3. Virtually no plan for the future
“You don’t want to wait until you’ve retired to address major, foreseeable expenses such as replacing your roof, repaving your driveway, purchasing a vacation home, or buying a new car,” says Pedro M. Silva, a financial advisor and chartered retirement planning counselor with Provo Financial Services in Shrewsbury, MA.
He also explained that “these larger expenses can add up, especially when funds are withdrawn from taxable accounts and taxes need to be paid on every dollar.”
“We encourage clients to tackle large expenses before retirement because the impact to their portfolio can be significant,” he says. Let’s imagine that you actually need a new roof ($7,000), a new driveway ($4,000), and a new car ($10,000 down and $300 per month).
“These purchases, which require $21,000 upfront, mean that you have to take nearly $28,000 in pre-tax withdrawals from your retirement account if you’re in the 24 percent federal tax bracket,” Silva explains.
