RETIREMENT PLANNING: The big 5 mistakes people make | Business |

Retirement Ahead
BY DARREN VILARDO November 02, 2013; 06:01 PM

Are you jeopardizing your financial future, your retirement lifestyle, and your legacy by making any of these financial mistakes?
Mistake No. 1: No clear retirement income plan. You should have a plan for how your retirement accounts will deliver income to you that is guaranteed to last as long as you do (and your spouse). Additionally, this income should increase in order to keep pace with inflation. Your income plan needs to be unaffected and not dependent on market performance, in other words, a market downturn will not impact the amount you receive. The income plan should not rely on positive performance at some projected rate of return. Market performance should not be a consideration for your income needs.
Ask yourself if you have a retirement income plan that satisfies all of these requirements. It’s also critical to understand how each segment of your plan works within the overall strategy.
Mistake No. 2: Too much portfolio risk. Unquestionably the biggest mistake retirees make is keeping too much money in the stock market.
Retirement is a fundamental change to your lifestyle, going from earning a paycheck and living off your wages, to living off your investment portfolio. This should also mean a fundamental change in how you invest. You must be more concerned with preservation and distribution rather than growth. In your working years, diversification means investing in various asset classes, i.e., large and small companies, U.S. and international companies, etc. In retirement, diversification means risky versus safe, and retirees should have safe.
Mistake No. 3: No tax plan. If you have substantial assets in a tax-qualified plan, such as a 401(k), IRA, SEPIRA., 403(b), etc., your largest liability in retirement will be taxes. Not only will you pay tax on the withdrawals over your lifetime, but you will often owe more tax on your Social Security income as a result of that withdrawal. The reality is, Uncle Sam is your partner in retirement, and if tax rates increase, his share of your nest egg will increase as well. Not having an exit strategy could cost you hundreds of thousands of dollars in unnecessary taxes. What is your exit strategy?
Mistake No. 4: No health care strategy. The statistics tell us that between 40 and 60 percent of us will need long-term care at some point in our lives. The costs of this care can be staggering. The problem is that more often that not, resources used to pay for this care come from the same retirement accounts that are supposed to pay for the retirement lifestyle of the “well” member of the family. I am not suggesting running out and buying a long-term care insurance policy; indeed, there are other ways to transfer the risk to insurance carriers, usually as a rider to an annuity or a life insurance policy. If, however, you do not transfer this risk in some way, you are essentially allocating all of your resources to this possibility.
Mistake No. 5: Using a traditional estate plan when you have qualified plan assets (IRA, 401k). The assets in these qualified plan accounts will pass directly to your beneficiary, for most that is the spouse, and then to the children. Do you want your spouse and children to share your money with the IRS? Or do you want your family to get it all? If you have a traditional estate plan, or worse yet, no plan at all, Uncle Sam will be ready and waiting to collect his share when you pass.
All of these common mistakes may be avoided, if addressed sooner rather than later. The path to a risk-free, worry-free, tax-free retirement begins with getting the information and taking action on your plan.
Darren Vilardo is an independent financial adviser specializing in retirement income planning, and the owner of Inland Retirement Advisors in Rancho Cucamonga. Vilardo can be reached at 888-944-6266 or