Saving up for retirement is an accumulation of a lifetime of hard work. It is a difficult task to achieve, but it is a fantastic accomplishment once completed. Once someone has retired from their career and is relying solely on their retirement savings, it is important to ensure that those funds can sustain them for the rest of their lives. This can prevent you from needing to find ways to earn money after you have retired. Keeping this in mind, below are some retirement mistakes to avoid.
Don’t Claim Social Security too Early
An individual could start claiming social security benefits at the age of 62. However, it may be more beneficial to wait until the maximum age of 70. The earlier that you start to claim social security, the lesser it will be worth as compared to waiting for a later age. These benefits are taxable, so waiting to take them until you are in a lower tax bracket is wise. Waiting until age 70 could result in a benefit that is 32% higher than if you had taken it when you were 62. This will likely benefit you in the long run as well, as people tend to live longer in current times. Planning to live until age 95 means that you need to stretch out your money until at least that long. Delaying claiming social security benefits can help you achieve that.
Don’t Delay Preparing your Power of Attorney
It is important to take the time to sort out the legalities early on, while it is still easy to do so. If you come to a point in your retirement where it is difficult for you to manage your finances, you will want to have a trusted individual to do so for you. Setting this up beforehand will allow you to live out your retirement with peace of mind. In addition to this, deciding to work with a financial advisor rather than managing your asset portfolio on your own is another part of this. This way, a trusted professional can help guide you through investing and buying/selling assets, without you having to worry about it yourself.
Pay Attention to the Market when you Retire
Retiring during a bear market is tricky because that is when the stock market starts to fall, and with it will come the value of your portfolio. If the market were to fall by 20% during the year, and you have started withdrawing 5% annually from your portfolio, that will not be a sustainable withdrawal rate for very long. If the market looks to be heading downwards right around the time that you retire, try to use up cash on hand before making withdrawals from your portfolio. This will ensure that your portfolio remains as high value as possible for the longest amount of time.
Don’t be afraid of investing in the market after you retire. Staying in the market will help fight against the cost of inflation. If the rate of inflation is 3% per year, all your costs of daily living will increase by that amount or more. Keeping a certain amount of money in the market will allow your funds to grow along with inflation.