Retirement expert explains how to avoid common planning mistakes

Listen and subscribe to decoding retirement Apple podcastsTo be in style Warnor wherever you find your favorite podcasts.

When planning the future, people often face short-term news than focusing on a long-term strategy, although pension planning can stretch for decades.

And it’s just one of the mistakes that save or live on a pension, according to Nick Nicof, the chief of the pension solutions and the leader of LIFEPATH.

“If I think about pension planning, it’s almost always a long horizon,” said Nefocus in the episode of decoding (see the video above). “And what we do is, are we penetrating short-term news?” And if you think about short-term news vs. pension planning, they are two very different things. “

Consider that in their 20s, a person will spend about 45 years to save for retirement. Then, reaching 65, they can expect to live on average for another 20 to 30 years. Combined, this presents a significant financial planning term. Even someone 55 is still a decade before retiring.

“The reason why the time is so important, the longer you are in the markets, the better the probability it is,” he said. “But if we have this short horizon view of what will happen next year or next year or next quarter, it tends to keep it very well for long-term investments.”

Nefouse also suggested that individuals often make mistakes on risk. “We tend to think cylinders as a market risk,” he said.

Instead, risk should be considered a concept of cycle, including market risk, risk of inflation, risk of durability, risk of human capital (loss). Moreover, individuals must take into account that the risk is developing in one’s life.

In BlackRock, as a result of which those who want GPS to grow, protect, spend.

“When you are young, it’s just about increasing growth,” he said. “And here’s where you want to have the highest equity waiting in your portfolios. Really rested in growth shares. This, when you want to start in a portfolio in the instrument. “

Read more: Pension planning. Step by step guide

When you retire at a one-time, 62, 65, or 67, there is little guidance on how to coordinate the assets systematically, and many avoid even “detail”, “Nefocus said. As a result, retirees tend to fix their account balance to spend it reluctant. They will use capital gains and income, but they confuse the ground.

“This is another big mistake,” Nefush said. “Many people do not want to cross the director by retiring.”

Being fair, the fear of spending the principal is partly due to uncertainty about durability.

“When you look at behavioral research, it is not illogical that people do not want to spend their director,” Nefush said.

However, the savings point is to spend the money to retire so you can live as you spend your work years. “Your principal must be spent,” he said.

To help individuals appreciate how much they can spend on retirement, BlackRock offers public access LifePath cost tool On its website, which calculates one’s cost potential based on their age and savings.

One of the ways to apply for basic misconceptions and others to take into account small decisions.

The use of automatic registration, qualified defense (similar measures) in the programs (such means) can significantly improve retirement savings significantly, Nefouse said.

Qualified default investments such as targeted dates funds provide a structural approach to investment. These funds are designed to be more growing, when the investor is young and gradually becomes more conservative, as far as retirement.

“It is important that it does not session in cash,” Nefus said. “Do you actually grow growth for a much longer period?” This, he said, helps to maximize long-term income, while it is risking over time.

Many employees face the dizzying mass of retirement savings options, traditional and Roth 401 (K) programs. With so many choices, how do you decide where to promote and how much?

“This is complicated,” Nefocus said, noting that the decision depends on personal preferences, the level of income and taxes. But the most important step. “Just start saving somewhere.”

“Roth 401 (k) and traditional 401 (k) selection, it goes down to taxes.

“We can debate [over] The rotum, which is growing free taxes and comes out of taxes, against the traditional, which comes out of your earnings, then taxes.

One version of consideration is HSA. “I would say that we would not see HSAs,” Nefush said.

Read more: 4 ways to keep taxes in case of retirement

What HSAs makes them so powerful is their triple tax advantage.

“If you can stand without your HSA, this is free from triple taxes,” he said.

A particularly smart strategy is “to prioritize the employer’s games,” added Nefouse. “What I’m saying to people should hit 401 (K), traditional 401 (k), as it is inclined to where the meeting is presented.”

The same goes for HSA if the employer contributes. “If your company is going to provide you with money to get involved in them, go into them.”

Then, when these grounds are covered, where saving the next becomes a “higher level problem,” that is, to have a good problem.

Nefouse also discussed how the traditional idea of ​​retiring, a moment, when you work, the next day changes.

Many people prefer “partial retirement” or “covers”, not completely stopping work. They can reduce their hours, but play a role or explore a new industry at all.

“We reflect on this stage as a pension window,” Nefus said.

Unlike the airline pilots, which usually retire on their 65th birthday, most Americans do not follow the strict retirement date. Instead, at the age of 55 to 70, they gradually pass through full-time work, he said.

While many people say they want to work longer, reality is different, and many people don’t work at the age of 65.

Health problems. Whether they or her husband can make a way out earlier. The loss of job loss in the late 1950s is another risk, because “it is very difficult to re-equipment at the same pace,” said Nefush.

So what is the Action Council? “Start planning early,” said Nefoz. This means building many sources of income, understand social security and given the guarantees of pension revenues.

Social security plays an important role in this transition. “The longer you postpone, the more money we will give to the Social Security Council,” he said.

While the benefits begin from 62, up to 70 are expecting significantly greater payments. “Think about it as a logarithmic scale, you receive at least 62 years old from the government, and at a maximum of 70,” Nafus said.

Robert Powell of Robert Powell, a pension expert and financial pedagogue, allows you to plan your future on Tuesday every Tuesday RecruitmentA number you can find more episodes on us Video node Or view on your Preferred streaming serviceA number