Nearly everyone dreams about all the things they're going to do when they retire. But not too many people dream about what they're going to do with their money during that time.
Luckily "Good Morning America" financial contributor Mellody Hobson has thought about just that and is here to answer some of the most common retirement finance questions.
Recently she traveled to an active living community in Phoenix to take questions from retirees there.
Check out her advice below and tune in to "Good Morning America" at 7 a.m. ET for the latest in the Mellody on the Move series.
What If I Need a New Car?
When it comes to getting a new car when you're retired, Hobson said the best thing to do is to pay as much in cash as you can and make the biggest down payment possible.
"Don't pay any more interest than you have to," Hobson said. "Just put a bigger down payment so that your monthly payments are less, then any interest that you're paying is less."
Also, right now interest rates are low for cars, which could make your payment even lower.
Leasing a car is a fine alternative, Hobson said, but there are issues if you drive a lot. If you do drive over your mileage limit at the end of the year, you will have to pay for the extra mileage.
What Is Reverse Mortgage and Is It Right for Me?
If you own a home and it is mostly paid for, you could be a candidate for a reverse mortgage, Hobson said.
"The way reverse mortgages work is the bank will pay you a certain amount of money, usually monthly, then, when the last spouse passes away the bank recoups the cost," Hobson said.
For those that qualify, a reverse mortgage can be a good deal, but only if done with caution, Hobson said.
"The one thing that I would say is be very, very careful when you think about getting a reverse mortgage and who you use. Some organizations charge exorbitant fees, so you really want to shop around and go with a reputable provider," she said.
I'm Going Back to Work, Do I Still Feed My 401K?
There's a trick here that works for anyone over 50 and is thinking of going into retirement, whether you have once already or not.
It's called the catch-up revision, and it allows older workers to put a little more bang in each buck they save for their 401Ks.
"Basically what occurred is that Congress realized many Baby Boomers perhaps haven't saved as much as they needed to and so they said when you put money into an individual account or into a 401K plan, you can actually put more than everyone else -- more tax deferred money -- so that you can catch up in time to resave for retirement," Hobson said.
Hobson said to invest as much of it as you can, "because as you get further and further into retirement, that money will still have lots of years to still grow."
When Should I Tap Into Social Security Benefits?
If you're in good health and do not need the money, Hobson said you should wait until age 70 so you can get the highest amount of benefits. If you tap in at 62, like half of Americans, on average you'll take a 25 percent cut in benefits, Hobson said.
Married couples, on the other hand, have more options.
"If you're both in good health and you can afford it, one option would be for the higher earning spouse to delay their benefits until 70 and have the lower earner begin at an earlier age," Hobson said. "This way the surviving spouse will end up with the maximum amount of benefits. Remember, if the higher earner dies before 70, the survivor's benefit would increase to the amount that the deceased spouse would have earned."
How Do I Make Up Savings Lost in the Recession?
"It's heartbreaking. Many people saved and saved, doing everything right, only to be slammed by the greatest financial crisis since the Great Depression," Hobson said. "The best thing I would say is, 'Stay the course.' You want to keep saving. The silver lining in this story is that the market is up over 70 percent since its March 9, 2009, bottom."
Hobson said those over 50 should take advantage of the 401K catch-up provision and after that, you should put 40 percent to 60 percent of your money into stocks or in mutual funds and the balance should go into bonds and bond mutual funds.
Web Exclusive Tips for Retirees
The following tips were provided by "GMA" financial contributor Mellody Hobson exclusively for the "Good Morning America" Web site.
If you have not done so already, investigate buying long-term care insurance as soon as possible. This insurance will be very valuable if you need extended care for an illness or injury. The longer you wait, the more it will cost.
Make sure you have completed the proper estate planning. You should have a will and a power of attorney in place. This will save you and your family from making agonizing health and financial decisions.
If you can avoid it, try not to withdraw money from your tax-deferred accounts (e.g. 401K) early. Not only will you avoid penalties and taxes, but you will also allow your assets to compound and grow further.