Live Your Golden Years in Abundance, No Matter What Age You Started Planning for Them
Everyone wants financial independence—having enough personal wealth to be able to live comfortably and have all basic necessities covered without having to actively work for them. In order to never outlive your money, and even leave some behind for your loved ones, be sure to avoid these 7 far-too-common financial land mines:
Money Mistake #1: Overconfidence in Your Investing Skills
Highly regarded economists have shown that a portfolio of randomly chosen stocks can perform as well as a carefully assembled one.
Yes, you may be able to beat the market, but you’re more likely to do so through luck. If you are relying on your investing skill to fund your retirement, you should be worried.
Money Mistake #2: Ignoring Safe Financial Vehicles
Aside from maintaining a 401(k), investing your money into assets like stocks, bonds and other investments that create profits is a big help to realizing financial freedom—but make sure a healthy portion of your money is in Safe Investments where you never lose principle, like equity index annuities with income riders.
Money Mistake #3: Retiring Too Early
Consider a typical 62-year-old nearing retirement. By remaining employed three or four more years, she could potentially boost her retirement income by almost 25% because of the exponential nature of compounding interest.
You should carefully consider the impact of working just a few more years before you retire.
Money Mistake #4: Not Having a Current Will or Living Trust
You need to have your wishes laid out in detail. A Living Trust will help you avoid probate, which is court that takes money and fees out before your family receives it.
With a Living Trust, you are in control of making critical decisions about who inherits your property and your portfolio (instead of the court system). Not having this could cost your heirs a bundle in easily avoidable estate taxes.
Money Mistake #5: Remarrying Without a Prenuptial Agreement
52% of first marriages end in divorce. A prenup is even more important the second time around.
Prenups can protect one spouse when the other is strapped with financial obligations like college tuition, child support, and caring for elderly parents. It ensures that each party will take financial responsibility for the children upon the death of the parent.
Another significant benefit of a prenup is that it can limit or waive the other’s right to a statutory share of each other’s estate.
Money Mistake #6: You Don’t Have a Plan For Emergencies
If you have minor children you should set up a guardianship in case of emergency. A guardian is a person (or persons) who will make personal and financial decisions for your children if you are no longer living or are incapacitated and can no longer take care of them.
When a parent dies and there is nobody appointed to handle the affairs of the children, the courts will choose someone for you.
Money Mistake #7: You Haven’t Given Someone Power of Attorney to Make Financial Decisions if Something Happens to You
Power of Attorney is a document that authorizes someone you trust to make financial and legal decisions for you if you can’t make them yourself. Legal and financial decisions are completely separate from healthcare decisions. You need Power of Attorney for both, no matter what age you are.