New to retirement? Avoid these rookie mistakes
The early stages of retirement can be extremely exciting – and possibly a little unsettling. After all, you’re going from a full-time work schedule to suddenly having many free hours day in and day out, and that can be quite an adjustment.
But you will also need to adjust financially in retirement. And for the smoothest transition possible, make sure to avoid these rookie mistakes.
1. Not sticking to a budget
You might assume that you won’t end up spending that much money in retirement, so you don’t need to keep track of your bills. But in fact, the cost of living for your seniors may end up being higher than expected. You might think that you will spend very little on transportation, for example, if you don’t have to commute to work, but if you drive a lot to get out of the house, your fuel costs can end up being on par. what happened to yourself while you were working.
That’s why you absolutely need a retirement budget. First figure out what your essential bills look like, then compare them to what your income entails based on your Social Security benefits and how much money you can withdraw from your savings. This will help you figure out how much you can afford to spend on hobbies and other expenses so you don’t overdo it.
2. Not establishing a savings withdrawal strategy
The last thing you want to do in retirement is to use up your nest egg prematurely. This could lead to a world of financial hardship in the later stages of your later years, when you’re less likely to supplement your Social Security benefits with a job.
As such, don’t just mind withdrawing your savings. Instead, design a strategy.
Previously, an annual withdrawal rate of 4% was considered acceptable for retirement savings, but if you plan to live a fairly long life, a rate of 2.5% or 3% may be a more appropriate guideline to follow. . You can also play around with different withdrawal rates to see what works for you, but the key is to strategize rather than just randomly withdrawing money from your retirement plan.
3. Choosing the wrong Medicare coverage
Once you retire, you may be eligible for Medicare. But if you’re not careful, you could end up paying too much for health care and eating away your savings unnecessarily.
You have options when it comes to health insurance. You can stick with original Medicare and sign up for a Part D drug plan, or you can get an all-in-one plan with Medicare Advantage. There are pros and cons to each choice, so you’ll need to do some research to see what works best for you.
But also, there are options that you will have to go through in each choice. If you go with original Medicare, you will need to select the Part D plan that best meets your needs without having to pay too much for your premiums. Likewise, you may have a few dozen Medicare Advantage plans available where you live, so choosing the right one will be crucial.
Now the good news is that you are allowed to change your Medicare coverage every year once you sign up, so if you end up with the wrong plan you won’t be stuck with it for life. But it’s always best to do plenty of research to avoid signing up for a plan that doesn’t really meet your needs.
Start off on the right foot
Entering retirement means facing a whole new schedule, but also a whole new set of financial decisions to make. Try to avoid these rookie mistakes so that you can fully enjoy your new stage in life.