The biggest step to preparing for retirement is to start saving as early as possible and continue doing so year after year.
But once you are nearing or at retirement, preserving your precious savings and maximizing your income for your golden years becomes primary.
Unfortunately, too many people make mistakes that negatively impact their bottom line during retirement.
The most common of those mistakes and what to do about them include:
- Reacting impulsively to market dips. While completely natural, panicking or making any rash decisions to sell off assets during a downturn is inadvisable. It prevents you from benefitting from a recovery. It also destabilizes your portfolio, with continual changes showing little to no improvement over steady, cautious planning. Instead, create a customized plan with a trained financial advisor that has built-in safeguards to protect you from the ups and downs. Such a solid plan is achieved via a balanced and diversified portfolio that also takes into account your personal risk tolerance, age, needs, and finances.
- Starting Social Security payments too early. As tempting as it may be, if you start collecting checks as soon as you are eligible, rather than delaying it, your monthly payments will be lower for the rest of your life. For example, if you start collecting monthly checks as 62, the age when most Americans are initially eligible, you will collect $750 per month. But wait until your reach your full retirement age of 70, and you will collect $1320 per month. That’s a significant difference that can help offset increasing healthcare costs as you age. It can protect you from outliving your savings. Plan carefully and work with your advisor to determine if you can and should use other income sources for a few years to delay starting to collect monthly benefits.
- Forgetting Medicare Deadlines. When people sign up for Social Security before age 65, they are automatically enrolled in Medicare. But if they delay getting Social Security to take advantage of higher monthly payouts in the future, too often they miss the Medicare open enrollment deadlines which specify that they must sign up three months before their 65th Late enrollees often pay penalties and may even become ineligible for gap insurance to cover costs not included in Medicare.
- Failing to plan a withdrawal strategy. After saving for years, it’s time to adjust to spending. But how, when and how much you spend, and what you do with the remaining assets is critical. For example: do required minimum distributions suddenly put you into a higher tax bracket? If so, it may be wise to convert your IRAs into Roth IRAs. It may also make sense to take funds out of traditional tax-deferred IRAs before age 70½ when you have more control over when and how much to withdraw. A tax advisor should be consulted to determine the best withdrawal strategy for you.
After committing yourself to a retirement roadmap and sticking to a long-term plan to save for your later years, you should be well-positioned to begin retirement financially stable. But if you fail to create a new plan and revisit it annually to adjust for changing circumstances, you may be hurting your bottom line unnecessarily.
At Silverman Financial, we are in it for the long haul: we work with you before your retirement to make sure you are on track. And we work with you after you retire to stay on top of your portfolio and to make sure it continues to meet your needs.