How to know and avoid 10 retirement mistakes
By Joseph Singleton

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We have heard for several years now about the enormous number of the baby boomer population in America who are turning 65 over the next 20 years. According to the AARP, that number is 8,000 every day. Some have called it the pig in a python. We have also heard that Social Security cannot provide for everyone, and there is concern how people will be able to afford to retire.

INDUSTRY PULSE

Do you have retirement savings outside of Social Security and your company plan?
  • 1. Yes
  • 2. No

We are living longer and dying more slowly. How can we avoid the mistakes that prevent us from retiring with dignity?
  1. Do not depend on someone else. Unfortunately, relying on Social Security and your company retirement plan alone will probably not be enough. You cannot rest on a two-legged stool. Contributing to a Roth IRA or adding rental income by buying rental property will add another "leg" so you can sit comfortably on your three-legged stool.

  2. Have a goal rather than a dream. Most people do not consider retirement until later in life. If asked, they will say something like, "I just want to be comfortable." This is a dream; however, saying, "I want to retire with a monthly income of $5,000 that adjusts to inflation." is a good goal.

  3. Start saving and investing now. Most people go into debt early in life with credit cards, student loans and vehicles, so they do not think they can save anything. It is important to try to save something every month.

  4. Start today — do not wait any longer. Similar to No. 3, people find it hard to get started, but it is never too late. The best time to plant an oak tree was 100 years ago, but the next best time is now.

  5. "Insure" your plan. Nothing will ruin your family's retirement plan faster than a premature death of a wage-earner. Having the proper amount of an inexpensive life insurance term policy on mom and dad will provide the reassurance in case either passes away during their income earning years.

  6. Do not ignore taxes and inflation. By taking advantage of the tax-advantaged investments available, i.e., company retirement plans, Roth IRAs and traditional IRAs, you can avoid paying taxes on the growth, reaping the benefits of forcing you to save towards retirement. Inflation has averaged about 3 percent a year, which means a dollar today will have the purchasing power of only 50 cents in 24 years.

  7. Do not blindly trust others. Before investing with someone who is supposed to help you, make sure he understands your goals, he has experience and he has references. You must like and know this person because he should be working with you and communicating with you for several years.

  8. Do not micromanage your investments. Create a "diversified" portfolio of different styles of investments that is based on your goals, your time frame, your risk tolerance and the current economic conditions. Then "rebalance" a couple of times a year — that's it.

  9. Continue your plan after retirement. Once you retire — your plan does not. You will probably need to shift your investment goal from growth to income. There are basically two reasons to invest: No. 1. You want it to grow for future use; or No. 2. You need income now. The average person lives another 17 years after retiring from the workplace. Keep planning so your money does not die before you.

  10. Do not underestimate what it will take to retire. A rule of thumb is 75-80 percent of your present income will provide the same lifestyle in retirement. In my experience, however, people spend more when they retire. Every day is Saturday, and we spend the most on Saturdays. Plan on 100 percent or more of your current income as your retirement goal.
Joseph Singleton is the founder and head advisor at Wealth Solutions Group, an independent financial planning firm located at Christian Community Credit Union in Covina, Calif. Joseph has helped families, businesses and ministries pursue their financial goals since 2000 and is the author of the book, "The Lord's Financial Plan."