Preparing for retirement is more than just saving enough money to last you through the years. There are many moving parts to consider. From moving to medical expenses to when you actually do retire, it is important to have a detailed plan in place to avoid these common retirement mistakes.
1. Giving in to post-retirement spending hikes
Most retirees generally tend to spend more, not less, in the first few years after retirement. Do not assume you will not spend much. To avoid this, make a budget for long-term planning. If possible, anticipate travel and retirement-related expenses and put them into the budget. Once you have retired, track your spending to see which categories go up or go down, then see how you can balance things out. For example, if new hobbies are costing you more, maybe you can eat out less.
2. Moving at the wrong time
Many retirees move to where they think it would be nice to retire only to move back after just a few years, costing them even more. Some downsize to discover that property taxes are much higher in this new area, and some move to an area where real estate costs are lower but transportation and food costs are higher because of travel. To avoid this, investigate the hidden costs before choosing a retirement area. These costs can include property taxes, sales tax, and the cost of groceries and other basic needs. Also consider how close you will be living to high quality medical care, including specialists for age-related illnesses. Keep in mind, too, access to public transportation in case driving becomes difficult.
3. Underestimating medical expenses
Never assume that because you are healthy now, you will be healthy forever. While you may never get sick or hurt, it is always a good idea to have a plan for unexpected medical expenses. This goes hand-in-hand with overestimating Medicare benefits. Medicare does make it easier to manage medical costs, but it does not cover everything. If you do encounter serious health problems, copays and deductibles can add up fast. Some expensive drugs may not be covered by Medicare at all, and while it covers up to 100 days in doctor-ordered rehab after a hospital stay, after that you are on your own.
Do the math and make sure your estimate for retirement savings includes money to supplement Medicare. Plan for long-term care, too. Purchase long-term care insurance or make a plan for who will care for you and how if you can no longer live independently at home. Depending on your situation, it might be safe to plan for assisted care, whether it is at a facility or an at home service.
4. Getting sold or scammed on services you do not need
Older adults are seen as easy prey by those selling insurance policies and investments that may not be best for them or may even be fraudulent. Take the necessary measures to avoid this by reviewing all of your current policies to make sure they still make sense for your needs. Be wary of anyone trying to sell you anything, especially over the phone or by mail. Do not give your info or sign anything until you have done your research and talked to someone you trust, and never make any financial decisions under pressure.
5. Retiring too soon
Some people say, “I can’t wait to retire and get out of here.” Others may say to themselves, “If I love what I do then why would I stop?” For those who would like to start their retirement earlier and maximize on these golden years…good for you! However, a question you must ask yourself before making this decision is, “How will I make my money outlast my lifetime?” It is an important question to ask because we often underestimate how long we have to live. We tell ourselves that our family members lived into their 80’s therefore I will too….but what if you live into your 90’s or beyond? You need to make sure you budget your retirement savings and time accordingly.
For those who want to postpone retiring until later on, there could be unforeseen benefits for you. Waiting longer allows you time to maximize your social security benefits to full retirement age (66 or 67 depending on when you were born), this can also allow you more time to grow your nest egg to enjoy later on and be in comfort when you do decide to retire.
FOR MORE INFORMATION REGARDING COMMON RETIREMENT MISTAKES CONTACT MIRAMONTES CAPITAL.
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Miramontes Capital is a Registered Investment Adviser. Advisory services are only offered to clients or prospective clients where Miramontes Capital and its representatives are properly licensed or exempt from licensure. This blog is solely for informational purposes. Past performance is no guarantee of future returns. Investing involves risk and possible loss of principal capital. No advice may be rendered by Miramontes Capital unless a client service agreement is in place.