Whether you’ve just recently retired, or it’s coming up in the next few years, it’s possible you may be feeling some financial uncertainty regarding your readiness for retirement. Before making any major decisions, here are five big retirement mistakes to avoid.
Mistake #1: Neglecting Your Emergency Fund
A little preparation now can go a long way when unexpected events occur. From a health emergency to car repairs, you never know what surprises may come your way in retirement. As you continue saving and preparing for financial independence, don't forget to plan for the "what if" scenarios that may pop up unexpectedly.
Mistake #2: Making Unnecessary Withdrawals
Withdrawing from any retirement accounts early could mean big tax penalties and less income in retirement.
Additionally, the money you withdraw from a traditional IRA will still be subject to income tax. And to avoid robbing your future retirement, you’ll want to develop a plan to replace that lost income in the coming years. If you’re struggling to cover expenses, talk to your financial advisor about other options you may want to take first. Look into what relief programs your state or local government offers, tap into your emergency fund if necessary and reevaluate your budget.
Mistake #3: Making Emotionally-Driven Investment Decisions
From social media posts to advertisements and news outlets, we're often bombarded by news that could affect your investment decisions.
After absorbing info day in and day out, it’s nearly impossible to not let it affect your decisions about money. If there's something scary on the news, should you drain your portfolio and stuff it under the mattress? Do you need to look at rebalancing assets amidst this market volatility? Working with an investment advisor can bring an objective, scientific and education-based perspective to the question of what to do with your assets. Together you can focus less on the world around you and more on your individual goals as you head into retirement.
Mistake #4: Forgetting to Reassess Your Current Budget
Have things changed since you last made your monthly budget? Maybe you used to commute to work, and now you’re working remotely. Or you used to spend every Friday at happy hour with friends, now you enjoy a quiet evening at home. It’s very likely that your daily habits, and what you spend money on, will change when transitioning toward retirement.
Reevaluate what your spending has been like over the past several months and determine if there are any opportunities to put more toward your savings or other goals.
Mistake #5: Ignoring Legislative Changes
It's important to stay on top of legislative action and changes that may have recently happened or could be impacting your retirement in the coming years. These have the power to impact your taxes, withdrawals and estate planning strategy. Your financial advisor can help keep track of ongoing legislation and keep you and your portfolio up-to-date and prepared for potential changes.
We work with retirees and pre-retirees to develop retirement strategies and determine if things need to be adjusted. If you're feeling anxious about your upcoming transition toward retirement, working with one of our financial specialists can help ease your concerns.