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We spend so much time focused on saving for retirement that sometimes we forget to continue planning once we reach our retirement goals.
Your financial planning journey doesn’t end once you retire. Here are five common mistakes people make in retirement – and how to avoid them.
You can start receiving your Social Security retirement benefit at any point between age 62 and 70. However, your full retirement age varies based on the year you were born. (For people born in 1960 or later, full retirement age is 67.)
There is a strategy to deciding when to collect Social Security. If you can afford to wait until age 70, for example, your benefits can increase by as much as 8 percent per year between age 62 and 70.
Consider these points when figuring a Social Security strategy:
Some people make the mistake of being too conservative with their investments once they enter retirement. Remember, you don’t need all of your funds at once, so some of it can likely remain in more aggressive investments for a bit longer.
Some people also get nervous about normal market fluctuations, so they may overreact to a change by selling or changing their allocations. The problem with getting out of a market allocation is people often don’t know when to get back in. Market timing sounds good in theory, but it generally doesn’t work in practice. There are also tax considerations to keep in mind if you sell.
When deciding to stay the course or sell, you want to make sure your reasons are sound and not a knee-jerk reaction to a market fluctuation. If you don’t know what to do, give us a call, and we’ll talk you through it.
If you’re supporting your adult children while you’re in retirement or donating more than you really can afford to charity, you could be setting yourself up for problems down the road. There are ways you can help your loved ones and causes you care about without compromising your own future.
A charitable remainder trust, for example, can provide you with income and tax benefits for a period of time, and when the trust ends, the remaining assets transfer to your designated charitable organization. (Read this story for more information.)
Life insurance can be a good way to leave a legacy for your family. When we’re near or in retirement age, life insurance isn’t used to replace income; it’s used to leverage your legacy on a tax-favorable basis.
Effectively planning your estate is one of the most important things you can do to leave a legacy for your family, both in passing on your assets and in protecting your family’s relationships with each other.
Post-death settlements can be emotionally trying, even for the closest-knit families. In general, if people are kept in the communication loop, there’s less intimidation, fear and suspicion. Planning and sharing those plans with family members can help diffuse conflicts.
Naming a corporate fiduciary, such as Bell Bank Wealth Management, can also be a cost-effective way to minimize conflict and ensure your wishes are carried out by a professional experienced at handling a wide variety of post-death settlement issues.
Ultimately, the biggest mistake retirees make is failing to plan. Retirement planning doesn’t stop once you retire. Financial plans are always evolving, and your lifestyle might change.
Your expenses also change in retirement, so it’s still important to monitor your spending through a budget. You also want to make sure you and your spouse are in agreement about your plan and that you’re not taking more money out of your portfolio than it can support.
Continue meeting with a financial advisor after you’ve retired to review your finances every year and, if necessary, figure out how to make adjustments so you can continue to enjoy your retirement years.
▶ We can help you avoid these all-too-common retirement mistakes. For support in your retirement planning, call our wealth management team at 701-298-2240 or click here to find an expert.
Investing and wealth management products and products and services offered through Bell Insurance are: Not FDIC Insured | No Bank Guarantee | May Lose Value | Not A Deposit | Not Insured by Any Federal Government Agency
This article has been written for the general information of clients and friends of Bell Bank. It is not intended, nor may it be relied upon, as tax or legal advice with respect to any matter. This article also cannot be used by a taxpayer for the purpose of avoiding penalties that may be imposed by the Internal Revenue Service or other taxing authority. Consult a tax advisor regarding tax considerations for selling or changing investment allocations.