Not realizing what you don’t know could come back to haunt you later in life.
If you know someone or are yourself in or near retirement, it can be easy to misunderstand how Social Security works. It can be difficult also to estimate life expectancy or plan for big expenses like long-term medical care.
You may think you have everything planned out, but before you dismiss our advice maybe things won’t work out the way you think they will.
Most people don’t have the luxury to hire a financial planner, and therefore they don’t get the best, objective financial advice before retirement. Steve Vernon, a consulting research scholar at the Stanford Center on Longevity, fears that many people today just go with the flow. He warns against thinking that a Social Security check and a little savings is enough, “There’s no way that somehow everything will work out.”
Retirement can get complicated, and sometimes decisions can have severe consequences. Talking with a financial planner can save you from making a costly mistake.
1. Assuming Your Funds Outlive You
If you die early into your retirement, your worries about paying for the rest of it are over right there. Live longer though, and you easily could outlive the funds that you’ve painstakingly accumulated.
This favors the decision of waiting to get on Social Security, since every year you put it off increases the benefit you receive. This is a guaranteed return on a stream of income that you can’t lose in a recession.
2. Ignoring Your Spouse
When one spouse passes, that Social Security check goes away. The surviving spouse has to get by on the larger of the two checks. To maximize this benefit, it will be prudent for the higher earner to delay filing for Social Security for as long as possible.
Married couples who are on track to receive a pension should also consider applying for a “joint and survivor” option that allows payments to continue in the event one partner passes prematurely.
3. Procrastinating on Debt into Retirement
Being rich has its perks. Debt may not be a big deal if you have the means to cover the payments and interest. If you are not rich however, you may be pulling too much from your savings to pay off your debts. If you dig into your retirement funds early, that could push you into a higher tax bracket or even increase your health insurance premiums.
Consulting a financial planner will give you some options to have your debt paid off before retirement. It would be wise to do so before you think of digging into retirement savings to pay off big debts like a mortgage.
4. Sidelining Plans for Long-Term Care
A big fear of many people is that they slowly slip into infirmed care in their golden years. Roughly 70% of people over 65 will need help in the future with daily tasks such as bathing, eating or dressing.
Family and friends can only help so much, and long-term care costs can balloon to over $250,000. A solution to prepare for this will be to apply for long-term care insurance.
5. Getting Realistic on your Retirement Date
Half of retirees believe that they left the workforce earlier than they had intended. Some are lucky enough to retire early due to windfalls or high-performing stock markets. Many more start retirement early due to losing their jobs or being too ill to find another job.
You can choose to work longer in an attempt to save more, but it is not an option that is guaranteed.
Understanding that time and good health are finite resources, it is better to not put off retirement for too long. Give the Financial Helpers a call today – and you can find out if it’s time to start saving for the future that you want.
