When you retire, you will face a lot of fun choices. Sleep in or get up early? Travel the world or stay home? Host the next get-together with friends, or go to someone else’s house?
There’s no wrong answer to any of those questions. But you will also face more serious retirement decisions that will play into your happiness and comfort over the next few decades.
When you retire, you should weigh the consequences of these decisions by gathering all the information you can. Being informed will help you avoid these four mistakes that can cost you money in retirement.
1. Living in a High-Cost Area Where You Can’t Afford Your Expenses
While most parts of Central Pennsylvania have reasonable living expenses, some areas are more expensive than others. When you received a large paycheck from your employer, you may not have worried about paying for high property taxes or costly housing or $7 cups of coffee.
But when you live on a fixed income, these things become a concern. You can save thousands each year by moving just a few miles away. If you start to feel the expense (or the pace!) of life where you have always lived is too high, look into alternatives nearby. You don’t have to leave your family and friends.
2. Choosing a Medicare Plan That Isn’t Right for You
Many people find Medicare confusing, especially when they select their plan for the first time at 65. Talk to a trusted advisor to determine which plan will provide the benefits you need. Someone on a lot of medications, for instance, will still face out-of-pocket expenses on Part D, so they need to plan for that or risk an unpleasant surprise.
3. Choosing the Wrong Time to File for Social Security Benefits
You can begin claiming benefits at age 62, but for many people, this is not a wise decision. Delaying the age at which you claim Social Security will increase the amount of those payments.
Not everyone can hold off until they are 70. If a person has a short life expectancy, claiming benefits sooner rather than later is a smart decision. Those in good health, with sufficient funds to rely on in the near term, should wait until they’re older to file.
4. Withdrawing a Lot From Your Savings
The biggest fear of most retirees is running out of money. While it may be tempting to dip into your account for the big trip you’ve looked forward to for years, you need money in the bank not just to sustain you into the future but also to continue to grow. Your investments can’t help you if you have too little money to put into them.
Withdrawing 2 to 3% of your retirement savings per year will help it stretch. With retirees living longer, you want to ensure you have the funds to support yourself for decades into the future.
Do you need help sidestepping these retirement mistakes? Reach out to Jay to discuss your financial future.