After decades of working, planning, and saving, you’re finally beginning to see the light at the end of the tunnel! But now, as you head into the final stretch of your career, you must avoid a few common mistakes. Make wise decisions now, and you can enjoy a more stable retirement soon.
Don’t collect Social Security too soon. Sometimes it does make sense to retire earlier and collect your checks right away. But don’t take this step if you’re just antsy to retire or are worried the system will run out of money (it won’t). Claiming your checks early will reduce your payments permanently. On the other hand, you can earn higher checks by waiting beyond your full retirement age (about 8 percent per year that you wait, up until age 70). If you don’t need the money now, you might thank yourself for waiting later.
Don’t withdraw your entire retirement account. Yikes! Yes, people actually do this. Scheduling withdrawals each year is almost always the way to go. If you pull all of your money out right away and stash it in your bank account, you can trigger some excessive income taxes and possibly penalties.
However, you can roll the funds into an IRA if you wish, and sometimes this is a wise move for many reasons.
Don’t dole out inheritances early. Unless there’s a good reason, that money is often better utilized by allowing it to continue growing in your retirement account. And you can never predict how long your retirement years will last or what surprise expenses will come up. Most of us don’t want to go back to work much later in life.
Don’t splurge on a luxury vehicle. If you’re thinking you can purchase one car to last the rest of your life, think again. Many retirees are living 20 to 30 years after retirement these days. This might not be the last car you ever purchase, or your needs could change in the future. Hold off on a big splurge unless you’re certain your budget can really handle it.
Don’t forget to plan for healthcare expenses. Many people are unaware that Medicare offers numerous plans, rather than just one, one-size-fit-all policy. Work with a Medicare insurance professional to identify the options that are best for your situation and budget. And remember that there are some expenses that Medicare does not cover at all, such as long-term nursing care, and consider other options to pay for those.
If you’re getting ready to retire, remember to schedule another appointment with us. We should review your plans in these last few years of your career, so that we can help you start off your retirement on the right foot.