Retirement Mistakes:

Listening to the wrong people.

We talked about taking advice from the wrong people earlier in the book, but I want to reinforce this it simply means think about who you are taking or receiving financial advice from. Just because they are related to you, or they work at a bank or are actually an advisor in some capacity does not mean you will take their advice to heart and act on it.
You will take in the information, interpret it and decide if that advice fits your needs or solves your problem at hand, then move forward.
Not understanding tax consequences of IRAs.
Understanding that any qualified retirement plan such as your IRA, 401k or pension all come with taxes and this means you will be taxed if you take out lump sums. Not being aware of this means you may be taxed excessively with the wrong advice. I have heard people tell me that their brother-in-law told them to take their IRA and cash it out and pay off their mortgage, not knowing that they had just incurred a huge tax bill. This advice was absolutely criminal, but people do it every day unaware of the tax consequences.

Getting caught by the 20% withholding penalty.

This is another one of those areas that happens to people because they listen to the “know it all’s” out there.
If you are going to move your pension plan, 401k or other company retirement plan somewhere else, make sure you know that you may have 20% withheld for taxes because you chose to do it yourself without having an asset to asset transfer. You have the check sent to yourself instead of the company that will accept your money. Doing this, you will now have the IRS take out 20% of all your funds and you will be taxed on the 20%. So make sure you have someone that knows about rollover pension options before electing to do this one yourself.

Owning assets the wrong way.

How you title your assets is extremely important and I am not getting into how you should title your assets. Just know that you need to see an attorney who can help you plan for the proper way so that you can avoid taxes and other problems when someone passes away without having your assets are titled properly.

Choosing the wrong pension option.

Just realize that you need to consider all of your pension options when you retire from your company. By choosing the wrong option, it can cost your spouse and your family the entire lump sum and it is irreversible.

Not understanding that Social Security is taxed.

Just realize that you need to consider all of your pension options when you retire from your company. By choosing the wrong option, it can cost your spouse and your family the entire lump sum and it is irreversible.

Not withdrawing your IRAs RMD after age 70.5.

This one is very critical so do not get caught by the IRS with this one and if you do, you better beg for forgiveness.
If you do not take the (RMD) required minimum distribution set by the IRS once you are age 70 and 6 months of age you will be penalized 50% of what you were supposed to take out, so if your RMD was $10,000 you can be Penalized $5000. Make sure you know about this one!

Not reviewing your insurance plans.

You need to realize that all of your insurance plans, mainly life, health, long term care and Medicare supplement insurance will be a big part of your life once you are retired so reviewing these plans is as imperative as reviewing your investment accounts.

Not planning year after year.

Remember that retirement and retirement planning is not “set it and forget it.” You need to realize that reviewing your accounts, plans and goals is an ongoing ritual that needs to be addressed and maintained as often as you feel comfortable. I do not recommend anything less than every 3 years.