Retirement planning is tough and full of never-ending questions. Am I saving too much or too little? When should I retire? Am I claiming social security too early? The list goes on and on, and it's enough to make your head spin. Here are some mistakes to avoid to make retirement planning simpler.
Not Planning for Free Time
Knowing what to do when you retire is as important as planning for it. Many Americans work 40 hours a week, and that's not counting commutes and overtime. Once retired, that's over 40 hours a week you get back!
This is why you should have an after-retirement plan ready to go. Maybe you've always wanted to learn to paint, travel the world or improve your golf game. These goals will help you plan for how much money you need to make them a reality.
Claiming Social Security Too Early
When Americans reach age 62, they're eligible to start their social security benefits. This is the "early retirement age." Full retirement age is either 66 or 67, depending on the year you were born. You may be wondering what the difference between starting your social security benefits at 62 vs. 66/67 is. It's all in the amount of money you'll receive.
Signing up at 62 will give provide you with monthly funds at a reduced amount. For example, if your full retirement age is 67 but you sign up for social security at 62, you will take a payment penalty of 35%, meaning that if your benefit was going to be $1,000 a month at 67, it will be $750 a month at 62.
Delaying your benefits will actually increase the amount you will get per month. Note that your retirement benefit will only increase up to age 70, and there's no benefit to delay claiming your benefits after 70 years of age. Fore more information on your benefit would increase, visit the delayed benefits page on the Social Security Administration's website.
If you'd like to calculate your benefits, the Social Security Administration also has a benefits calculator available for this very purpose.
Not Saving for Retirement Early Enough
While social security provides retirement age adults with money for their expenses, it's likely not enough to cover them all. While you can claim social security benefits and continue to work, most people will likely stop working. This means social security is your only source of income and supplementing social security with savings and investments is important.
Not Making Lifestyle Adjustments for Retirement
Look at your current income and your monthly expenses, including your loan payments, food, gas, utilities, etc. If you retired today, would you be able to maintain your current lifestyle? If not, you need to start planning for how to modify your lifestyle to live on a social security income. Continuing with our last tip, this is where savings can come in and allow you to keep your current lifestyle.
Retirement is also when you have the most time in your adult life to do really dive into hobbies, go on vacations, and spoil your grandkids! You should plan to have money for these endeavors.
Prepare for Medical Bills When Retired
As we get older, our health problems likely increase. Ensure you have enough money to deal with medical problems that may arise, especially if you have pre-existing health conditions with a high likelihood of recurring or causing problems in the future. Trading in your dream vacation for paying for medical bills is a choice no one should make!
The Credit Union Difference
Ready to take your retirement plan more seriously? Florida Credit Union offers personal investment services for our members. For a full showcase of our products and services in addition to information about our financial advisors, visit our investment services page. We also offer free financial calculators that are available online at anytime. These include calculators for figuring out your retirement income estimator, how long your savings will last, and more! Simply follow the link and scroll down to the "retirement" tab.
Florida Credit Union is a full-service financial institution. Founded in 1954 as the Alachua County Teachers’ Credit Union, FCU now services over 130,000 members in 48 counties throughout North and Central Florida. For more information on the services we provide, visit FLCU.org or call us at 1-800-284-1144.