For many people, retirement is the ultimate goal: the day you leave work, return home, and never have to look back. Retirement, however, is not always what is anticipated of it, and many people live to regret the decisions they made before leaving their jobs. There are a lot of things to ask yourself as retirement approaches. However, be sure you’re making the right choices far, far in advance. To what extent have you prepared yourself? How much money will you really need? What about the sources of income that make up your nest-egg, like your 401(k) and/or IRA? Do you know when to start taking Social Security benefits? To help, we’ve developed a list of the most common retirement mistakes you should look out for. Take a look and see if any of these sound familiar.
Putting Off Saving for Retirement
Retirement involves saying goodbye to employment and all of its associated wages, bonuses, and benefits. As a result, many retirees later realize they should have saved more. This frequently happens because they started saving too late. Many people wait until their 40s or 50s to start saving. Some retirees may overlook other parts of building a strategy, too. These are retirement mistakes that many people are only now understanding; more than 25%* of retirees who haven’t saved enough blame their lack of time.
Ignoring Inflation
It’s understandable that many retirees could overlook inflation while developing a retirement strategy. After all, the country saw essentially no inflation for nearly ten years.* However, as prices rise, more people regret not paying closer attention to how inflation may affect their retirement years.
Over half of retirees* express anxiety about inflation and its potential impact on their retirement. In fact, annuity sales have reached all-time highs in recent years, which may be due in part to concerns surrounding inflation. An annuity is a financial product that can provide you with guaranteed lifetime income (backed by the claims-paying ability of the carrier), typically received in the form of a series of payments. One advantage of an annuity is the opportunity to offset inflation through an optional provision called an income rider. Are you interested in these products? Reach out to us to learn more.
Relocating On a Whim
Many people approaching retirement find the draw of warmer climates enticing. You may be planning to retire in Florida or one of the many retirement communities near the ocean. However, we’d recommend taking a look around before making a commitment. Another big potential retirement mistake is uprooting oneself and moving to a new location without knowing what to expect. Take extended vacations in your chosen destination far before your planned retirement date, to become familiar with the way of life. This is especially true if you want to retire abroad, where new languages, laws and customs might take getting used to.
Taking Offers That Seem Too Good To Be True
Years of strategizing and hard work are essential for a successful retirement. There are no shortcuts. Still, get-rich-quick schemes and other scams cost Americans hundreds of millions of dollars* each year, and elder fraud is especially prevalent. Have you ever gotten an offer that seems “too good to be true”? They frequently come with requests for sensitive financial information, such as Social Security numbers, bank account numbers, and credit card numbers, which is unnecessary. Or, you may supposedly be required to wire money or pay a fee before receiving a reward of some kind. Additionally, avoid anyone who discourages you from seeking advice from a third party, or who puts pressure on you to make a decision right away.
If you suspect you’re being conned, what do you do? The FTC recommends searching for the company or product on Google or another search engine, along with the terms “review,” “complaint,” or “scam.” Or, to find out if they’ve received complaints before, contact the state attorney general or the local consumer protection office. Also, remember to file a complaint with the FTC.
Taking Social Security Too Early
The Social Security Administration allows people to start receiving retirement benefits as early as age 62, despite the fact that the majority of workers’ full retirement age is between 66 and 67. However, if you can afford to wait, you may want to. Many retirees regret starting their Social Security payments too early. There is a cost to doing this; your monthly payments could be cut by up to 30%.* That’s a permanent reduction in benefits, by the way, which many employees will undoubtedly find shocking, instead expecting their benefits to increase automatically once they reach full retirement age. Furthermore, early benefits may be reduced for those who start while they’re still working, if they’re at a certain income level.
It’s probably a good idea to live off of other income sources for a few years to avoid claiming. Alternatively, if possible, stay on the job for longer or create a side hustle to help bridge the cash gap. There are many innovative ways to make extra money nowadays.
Ignoring Long-Term Care
All of us like to think we’ll remain active and healthy well into our retirement. A good diet, plenty of exercise, and regular checkups with your doctor all help. However, even the healthiest retirees can become ill, and even if you don’t have a serious medical problem, aging will eventually take its toll on your body and mind as you reach your 70s, 80s, and 90s. This is why it’s critical that you can afford long-term care. Being unable to finance LTC is another common retirement error.
Long-term care policies can cover continuing custodial care, something Medicare does not. However, if you wait too long, you may be unable to get coverage, or the rates could become too high. Long-term care funding is available, although it is often expensive. If you can afford the premiums, look into long-term care insurance, which covers some but not all nursing facility fees. Some retirees regret not purchasing long-term care insurance before retirement, as it may have been cheaper if they did it earlier.
Failing to Plan How You’ll Spend Your Time
Our employment provides structure to our lives five days a week; weekends are reserved for relaxation and doing household tasks. On Monday morning, the cycle begins anew. However, once you retire, you will find yourself with a lot more time on your hands. Have you given much thought to how you’ll spend your time after retirement? It’s critical to budget your time in retirement just as carefully as you do your money. For example, consider taking a part-time job doing something you love. Now that you have more time, you may be able to take casual hobbies and interests to new heights.
