Navigating Retirement Financial Pitfalls

When planning for retirement there are many “pitfalls” that you want to avoid. Being aware of these classic financial missteps puts you on the right path for a comfortable retirement. Calling them "missteps" may be a bit harsh, as not all of them represent errors in judgment. Either way, becoming aware of these potential pitfalls may help you to avoid falling into them in the future. Here are some questions that you should ask:

When should I start collecting 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 What is the optimal time to start your benefits is a question you want to ask yourself.2

How will I manage medical costs?

One report estimates that the average couple retiring at age 65 can expect to need $315,000. This will cover health care expenses during 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.3

Understanding longevity: How long is retirement?

Actuaries at the Social Security Administration project that the chance of living to age 90 is 34% for a 65-year-old male and 45% for a 65-year-old female. The prospect of a 20- or 30-year retirement is not only reasonable, but it should be expected.4

How will I manage my withdrawal strategy?

When it comes to living off your savings, you’ll want to coordinate your withdrawals. New retirees sometimes worry that they are spending too much, too soon. Should they scale back? Are they at risk of outliving their money? This concern may be legitimate. While some households "live it up" and spend more than they anticipate in retirement others are too frugal and not spending up to their potential. As you age you should expect your spending will also change. 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.5

How should I manage 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 financial professional would need to review your financial situation so they can better understand your goals, risk tolerance and tax situation.

How will I balance other costs, like college?

There is no "financial aid" program for retirement. There are no "retirement loans." A financial professional can help you review your anticipated income and costs before you commit to a long-term strategy. They are able to help you make a balanced decision between retirement and helping with the cost of college for your children or grandchildren.

Are you comfortable with your investment decisions? If you are unsure about your decisions, maybe it’s time to develop a solid strategy for the future.

This article is for informational purposes only and is not a replacement for real-life advice, so make sure to consult your tax, legal, and accounting professionals before modifying your investment strategy for tax considerations.

SSSA.gov, 2023
https://tobininvestmentplanning.com/financial-tips/when-should-i-claim-social-security-62-70-or-somewhere-in-between
Fidelity.com, 2023
LongevityIllustrator.org, 2023
https://tobininvestmentplanning.com/financial-tips/retirement-income-the-4-rule