Financial Mistakes to Avoid in Retirement
We want to make sure that we can afford to retire. Saving for retirement takes careful planning and follow-through. There are also common financial mistakes to avoid in retirement.
Typically, with retirement comes much more free time and flexibility. This also means there is much more opportunity to spend money. Don't overspend. Retirement can easily last 20 years or more. Make sure you keep your expenses at sustainable levels.
When planning your financial needs, plan for inflation. In 20 years, with inflation, it could cost you twice as much as it does today to maintain your current standard of living. It may be wise to keep some of your portfolio invested in equities, to increase with time, to protect yourself from inflation.
It is vital to budget for medical expenses. Medicare covers a lot but not all your medical expenses. You may still have expenses for deductibles, copayments, and dental, vision, hearing and nursing home care.
Planning for when to start taking Social Security is important. Up until age 70, the later you take it, the greater your monthly benefit. Then again, the later you take it the shorter amount of time you will receive your benefits. Social Security is a source of income you can't outlive. Work with your financial advisor to assess the best time to start receiving your Social Security benefits.
When you retire greatly affects the assets you need to retire with. Early retirement has the potential to lower your Social Security benefits. If you retire before age 65 you may have to self-fund your health care until you are eligible for Medicare. You will have more years of expenses to sustain your standard of living.
There are many complexities to retirement planning. Keeping the factors above in mind will help you achieve a successful retirement plan. Work with an experienced and qualified financial advisor on your plan, these factors, and others. Meet regularly to help you stay on track.
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