You are approaching your retirement age and anxiety is eating away at you. I know, we are all waiting for that beautiful moment when we don’t have to work anymore, but it is precisely that anxiety that is your worst enemy when it comes to making decisions about what is coming.
There are a number of mistakes that everyone approaching retirement should not make, because they could negatively impact the amount that Social Security (or your retirement plan such as a 401(k), for which you have saved so much) is going to pay you month by month for the next few years.
Common Mistakes That Impact Your Retirement: Recognize Them And Avoid Them
During your prime salary years, experts recommend making higher contributions to your retirement plan, including catch-up contributions for people age 50 and older. According to Julie Back, senior vice president and financial advisor at Wealthspire Advisors, by the year 2024, this extraordinary contribution can reach up to $30,500.
If you are making automatic contributions from your salary, make sure you do not exceed this limit. If you have the ability to do so, consider contributing the maximum amount allowed to maximize your retirement savings.
To get the best possible payment, there is a variable that you should also consider, which is the age at which it is convenient for you to retire. The minimum age to start receiving Social Security benefits is 62, but the full retirement age can vary between 65 and 67, depending on each person’s date of birth. However, according to Back, waiting until age 70 to start receiving benefits may be a wiser decision from a financial point of view.
By waiting until the age of 70, higher benefits can be obtained due to the postponement of retirement. This is because Social Security offers an increase in monthly payments if you wait beyond full retirement age. For example, if the full retirement age is 67, for each additional year that is waited until the age of 70, the monthly benefits may increase by a certain percentage, which varies depending on the person’s date of birth.
There may be cases in which the person needs to start receiving his retirement as soon as possible, due to the economic or family circumstances in which he is at that particular moment, and that’s fine, but, if possible, it is advisable to delay it as much as possible to increase the size of the checks that Social Security will send you.
Prevent Avoidable Debts and Think Twice Before You Invest
Financial experts have recommended on the importance of avoiding getting into unnecessary debt, not only when you are already approaching retirement age, but also in life in general. Those toxic debts (like buying a new car that you don’t need, when your current car works fine, or a new 60-inch TV) drain your ability to save, including your retirement savings.
According to Jamie Cox, a finance expert, going into unsustainable debt can be more damaging than any other financial mistake, so it’s important to make prudent financial decisions and carefully evaluate options before incurring significant debt.
While buying a house after retirement may be a valid option depending on the circumstances, accumulating considerable credit card debts or acquiring expensive goods that devalue quickly can have a negative impact on the financial situation.
It is common for people approaching retirement to forget that their margin of time to recover losses on investments is limited. This can be risky because time is a crucial factor in investing. When retirement is approaching, there is less time for investments to recover in the event of a loss. Catastrophes can happen, global events (such as the pandemic, or a global crisis like the one in 2008, to recall two examples) that leave you broke, and time no longer plays in your favor.
Imagine that you have an investment that suffers a significant loss. If you are far from retirement, you have more time for that investment to recover and you can recover what you lost. However, if you are close to retirement, the time frame is smaller, which increases the risk of not being able to recover those losses before you need to use those funds for your retirement.
