Avoid These Common Financial Missteps

Retirement is a significant milestone, but proper planning doesn't end once you stop working. Ensuring financial stability throughout your retirement requires careful consideration and strategic decisions. In this Security Spotlight, we'll highlight five common mistakes to avoid to safeguard your retirement assets.

1. Applying for Social Security Benefits Too Early

Many retirees claim Social Security benefits as soon as they are eligible at age 62. However, this can reduce your benefits by up to 30%. Waiting until full retirement age (FRA) or even age 70 can significantly increase your monthly benefits, providing more financial security in the long run.

2. Maintaining an Aggressive Investment Approach

As you approach retirement, it's crucial to shift to a more conservative investment strategy. The focus should be on capital preservation to ensure you have the necessary funds for daily expenses and to mitigate the impact of market volatility on your portfolio.

3. Overspending

Retirement often means a reduced income, making it essential to adjust your spending habits. Develop a realistic budget that aligns with your new financial situation to ensure your savings last throughout your retirement.

4. Neglecting Required Minimum Distributions (RMDs)

Once you reach a certain age, you must take annual RMDs from specific retirement accounts. Failing to do so can result in significant tax penalties. It's crucial to plan for these distributions to avoid unexpected financial hits.

5. Underestimating Healthcare Expenses

Healthcare costs can be a major financial burden in retirement. With the average couple needing approximately $315,000 for medical expenses, it's important to plan for these costs. Consider long-term care insurance to protect against the high costs of extended care and to provide more options for your care.

Planning for retirement involves more than just saving money. It's about making informed decisions to protect your financial future. Start the conversation with a financial advisor today to create a comprehensive retirement strategy that considers all aspects of your post-work life.