7 Gaping Potholes on the Bumpy Road to Retirement

RetirementThere was a time when employees could set a firm personal schedule for retirement, and then rely on their savings and company 401(k) to fund their twilight years. No longer.
 
Ample employee retirement accounts and savings have now become as rare as an albino leopard. And if you can remember the time when they weren’t all that rare, chances are you retired at least 15 years ago, and out of harm’s way (or not!).
 
Kiplinger Magazine has recently published an article identifying 7 dangers (I call them “gaping potholes”) you’re likely to encounter on your road to retirement. Planning for retirement is no longer a matter of remaining on automatic pilot, and waiting to worry about what to do when your time rolls around. Even if you’re not planning to retire anytime soon, you’d be wise to heed these dangers.
 
Taxes – While the government let you build your retirement account on a tax-deferred basis over the years, it’s important you remember, when you eventually do retire, you’re going to have to take a hit on your taxes. As the Kiplinger article points out, if you’re in the 25% tax bracket, and withdraw $50,000, you’ll wind up with only $37,500 after taxes.
 
Inflation – It would be foolish not to take inflation into account. Even at 3.3% a year, in only 21 years, the dollars you save and spend will be worth only half as much.
 
Health-care Costs – It would be especially unwise for you to depend entirely on federal programs in your retirement. If the current congressional debate is a harbinger of things to come, retirement provisions for health-care costs are almost certain to get worse, not better. Increased Medicare supplement premiums, drug copays, and dental care are all likely to take a bite out of your nest egg.
 
Life Expectancy – People are living longer and longer. And you certainly don’t want to get to the point where you outlive your savings.
 
Excessive Debt – Whatever you do, just don’t pay down on your debts. Pay them off completely – particularly credit-card debt. The last thing you need during your retirement is a string of credit-cards at usurious interest rates perpetually tempting you to spend beyond your means.
 
Inadequate Savings – Remember what your grandmother told you about saving money? Let’s hope you didn’t write her off as some obscure relic of years gone by. She was dead on the money (pardon the play on words!). Going forward, you’ll need every cent you can sock away.
 
A Precarious Stock Market – I know it seems like the first line of a valedictorian speech, but we live in uncertain times. You can no longer content yourself with closing your eyes, leaving your money in particular stocks, hoping to open your eyes one day to find you’re a multi-millionaire.
 
If the market takes a hit (and make no mistake; it will take at least one hit before you retire), your nest egg could shrink substantially. As you age, it’s usually wise to reduce your level of financial risk.
 
The best way to hedge your portfolio, and to reduce your level of financial risk, is to invest in physical gold. When the market for paper assets starts shrinking, there’s a certain comfort in knowing you already have what other investors are now fleeing to.
 
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