continue this pattern or may decide that a more equitable approach is more appropriate for retirement. Couples need to discuss and mutually agree on how they will manage household responsibilities rather than assume old patterns will continue or that new changes will take place.

Conclusion

Couples who are transitioning from full or part-time employment to retirement frequently do not realize the impact this life transition will have on their marital relationship. Due to increased longevity and early retirement patterns, couples can expect to spend a significant portion of their marriage in retirement. Despite this demographic reality, few couples work to prepare their marriage for this new life stage and are surprised by the changes and challenges they experience in their marriage as a result of retirement. Just as couples financially prepare for the retirement transition, couples need to prepare psychologically to ensure their marital security in retirement.

References
Szinovacz, M.E. & Schaffer, A.M. (2000). Effects of retirement on marital conflict tactics. Journal of Family Issues, 21(3), 367-389.
Szinovacz, M.E. & DeViney, S. (2000). Marital characteristics
and retirement decisions. Research on Aging, 22(5), 470-498.
Szinovacz, M.E. & Harpster, P. (1994). Couples’ employment/retirement status and the division of household tasks. Journal of Gerontology: SOCIAL SCIENCES, 49(3), S125-S136.
Yogev, S. (2002). For better or worse: But not for lunch. NY: Contemporary Books.

Writing Your Own Retirement Speech - Some Hints

By Nick M Grant

A retirement speech is your best opportunity to convey best wishes or congratulations to a retiring coworker, or your only opportunity to express your feelings about a lifetime of employment. Either way, it is the last moment in your career, and one of the most important. Do not leave a retirement speech to the last minute. Successful careers deserve an equally well planned retirement speech. Despite the anxiety that sometimes comes with public speaking, it is certainly not a time to become too anxious.

If you would like the perfect vehicle to tell someone congratulations on their retirement why not use a retirement speech? It will not be as easy as you think to do, so give yourself plenty of time to plan it out. Retirement speeches should tell the audience about your feelings-remember this is the very last step of your professional life, so make the most of it.

You will need some time, not only to plan out the speech, but to write it out. Then, after it is written, put it off to the side for a day or so, and put it out of your mind. Go do something else. Go play golf, go to a football game-something.

After you have given the written speech a rest, come back to it. Read it out loud to yourself. Does anything sound really stupid, or uncharacteristic for you? OK, thanking everybody and their brother may be unusual for you, but other than that, does the speech sound normal? If so, ask a spouse or a friend to listen to you.

Then, standing in front of your audience, relax and go through your retirement speech. Pay attention to the speed of your speech-don't go too fast, that's something that is common. Just relax and be yourself.

As you practice in front of your audience, think of one or two absolutely unforgettable things that happened during your career. Take advantage of the one or two things, and weave them into your speech-they can definitely reflect on you, your past and your livelihood then, and possibly even into the future. Best of all, one or two things wisely chosen will keep you from talking endlessly.

Your practice audience can tell you what you need to work on, and after having done that, take a minute or two and make some note cards just to keep yourself on track.

Of course, adding humor to any speech is always a must. While it does not have to be gut-busting, do make it so that at least a few people grin. If you are really at a loss, get onto the good old Internet, and start Googling "retirement jokes"-you will undoubtedly come up with something that you like. Or jokes on any other topic that you might like, for that matter.

Some people are so lazy that they can't even be bothered to write their own retirement speech. Those people will either buy a speech-and yes, you can do this from the Internet, or hire someone to write it. More power to them, but personally, writing the speech yourself guarantees that you get things right.

For more retirement planning tips including retirement homes, investment and party ideas check out http://www.easyretirementplanning.us; photo courtesy of www.cartoonstock.com

Great Ideas For Retirement Gifts

By Kelly Hunter

Whenever people retire, you always want to get them a gift. There are some gift ideas that are played out, however. Ideas like custom pens, wooden clocks, and things like that are played out. Just because someone is retiring does not means that it's the end of their life. In fact, it's just the start. You have to remember that people who are retiring do not lose their good humor. That is why many people are finding out that the best retirement gift ideas are the ones that are funny. You have to think that most of the gifts that this person is going to get are going to be very deep and meaningful. Why not get them something that is going to make them laugh so that they can see that good times are still ahead. It's going to make you feel good, and it's going to make them feel good.

