There is quite a bit of information published when it comes to some of the financial mistakes that plague start-ups, family businesses, corporations, and charities. But are there classic financial missteps that impact retirees? The answer is yes, regardless of wealth or resources. There are some "missteps" worth noting, and becoming aware of them earlier, the better to avoid pthem. Considerations include:
Managing Social Security
Social Security benefits are structured to rise about 8% for every year you delay receiving them after your full retirement age. Is waiting a few years to apply for benefits an idea you might consider? Filing for your monthly benefits before you reach your full retirement age can mean comparatively smaller monthly payments.1
Managing Medical Costs
One report estimates that the average couple retiring at age 65 can expect to need $315,000 to cover health care expenses during the course of their retirement, even with additional coverage such as Medicare Part D, Medigap, and dental insurance. Having a strategy can help you be better prepared for medical costs.2
Understanding Longevity
Actuaries at the Social Security Administration project that a 65-year-old man has a 34% chance and a 65-year-old woman has a 45% chance to live to age 90. The prospect of a 20- or 30-year retirement is not only reasonable, but it should be expected.3
Managing Withdrawals
You may have heard of the "4% rule," a guideline stating that you should take out only about 4% of your retirement savings annually. Each person's situation is unique but having some guidelines can help you prepare.
Managing Taxes
Some people enter retirement with investments in both taxable and tax-advantaged accounts. Which accounts should you draw money from first? To answer the question, a qualified financial professional would need to review your financial situation so they can better understand your goals and risk tolerance.
Managing Additional Expenses (i.e college for next generation)
There isn't a "financial aid" program for retirement or retirement loans. Understand your anticipated income and costs before you commit to a long-term strategy to make a balanced decision between retirement and helping with the cost of college for your children or grandchildren.
Business Income
Many business owners have structured their estates to receive income from the sale or leaseback of property or assets while they are in retirement. In a scenario where supply chains are impacted or natural disasters impact a community, many assumptions of business as usual, thereby expecting income as usual, can prove disastrous.
- SSSA.gov, 2023
- Fidelity.com, 2023
- LongevityIllustrator.org, 2023