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Surprising Secrets of Successful Retirees

Surprising Secrets of Successful RetireesWhether you’re in your 30s, 40s or even your 50s, you’re probably curious about what it takes to enjoy a successful retirement. Fortunately, the professionals at MoneyTips.com, an online community and financial planning resource, believe they have discovered the answers you crave. They recently surveyed more than 500 Americans to learn what the most successful did to prepare for their golden years and how they’re enjoying their retirement. Some of the secrets uncovered are quite surprising.

First off, the most “successful” retirees might not look like you’d expect.

While four out of five are between the ages of 60 and 79 and now fully retired, only 42 percent of successful retirees are women. This is a bit surprising given that women traditionally live longer than men do. Also somewhat surprising is the financial profile of those who are living comfortably in retirement. According to the survey results, 44 percent have less than $500,000 in assets. Sixty-seven percent live on less than $100,000 per year, and 27 percent live on less than $50,000. Eight-five percent rely on social security for a portion of their retirement income.

While they consider their retirement “successful,” they still have a few money concerns.

Almost have of the survey respondents reported that worries about money still cause them stress, even though they feel their retirement lifestyle is comfortable. The most common concerns are outliving their savings (25 percent), incurring substantial healthcare costs (24 percent), and maintaining their standard of living (23 percent). Fewer worry about leaving an estate to their family (5 percent) or funding their children or grandchildren’s educations (7 percent).

They’ve found numerous ways to minimize their risks of running out of money.

Proactive frugality is a common trait of the successfully retired. The survey results show 55 percent drive cars that are at least two years old. Forty-four percent spend less than their monthly income. Thirty-six percent have reduced their living expense, and 35 percent have cut back on luxury extras. That said, only 20 percent report sticking to a carefully planned budget.

They also make smart insurance and income moves. Seventy-three percent of successful retirees report carrying Medicare insurance and 24 percent have invested in long-term care insurance policies. Seventeen percent have continued to work (or their spouse has done so). Ten percent collect income from rental properties.

They had a plan for retirement.

Among survey respondents, nearly 65 percent calculated how much they’d need to retire sometime between their 20s and their 60s. However, more than 50 percent didn’t start saving until they were in their 40s. At that point, 12 percent saved between 1 to 5 percent of their income, 34 percent saved between 6 and 10 percent, 22 percent saved between 11 and 20 percent, and 8 percent saved 21 percent or more.

When it came to investing those savings, 62 percent of successful retirees consulted professionals at least some of the time. However, 44 percent report primarily making their own investment decisions. Sixty-six percent chose traditional IRAs, while 27 percent utilized Roth IRAs. The popular 401(k) was part of the investment portfolio of 53 percent of successful retirees. Other common investment vehicles were defined benefit plans (30 percent), tax sheltered annuities (25 percent), SEP IRAs (18 percent), rental properties (17 percent) and health savings accounts (12 percent).

Would you like to join the ranks of successful retirees? If so, we can help. Contact us anytime you need financial planning or investment assistance.

Real Estate Mistakes Retirees Make

Real Estate Mistakes Retirees Make

As you approach retirement, real estate may be one of the biggest assets you have. Unfortunately, it’s also an area in which many retirees make mistakes. Consider the following common errors—from belated downsizing to carrying a mortgage—as well as how to avoid them.

Delaying Downsizing

The larger your home, the higher your energy bills and—very likely—the more substantial your property taxes and homeowner’s insurance premiums. Postpone downsizing into a smaller property and you’ll pay these costs longer, missing out on potential savings. As soon as your children are out of the home—even if only to go to college—it’s time to reevaluate how much room you actually need.

Squandering Downsizing Proceeds

If trade your home for a smaller property and are able to walk away with cash on closing day, invest rather than spend your windfall. Depending on your individual circumstances, this may mean living off the equity in order to postpone drawing social security or touching your other retirement funds. It could also mean using the equity to max out your IRA and/or 401(k) contributions. Your financial advisor can help you analyze your options and their associated tax implications.

Relocating Without Researching

Not only do you need to consider the cost of living and recreational benefits offered by any new location, but you should also look into part-time employment opportunities and available healthcare. Many retirees choose to go back to work to supplement income and relieve boredom, so you don’t want to choose a location where this won’t be an option. Nor do you want to relocate to an area lacking doctors or hospitals within your insurance network.

Owning More Than One Home

If you love the idea of spending your winters in a warmer climate but don’t want to make a permanent move, purchasing a home in a second location can be tempting. However, it’s important to remember that maintaining two properties is always a drain on finances. Consider renting a condo or other abode in the location where you’ll spend the least amount of time instead. If you must own a second property, rent it to vacationers when you’re not using it yourself to defray some of the costs.

Carrying a Mortgage In Retirement

Sure, mortgage rates are currently near historic lows, and you can deduct the interest paid each year when you file your income taxes. But if you’re going to be living on Social Security, IRA distributions and other investments, that deduction may not be very significant. Additionally, if you take the money you might have paid into a mortgage and use it to cover other expenses, you could possibly delay drawing on Social Security until you reach full retirement age—leading to larger distributions. If you’re nearing retirement, consult your financial planner before you refinance your home loan or use one to buy a new property.