For many workers, retirement is the ultimate goal: the day you get to leave work, return home, and never look back. Retirement, however, is not always what is expected of it, and many people live to regret the decisions they make before leaving their jobs. As retirement approaches, several questions must be considered. How effectively 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 IRA? Do you know when to claim Social Security benefits? Retirement can be a complicated process, but we believe it doesn’t have to be. To help, we’ve compiled a list of some of the most common retirement mistakes. Take a look and see if any of these sound familiar:
Putting Off Saving for Retirement
Retirement entails saying goodbye to employment and all of its associated salaries, bonuses, and benefits. As a result, many retirees realize years later that they should have saved more. This is frequently the result of them starting the process of saving too late. Many people wait until their 40s or 50s to start saving. This is a retirement mistake that many people are only now realizing; more than 25%* of retirees who haven’t saved enough blame a lack of proper strategizing.
Ignoring Inflation
It’s understandable that many retirees might overlook inflation when developing a retirement strategy. After all, for a while, the country experienced almost no inflation for nearly ten years. However, as prices rise, more people regret not paying closer attention to how rising costs may affect their retirement years.
Over half of retirees* express concern 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 inflation concerns. An annuity is a financial product that can provide you with guaranteed lifelong income (backed by the claims-paying ability of the carrier), either in the form of a series of payments or a single lump sum. One advantage of an annuity is the ability to offset inflation through an optional feature known as an income rider. Interested in these products? Contact us for more information.
Falling For Elder Fraud Scams
The keys to a successful retirement are hard work, and careful strategizing started years in advance. There are no shortcuts. Still, get-rich-quick schemes and other scams cost Americans hundreds of millions of dollars* each year, especially those targeted at retirees. Have you ever received 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. You may also be told you need to wire money or pay a fee before receiving a reward of some kind. And, very importantly, avoid anyone who discourages you from seeking advice from an impartial party, or who puts pressure on you to make a decision right away.
How would you handle suspicions of fraud? The FTC recommends searching for the company or product name on Google or another search engine, along with the terms “review,” “complaint,” “scam,” etc. Or, to find out if they have received any 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 Payments 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’ current full retirement age is between 66 and 67. However, if you can afford to wait, you may want to. Many seniors regret taking their Social Security benefits too early. There is a cost to doing this; your monthly payments could be reduced by up to 30%.* That is a permanent reduction in benefits, which many employees will undoubtedly find surprising. Despite what you may have assumed, your benefits will not increase automatically once you reach full retirement age.
So, it’s probably a good idea to live off your portfolio for a few years to avoid claiming. Alternatively, if possible, stay on the job for longer or get a part-time job to help bridge the financial gap. There are a number of ways to make extra money in this day and age.
Ignoring Long-Term Care
All of us hope to remain active and healthy well into our retirement. A healthy diet, plenty of exercise, and regular doctor’s visits all help. Even the healthiest retirees can become ill, however, and even if you don’t have any major medical conditions, aging will eventually take its toll on your body and as you reach your 70s, 80s, and 90s. This is why it’s critical that you can afford long-term care. Another common retirement mistake is being unable to cover long-term care costs.
If you wait too long, you may be unable to obtain LTC coverage, or the premiums will become far too expensive. Options to fund long-term care are available, but are consistently expensive. If you can afford the premiums, look into long-term care insurance, which covers some (but not all) nursing home expenses. Some retirees live to regret not purchasing long-term care insurance before retirement, when it could have been more affordable for them.
Fail to Plan How You Will Spend Your Time
Our jobs provide structure to our lives five days a week; weekends are reserved for relaxation and household chores. On Monday morning, the cycle continues anew. However, once you retire, you will find yourself with a lot more time to fill. Have you given much thought to how you will 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 getting a part-time job doing something you enjoy. Now that you have more time, you may be able to take casual hobbies and interests to new heights.