Some classic financial pitfalls have been known to affect retirees. Calling them “pitfalls” may be a bit harsh, as not all of them represent errors in judgment. Either way, here are five pitfalls to become aware of that may help you during your retirement.
- Social Security Benefits. Social Security benefits are structured to rise about 8% for every year you delay receiving them after your full retirement age. Waiting a few years to apply for benefits means you would get a larger monthly payment. However, applying earlier means you get benefits for a longer period of time.1
- Medical Costs. A healthy couple retiring at age 65 can expect nearly $208,000 in out-of-pocket medical expenses during the course of their retirement. This is in addition to the cost of coverages such as Medicare Part D, Medigap, vision insurance, and dental insurance. Having a strategy can help you be better prepared for medical costs.2
- Longevity. Actuaries at the Social Security Administration project that around 33% of today’s 65-year-olds will live to age 90, with about 14% living 95 years or longer. The prospect of your retirement lasting 20 years or more is not only reasonable, but also should be expected.3
- Withdrawals. There is a “4% rule” which states that you should withdraw only about 4% of your retirement savings annually. Each person’s situation is unique so determining your reasonable withdrawal percentage can help you prepare.
- Taxes. Some people enter retirement with investments in both taxable and tax-advantaged accounts. Determining which accounts you should draw money from first is important to optimize your tax situation.
To assist you in formulating your plan and avoiding these pitfalls, a qualified financial professional can help determine your strategy after reviewing your financial situation, goals and risk tolerance.
1. Social Security Administration, 2021
2. HealthView Services, 2021
3. LongevityIllustrator.org, 2021
Information in this material is for general information only and not intended as investment, tax or legal advice. Please consult the appropriate professionals for specific information regarding your individual situation prior to making any financial decision.
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