6) Continually taking equity out of your home. Too many of my friends have been duped into taking out additional equity when refinancing with a lower-interest mortgage. If you can secure a lower rate, use it to pay off your home off faster. When you have, start making those payments to your retirement account.
7) Retire with a substantial mortgage. The general rule of thumb is your mortgage payment should be no more than 20-25% of your income. If you retire and still have a mortgage, it might be tough to stay within those guidelines.
8) Taking out a reverse mortgage at a young age. Debt-laden baby boomers are taking out reverse mortgages at an increasingly younger age. Just read the HUD reports. Many have very little equity to begin with and use a reverse mortgage to stop their monthly bank payments for pennies in return.
Locking yourself into a fixed income at a young age is a great way to kiss your lifestyle goodbye. Many of these young boomers will find themselves wondering, “Why is there is so much life left at the end of my money?”
9) Putting your life savings into an annuity. While annuities have their place in a retirement portfolio, going all in is dangerous, particularly at a young age. After all, your monthly payment depends in part on your age.
I know folks who put their entire life savings into variable annuities. They thought they were buying a “pension plan” and would never have to worry again. The crash of 2008 slashed their monthly checks, and they have yet to recover. Retirement without worry is not that simple.
10) Thinking your employer’s retirement plan is all you need. The era of pensions is gasping its dying breath. We have many friends who retired from the airlines with sizable pensions. When those airlines filed for bankruptcy, their pensions shriveled. No industry is immune to this danger, so we all need a backup plan.
Government pensions are following suit. Just ask anyone who has worked for the city of Detroit! While the unions are fighting the city to preserve their pensions, an initial draft of the plan indicates underfunded pensions (estimated at $3.5 billion) may receive $0.25 on the dollar.
Don’t fall for the trap! If you work for the government, you still need to save for retirement. Contribute to your 457 plan or whatever breed of retirement account is available to you. The federal government has over $100 trillion in unfunded promises, and many state governments are woefully underfunded. That doesn’t mean your retirement has to be.
Reverse mortgages and annuities are often the undoing of many income investors and retirees. They can be used properly, however, if your situation or the opportunity fits with your needs. With all of the misinformation out there about these two products, we decided to pen two special reports to help you decide whether these are right for you. They are The Reverse Mortgage Guide and The Annuity Guide. Check out one – or both – today and learn where, if at all, these fit your needs.