You may already be well along the road to a fine retirement.
You started early, invested regularly, used tax-advantaged retirement accounts, didn't borrow from them, diversified your assets, monitored them and didn't overinvest in your employer's own stock.
No wonder you're so tired. But before you get cocky during that final approach to your retirement destination, realize the last stretch of road can have potholes, speed bumps and rough pavement. Maybe even a boulder or two.
"Divorce is the most common cause of retirement failure and devastation that I regularly encounter," said Malcolm Greenhill, certified financial planner and president of Sterling Futures in San Francisco. "Even if spouses weren't great at accumulating assets in the first place, they'd have done fine in retirement if they stayed together, but separately it becomes a much different story."
"People have seen home values increase over the years and figure someday they'll be able to cash in to retire, but homes are not the financial panacea they seem," said Michael Boone, a certified financial planner and owner of M.W. Boone and Associates of Bellevue, Wash. "You have to live somewhere in retirement, which takes a good chunk of that cash elsewhere, and in most cases people finally decide they don't want to move after they retire."
"I've seen so many investors nearing retirement get suckered at seminars into buying property or other investments sight unseen just at the absolute wrong time in their lives," said Greenhill, noting pre-retirees can be eager to swing for the fences. "They start to believe investment diversification means buying gold and condominiums."
"So many times retirees see the big pile of money they amassed and begin in retirement to use a much higher withdrawal rate than is prudent," said Boone, who considers the safe annual withdrawal rate to be 5 percent. "They've run their own calculations in which their withdrawal rate is based specifically on what they determine their portfolio will be earning."
"The actuarial figures we have say that a husband and wife at age 65 have a 40 percent chance of one of them reaching 95," Boone said. "If your income and education are above average, longevity numbers can be pushed even further out, and you'll want to be eating if you reach 95."
Andrew Leckey answers questions only through the column. Address inquiries to Andrew Leckey, P.O. Box 874702, Tempe, Ariz. 85287-4702, or by e-mail at [email protected]