Now, there are a few different ways you can choose to go about doing these retirement gift ideas. Most of the funny gifts you can get a person that is retiring are small gag gifts. Although they may be too small to be given as a single gift, it is cool if you can put them all together in a gift basket. In fact, gift baskets are one of the best ideas you can have when it comes to retirement ideas. This way you can give that person a variety of things to laugh at. Now, what you put in it is going to be up to you and is also going to depend on that person's humor. One of the classics is a small pad of paper that says retirement to do list. The funny thing about these pads of paper is that they only have one line to write things, because most people do not have much to do when they retire. There are also some funny books out there that give you some ideas for funny do's and dont's when you are retired. These can be fun books to get for people.

The last thing that you have to do is find a place to pick up these retirement gift ideas. You can start out at local stores, and usually you can find a great place at your local mall. However, if you want to save some money, then you may want to go ahead and start looking online first. By simply typing in retirement gifts in a search engine, you are going to come up with tons of ideas, and most of them are going to be at a good price. Pretty much, when picking up these kinds of gifts, you are going to want to think outside the box. Do not do the same thing that everyone always does, because that is not going to get you anywhere. You need to remember that everyone loves to laugh, and funny retirement gifts are the best thing in the world. A good rule of thumb is, if you think it's funny, they are going to think it's funny. If you are afraid that the retirement joke could be too hurtful, then you may want to go with something a little different.

Kelly Hunter owns and operates http://www.bestretirementgiftideas.com and writes about Retirement Gift Ideas Article Source: http://EzineArticles.com/?expert=Kelly_Hunter; photo courtesy of federalretirement.net

401K Withdrawal Rules

By Candis Reade

401K Retirement Plan was created in order for those working individuals to have a good substantial amount to have with when they retire. Yes, you have set aside a part of your income in order for you to live a life you want to live when you reach the age of retirement or when you want to retire from working. However, what if you are into a financial emergency, you need a substantial amount to pay for your medical bills and other expenses, what you should do? It is suggested that you should only withdraw money from your 401K only when you do not have any option left. Remember, you are slashing money out from your future, and if you will always do this withdraw and withdraw money from your retirement plan you will be shocked, there is no money left for you when you retire. Be sure you know the 401K withdrawal rules before withdrawing the money. It is not as simple as withdrawing money from the atm machine.

You should be familiar with 401K withdrawal rules before you decide on withdrawing money from your retirement plan. Most likely, the retirement plans of which working individuals have will only allow withdrawal only if it is under the so-called term financial hardships. What are these? Most of the reasons that are classified under such term are: death of the workers spouse or a big medical bill.

Most of the employers set up 401K withdrawal rules based on the guidelines that the Internal Revenue setup. This means that when you are in dire need of cash immediately, then supported with a reason under financial hardship, you are eligible for such withdrawal.

Here are four reasons that under 401K withdrawal rules that would allow you to make a withdrawal:

1. When you incur a surmountable amount for medical bills either for your spouse, family or even you.

2. Preventing the foreclosure of your home.

3. Purchasing a house which will become your primary residence, this excludes paying your mortgage.

4. Paying for school fees either for post-secondary or university for your dependents, spouse and children.

One of the 401K withdrawal rules that you should remember is that when you withdraw money based on the reasons mentioned above you will be suspended from making any annual contributions for the period of 6 months. Remember, when you need cash that getting money out from your 401K retirement plan will affect your future. It should be your last resort.

Candis Reade is an accomplished niche website developer and author. To learn more about401K withdrawl rules, please visit Early Retirement Plans Today for current articles and discussions. Article Source: http://EzineArticles.com/?expert=Candis_Reade

Photo courtesy of www.mmhabits.com