There are many people who make mistakes in retirement even if they had planned for it. Why does this happen? How do we avoid such retirement mistakes?
In this article, we will discuss the top five most common retirement mistakes that people make in their retirement. Keep reading to find out what the retirement mistakes are and how you can avoid them.
Mistake #5: Supporting Adult Children
The retirement mistake that takes the rank for #5 is being overly committed to supporting your adult children financially. While it may be tempting to help your children when they call, it is crucial to be able to cut the finances off.
The best way to approach this issue is to include your children in your retirement plan. With this, there are three benefits that can greatly help both you and your children.
- The first benefit is that your children get to experience what it means to plan for retirement and be engulfed in the experience.
- The second benefit is that they can better understand why you cannot support them in your retirement.
- Finally, it reduces the chances of you having to move in with your children in the future unless you choose to do so.
Mistake #4: Not Starting Anything New
The fear or lack of inspiration to start something new takes the cake for retirement mistake #4.
Often times, people underestimate how many years there are in retirement. Instead, people tend to be so excited to stop working and start dwindling down their bucket list that they don’t realize that this may get old at some point.
Whether your plans are to travel, relax, or anything else, you are going to want a hobby to keep you busy in the times where you have nothing to do.
It may happen that you run out of traveling money at some point or get to the age where it is more difficult to move around. In modern days, people are in better health and live longer than they used to.
Because of this, you can be looking at 15-20 years of retirement, years you need to fill up with new things to do. It is the perfect opportunity to pick up a new skill or begin to work on investments that can help you in your later years of retirement. It can also bring a sense of purpose or happiness to your life in retirement.
Mistake #3: Applying for Social Security at the Wrong Time
Without a doubt, it is important that you apply for Social Security, but you must do it at the right time.
You are eligible to apply for Social Security at age 62, but if you apply at this age, you will not receive full payments. If you want your full payments, you will receive them at your full retirement age which is between the ages of 66 and 67.
With this, if you continue to work for a while after 62, you can apply for Social Security and receive full payments. If you wait even longer until the age of 70, you will increase your payments by 6-8%
In order to get the most out of your Social Security, it is highly recommended that you apply later rather than sooner. This applies to both single income and the highest income spouse.
For more information and details, be sure to check out our other article: A Beginner’s Guide To SOCIAL SECURITY – Rates & Benefits.
Mistake #2: Medicare and Not Having It
Often times, many people retire early before realizing later that they are not eligible for Medicare until the age of 65. Because of this, they have to get their own private health insurance which can be a large cost.
Once you are eligible, many people often forget to enrol, which is another common mistake. The enrollment period extends from three months before and after your 65th birthday.
If you miss this enrollment period, you have to wait to enrol in the general enrollment period. this period runs from the 1st of January until the 31st of March. It is important to not forget to enrol.
Another thing that often surprises people is that not everything you want is covered by Medicare. Because of this, you may want to consider getting supplement plans to help with these extra benefits.
It is important to consider the long-term plan because you need to be prepared if someone gets ill or needs a lot of medical care. The costs of this sort of medical treatment can be very expensive and can drain your savings easily.
One resource that you can use for more information and supplement plans can be found through the Supplements & other insurance page of the medicare website.
Another great resource is another US government website – LongTermCare.gov, so check that one out as well.
Mistake #1: Underestimating Retirement Costs of Living
This one takes the crown for being the #1 retirement mistake made by retirees. Often, the expenses needed for retirement are underestimated, leaving you with too little of a budget to live off of.
To know the retirement costs of living in Australia, read Retirement Costs In Australia – Can You Afford Them?
In the early years of retirement, people often spend just as much as they did when they were working. Many times, this is due to people thinking you wouldn’t need money for transportation and such things anymore, but this is false.
In fact, retirees drive and commute just as much if not more than when they had a job. This is actually the second biggest investment other than housing when retired.
Since you spend so much in the early years of retirement, your budget dwindles towards the end and you no longer have much income to live off of.
Do you know how long you will live?
People often underestimate their life expectancy, which I discussed in detail in a previous article/video, so it is important to have a strategic plan for your retirement expenses.
There are many different strategies and methods for expanding your savings plan such as withdrawing bits of money at a time.
One important thing to remember is that after the age of 70, there is a minimum distribution that must be paid out of your 401k or IRA account, otherwise, you face a penalty fee.
I hope this article helps you to avoid the five common mistakes in retirement. I would love to know what you think about other retirement mistakes. Let me know in the comments!