5 Common Pre-Retirement Mistakes that Cost Dearly
In the best of worlds, individuals start saving for retirement the first paycheck they receive. And while some of us might have been intelligent enough to actually talk about the idea of a retirement account in our 20s, less than one percent of workers actually start and stay committed to depositing in one their entire work life. In fact, the most common time for folks to start their pre-retirement is in their late 40s and 50s, when retirement is now a real possibility in the not-so-distance future.
Yet, even with a good income, there are some big mistakes people can make. And the effects won’t be realized until it’s too late to make financial repairs. Here’s how a personal train wreck can happen with very little effort:
- Moving without researching for retirement – Americans like to move. As a country, we are more prone to change geographically every generation than most other countries. But that wanderlust has a price, and if we move to a location that doesn’t work for the cost of living and retirement, we can pay dearly in our retirement years. This is the issue where what barely suffices as making it in California could buy a person a mansion and 20 acres in Wyoming. If thinking about moving, even in one’s young years, take the time to see how it plays out for retirement.1 The choice now can pay dividends or hell later in senior years.
- Putting off critical insurance – One thing is for sure: any kind of health or care insurance you buy new is cheaper than 20 years from now when you are older. That’s because you’re a higher risk later on.3 If you can afford it, get long-term care and good health insurance coverage now and avoid paying through the nose for it later when you need the coverage, and dig into your retirement to pay it.
- What do you want to do in retirement – A lot of money is wasted in retirement because people don’t have a plan what they will actually do. Spend some time now and develop a plan for what you want your retirement to be like. Having a goal will give you purpose and confine your spending to what matters for you.
- Don’t miss Medicare sign-up deadlines – A key reason people lose money in retirement is due to not following the law and signing up for Medicare when due. Medicare is age-certain, and you have to sign up for it three months before age 65. Waiting for longer triggers a premium penalty you will pay for the rest of your life every month.4
- Don’t leave Social Security on the table – You worked for it, you earned it, so why do so many people forget about their Social Security benefits? This is literally part of your retirement package, and anyone who worked the required number of years is eligible for recovering payments from their years of paychecks. But the timing matters too; wait long enough and you maximize the benefit, pull too fast and your benefit is almost half what it could be.5 And that will make a big difference in your daily income when you’re in your late years and on a fixed income amount.
A successful retirement takes smarts. Do your research, take advantage of all your benefits due, and check out your options before diving in (including doing the math and figuring out which alternative pays you better in both the short and long runs).
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This content is developed from sources believed to be providing accurate information, and provided by Booth Financial Planning, LLC. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security.