Your Money
Financial planning IN retirement is quite different than planning FOR retirement. New to passive income and government benefits, retirees often make avoidable financial mistakes. We can break these common mistakes into three broad categories and avoid them with a little planning:
Ignoring Taxes - The tax code is complex, even at lower levels of income. There are tiers that, once crossed, have an absolute effect rather than the more common marginal impact. The Social Security tax torpedo is just one example. Two additional wrinkles you can easily miss are taxes triggered by Medicare and capital gains.
Obsession Over Taxes - Making decisions solely on the tax bill may leave you with less money at the end of the day. Tax-free bonds in a low tax bracket? Take the higher interest taxable bonds and pay the bill. Don't let the tax tail wag the investment dog.
The Assumption of Good Health - Everyone slows down over time, and emergencies can happen at any time. The riskiest assumption is that one will remain mentally sharp. Turning things over to a spouse or relative takes preparation. Sometimes you need legal documents. And remember, there is always a learning curve.
Common mistakes by retirees
by Dan Moisand
|
