Navigating Retirement Pitfalls

Navigating Retirement Pitfalls

April 24, 2024

Much is written about the classic financial mistakes that plague start-ups, family businesses, corporations, and charities. Some classic financial missteps have been known to plague retirees, too.

Calling them "missteps" may be a bit harsh, as not all of them represent errors in judgment. Either way, becoming aware of these potential pitfalls may help you to avoid falling into them in the future.

Managing Social Security. Social Security benefits are structured to rise about 8% for every year you delay receiving them after your full retirement age. Is waiting a few years to apply for benefits an idea you might consider? Filing for your monthly benefits before you reach your full retirement age can mean comparatively smaller monthly payments.1

Understanding longevity. Actuaries at the Social Security Administration project that a 65-year-old man has a 34% chance and a 65-year-old woman has a 45% chance to live to age 90. The prospect of a 20- or 30-year retirement is not only reasonable, but it should be expected.3 Remember, death is not a financial plan.

Managing withdrawals. You may have heard of the "4% rule," a guideline stating that you should take out only about 4% of your retirement savings annually. Each person's situation is unique but having some guidelines can help you prepare.  However, as you enter retirement these rules of thumb may go out the window, so it is important to work with an advisor that can help you manage your withdrawals.

Managing taxes. Some people enter retirement with investments in both taxable and tax-advantaged accounts. Which accounts should you draw money from first? Should you convert some of your tax-deferred assets to Roth at the onset of your retirement?  If so, how much?  What are the tax impacts of withdrawing from some accounts versus other accounts?

These are all questions you should have an answer to before you retire.  If you need help with any of these questions, please don’t hesitate to reach out to us.    

Managing other costs, like college. There is no "financial aid" program for retirement. There are no "retirement loans." We can help you review your anticipated income and costs before you commit to a long-term strategy, and help you make a balanced decision between retirement and helping with the cost of college for your children or grandchildren.

1. SSSA.gov, 2023
2. Fidelity.com, 2023
3. LongevityIllustrator.org, 2023