Many people look forward to retirement as a time to do the things they want to do, rather than the things they have to do, like working for a living. However, in order to enjoy your retirement to the full, you need to make sure that you plan effectively, in order to realise the retirement income you need. These are some of the retirement planning mistakes to avoid if you want to enjoy a contented retirement.
Taking Social Security benefits too early
Almost half of all Americans – 47 percent – apply for retirement benefits at the age of 62, according to government data. It’s the earliest age at which you can apply for the benefit, but it’s also entry level, so the payout is much less than if you defer application. While it might seem a great deal at the time – and it does increase with inflation year on year – patience is a virtue when it comes to retirement benefit drawdown.
A 60 year old single person earning $75,000 a year at retirement would receive $18,000 annual retirement benefit in the first year if he took the money at age 62, $24,240 at 66 – full retirement age (FRA) – and $32,520 at age 70. Remember that these benefits are inflation indexed, so the increases for those taking later retirement would also be greater.
Unless you were unlucky enough to die at age 70, in which case taking early retirement benefit at 62 is your best option, it pays to wait if you can. Around 75% of Americans take retirement benefit before FRA, yet statistics show the average 50 or 60 year old American can expect to live into his eighties. If you really need the money as soon as possible, consider working part time, then you’ll have the best of both worlds – more time for leisure, and enough income to allow you to delay drawing retirement benefits.
Underestimating savings requirements for retirement
Around 42 percent of Americans calculate how much they will need to save for retirement. That means that 58 percent just pluck a figure from the air and hope for the best. Statistically, your retirement savings will have to last for at least 20 years, so guessing how much you need is gambling on your future.
Consult an Independent Financial Adviser (IFA), or use an online calculator to help you do the math, but do something other than guesswork. Determining how much you need to save is only half of the equation – you need to ensure that you meet those figures if you want to enjoy a happy, fulfilling retirement.
Planning for retirement is not just a matter of squirreling a few bucks away when you have a little money to spare. It requires careful investment to maximise the funds available while not taking unnecessary risks with your precious capital. The best person to help you with this is an IFA who specialises in retirement planning. Don’t just take their word for it, either – it’s your money and your retirement that’s on the line. Ask to see qualifications and testimonials from existing clients, and only put your trust in the people most qualified to help you.
These are just some of the common retirement mistakes to avoid if you want to enjoy a happy retirement – and who doesn’t? Remember to look at the big picture – your retirement is not just a longer than usual holiday, it’s likely to last for twenty years or longer, so ensure you’re well prepared.