There are also a number of other mistakes that people sometimes make as they near retirement or are in retirement.
In today’s digital world, people have the opportunity to work well past age 65. If it is possible for you to do so, even if it’s just part-time, this can go a long way toward protecting your investments as you’ll dip into them later. This helps them to go the distance.
There are also a number of other mistakes that people sometimes make as they near retirement or are in retirement. Let’s take a look at them so you can do your best not to experience them at all.
Entering Retirement with Debt
Sometimes in their 50’s, people concentrate on saving money and trying to grow their retirement accounts as much as possible before they retire. While this is good, it’s even better if you can do this at the same time that you are paying down your debts.
Experts say that one of the best things you can do to eliminate financial anxiety in retirement is to enter it debt-free. You’ll want to have a plan for the 10 years before you retire that includes paying off your debts and not accumulating new debts.
So if it’s time for a new vehicle, buy a used one that is reasonably priced instead of taking on a new car note. If you are living in a big home and your children have all now grown and moved out, consider downsizing to a smaller home to reduce your mortgage payment. Try to pay extra on your mortgage each month with the intention to have it paid off by the time you turn 65.
You can even find extra things to do in your spare time to earn money that you can then throw at your debt. It’s easy today to find part-time work driving for Uber or pet-sitting for families near you.
Stopping Your Investments
In order for your money to go the distance with you, it’s important not to be too conservative. While you certainly don’t want your investments to be in high-risk portfolios for aggressive growth, you don’t have to put everything into CDs and bonds either.
Plan to leave at least a portion of your retirement assets in stocks or mutual funds so that your money can continue to work for you.
Taking Social Security Too Early
Here in America, you can begin taking your Social Security income benefits as early as age 62. However, your full retirement age usually isn’t until you reach age 67. Many people decide they want to take their benefits early because they don’t know how long they’ll be around. However, life expectancies today are longer than ever before due to medical advances, and it is not uncommon for people to live well into their eighties or even nineties these days.
When you take your Social Security income benefits at age 62, your monthly check will be only 70% of what it would be if you waited until your full retirement age.
Also, if you were able to delay taking these benefits, you could increase your check by as much as 124%. Therefore, if you plan to continue working, delay taking those income benefits as long as you can and your later retirement years will be much easier on you.Overlooking Health Costs
Many people think about retirement expenses like rent, food, and utilities. However, they often overlook the costs of healthcare in retirement. While you will have Medicare as early as age 65, Medicare isn’t free, and it doesn’t cover all of your healthcare expenses.
Part A benefits are $0 for most people at 65 because they have paid for these hospital benefits via tax deductions throughout their years of work. Part B, though, has monthly premiums, and this part of Medicare is very important because it covers all of your outpatient costs. It includes things like doctor visits, emergency care, lab work, and diagnostic exams as well as higher ticket items like chemotherapy.
Part B will cost you at least $135.50 in 2019 and about 5% of beneficiaries pay quite a bit more due to higher incomes. This also goes up every year to keep up with inflation.
As you use your Medicare benefits, you will also have to pay deductibles and copayments as you do now. These can be steep for people living on fixed incomes, so many people feel the need to buy Medicare supplement coverage.
Lastly, Medicare doesn’t cover long-term care needs and about half of Social Security beneficiaries will eventually have some sort of long-term care expenses. It’s important to plan for how you will pay for those expenses if you end up needing to live in assisted living or a nursing home someday.
All of these things cost money, so probably the number one mistake is simply not having a plan. Sit down with a financial planner today who can help you estimate the actual amount of monthly income you will need when you finally retire. Proper planning can make all the difference.
Danielle K Roberts is the co-founder of Boomer Benefits where she and her team help baby boomers navigate their Medicare insurance options. She is a member of the Forbes Finance Council and writes frequently about Medicare, retirement and personal finance.