Financial Mistakes to Watch for in Retirement

Board care for elderly can lead to financial mistakes during retirement.

Photo used under Creative Commons from bradipo.

While some people work and save for years so they can have a very comfortable lifestyle during their retirement years, others find  keeping their retirement nest egg intact to be a challenge. A 2010 survey conducted by Wells Fargo Bank revealed that more than a quarter of the American population has concerns about their finances for retirement. Thus, we’ve put together a short list of common financial blunders to avoid when you’re working to protect your valuable assets.

Have a Clear Understanding of Medicare and Medicaid: While Medicare is a very valuable healthcare management program, many retirees do not have the best handle on what is – and is not – covered by Medicare. One of the most financially devastating challenges to your financial health in retirement years is the need to enter an assisted living facility. While Medicare does, in most instances, cover a short-term stay in a rehabilitation center, Medicare will not cover a long stay in assisted living since assisted living is not medical care.

Unlike Medicare, the federally funded Medicaid program will cover long term care, but Medicaid is a program designed for seniors who have exhausted all their assets (for a considerable period of time) and is generally considered an absolute last resort option. Many assisted living facilities do not accept Medicaid.

Make no mistake – just one serious health challenge faced in the absence of a long term care plan can wipe out years of financial planning. It can also leave you with little options should you face a second, or third, health challenge. If you do not have a long-term care plan, or if yours is not comprehensive enough, start planning for that rainy day now.

Beware of Con Men: Today’s seniors grew up in a world that was more trusting and more caring. However, that innocence, along with the availability of funds and assets, makes them a huge target for the unscrupulous (to the tune of $2.6 billion annually). A good rule of thumb: if it sounds too good to be true, it is.

Estate Planning 101: Most individuals recognize the importance of having a will in place to leave their assets to the beneficiaries they hold dear. However, wills are not a set-it-and-forget-it type of document, and depending on when the will was initially drafted, it may have to be amended more than once. Pay attention to major life changes you experience, such as divorce, the death of a beneficiary, a birth in your family, or adoption. Note: if your will’s executor passes away, run (don’t walk) to have a new one appointed.

The general rule of thumb is to review and update your estate plan portfolio at least once a year (with, of course, revisions done in between when there’s a major change). Doing so will help you notice when your documents have become outdated.

Enlist the Help of Professional Estate Planners: While most family members mean well, the fact is that retirement planning is a specialized field best handled by professionals. Unless you have a family member who is both trained and experienced in this field, not just dibble-dabbling and reading market trends, it is best to maintain a relationship with a trusted advisor. Having the input from family members is fine, but before acting on their opinions, be sure your financial planner agrees.