Planning for your retirement is one of the most exciting times in your life. You’ve worked hard all these years and now it’s your time to sit back and relax! Before you ride off into your sunset, you will want to make sure you avoid some common pre-retiree mistakes that could derail your retirement. I sat down with LAGERS’ Senior Benefit Specialist, Diane Towne, and talked with her about some of these common mistakes LAGERS members encounter as they near retirement.
Not Understanding Your Payout Options
Without hesitation, Diane describes the number one mistake pre-retirees make as not taking the time to understand their options. When a member applies for benefits, they receive a sheet in the mail with eight different choices, which can feel very overwhelming. “I often get calls from people wanting to know what the most popular payout option is. I don’t like saying one option is more popular than another, because the most ‘popular’ option may not be the best option for them.” Diane encourages pre-retirees to take time to educate themselves. Especially if you are wanting to provide income for a spouse, understanding what each options means and how it works can help you make a better decision about which option will fit your needs best.
LAGERS has many resources available to pre-retirees wanting to learn more about their options including live and recorded webinars, free pre-retirement seminars, website and printed publications, as well and one-on-one counseling with a benefits specialist.
Failing to Realistically Assess Your Retirement Needs
The second mistake really goes hand in hand with the first. “I’m constantly reminding people that the payout option you elect at retirement cannot be changed.” This means that when you apply for your benefits, you should have a serious discussion about what you think your needs will be in retirement. You may think the $200,000 you have set aside in your deferred compensation plan is going to be enough, but is it really? What happens if that money has to last a spouse 25 years or if your health begins to fail, or maybe you want to travel and enjoy a more affluent lifestyle?
Taking the time to sit down and look at what you have and what you hope to accomplish in retirement, may change your mind about which option is right for you, and since you can’t change your payout option midstream, getting it right the first time is important. Being honest with yourself about your retirement assets, your health, and your expectations for retirement can really help you make an informed decision.
Forgetting to Plan for Taxes
Taxes are an inevitable part of retirement, and just like when you were working, you should do some tax planning to make sure you are maximizing your benefits. LAGERS staff cannot provide specific tax advice, so it is important for every pre-retiree to talk to a tax professional about retiring. Tax planning doesn’t have to be overly burdensome. Diane adds, “I always tell people to have that conversation the year before they are planning to retire while they are getting their taxes prepared. Let your tax preparer know that you are thinking about retiring in the coming year and have a conversation about what your plans are. Are you taking a lump sum, are you moving out of state, will your tax bracket change, do you know about Missouri’s Public Pension Exemption? That way, when your benefit begins, there are no surprises.”
Not Being Organized
Retiring is a major change in lifestyle, and you should plan accordingly. Take the time to get organized and have a plan well in advance of when you want your benefits to begin. Attend a pre-retirement seminar, plan a visit with your financial advisor, talk to your tax consultant, and gather your personal information required for the retirement process including birth certificates and marriage licenses. Having a plan can help eliminate surprises and ensures that your benefit will begin when you want it to.
Shying Away from Asking for Help
My card’s on top…and it’s there for a reason. “When I send out a member’s retirement packet, I always staple my card right on top. It’s because I want members to feel comfortable about calling and asking questions when they have them,” says Diane. Remember that the options elected at retirement are permanent, so if you don’t feel comfortable about the choice you are making, give your benefits specialist a call. “Sometimes all a member needs is to hear a LAGERS staff person reassure them that they understand their benefits correctly… I do this every day, a member will only do it once, so I am always happy to help walk people through it!”
Planning for your retirement can feel like a lot to think about, but remember that you are not alone. LAGERS staff is ready to assist you through the process and ensure you are comfortable with the decisions you are making. With a little bit of planning, you will find yourself well on your way to enjoying the retirement of your dreams!