Financial experts are emphasizing that a comfortable retirement requires more than just savings, warning that small oversights can escalate into costly problems once regular income stops. They identify common financial loose ends that retirees should address beforehand.
Carrying high-interest debt, such as credit cards or personal loans, into retirement can create severe financial strain, according to Jay Zigmont, founder of Childfree Trust. "Retiring with debt is dangerous. As you shift to a fixed income, you need to be debt-free," Zigmont said. "You won't have overtime and bonuses to help you chip away at your debt in retirement." Even mortgages or car payments can burden those living on fixed incomes, diverting dollars from essential needs.
Long-term care planning is another critical oversight, with nearly 70% of adults aged 65 and above expected to need some form of care, as reported by the U.S. Department of Health and Human Services. Zigmont warns, "You need a plan for long-term care before you retire. Medicare does not cover long-term care, and it is the largest single expense you will have in retirement."
Tax planning is often neglected, despite retirement income sources like 401(k) plans, Roth IRAs, and Social Security having different tax rules. Zigmont insisted, "You need a tax plan before retiring. Investing is relatively simple, but tax planning can be a challenge. You need to know which funds you are going to get access to, and when, in order to lower your total tax burden."
Storing large amounts of cash at home, while feeling safe, leads to loss of value due to inflation, noted Tom Betros, wealth advisor at D’Arcangelo Financial Advisors. "Inflation will erode the purchasing power of that cash over time," Betros said. "Although it may be safe, it's best to earn interest via a high-yield savings account or other interest-bearing vehicle." High-yield accounts currently offer 4% to 5% annual returns on idle cash.
Scattering retirement accounts across multiple firms can become problematic, especially when required minimum distributions (RMDs) begin. Betros noted, "When it comes time to take RMDs, it may become a mental burden to keep track of if assets are in different places. RMDs are only calculated according to the assets a financial firm has under custody. If you forget about an account, you may miss an RMD payment. Penalties of 25% may be assessed for the amount of the missed withdrawal."