Five Years Either Side of Your Retirement Date is the Dangerous Decade is part three of Money Tips for 2016 taken from the full episode of Right on the Money.

The biggest money mistakes in retirement are in the last five years before retirement and the first five years after retirement. It’s the decade of wrong decisions, the decade of indecisions. It’s the most dangerous decade in your life because it will determine whether your retirement is defined as the golden years or sunset years.

The NFL stats and the facts in the Red Zone are crunched and processed through a gauntlet of analytics in attempt to craft a game plan that will maximize the time in the Red Zone. But the results are basically the same: a field goal. Accumulating yardage doesn’t necessarily equate to points on the board. Accumulating money doesn’t mean much if the advisor fees, fund expenses and plan administration costs erode your investment return. That’s why it’s in the interest of retirement plan participant to know the score on these three critical items.
After the market meltdown of 2008, many baby boomers doubled down on high-beta risk investments in an attempt to make up for losses. Other baby boomers have been on the sidelines for the last five years, fearful of entering the market again. Both could be huge mistakes just before retirement. One of the biggest mistakes during the last five years before retirement is not working longer because you haven’t anticipated your projected life expectancy according to the new mortality tables.
After retirement, one of the biggest mistakes during the first five years is not participating in a hybrid retirement, working part time with full retirement income. Again, life expectancy is ever evolving, and at this point, ever extending human longevity. Another mistake is not taking into consideration taxation on qualified retirement funds and their correlation to Social Security benefit taxation. Many financial advisors such as Ted Meyer, RFC, IAR, tout the benefits of tax correlation and tax diversity in retirement to generate more spendable income.

Delaying the Social Security benefits of the primary breadwinner until age 70 can generate a dramatic increase in Social Security income. Delaying qualified retirement plan income until mandatory required minimum distributions at age 70½ may also increase your overall payout of your qualified retirement plan. If you really can defer income, then consider using a Qualified Longevity Annuity Contract (QLAC) that uses a guaranteed deferred income annuity to delay portions of your retirement income as far out as age 85. When you’re in the Red Zone of retirement, make the most out of it.