As we turn to the new year, it’s important to make sure your retirement strategy bases are covered—helping you maintain financial stability so you can build an enriching retirement. Here are four more mistakes to look out for and avoid as you prepare for your golden years.
- Not Having a Withdrawal Strategy
A common mistake is withdrawing too much too soon, risking the depletion of your nest egg. The 4% rule—a guideline suggesting you withdraw no more than 4% of your retirement savings annually—can help ensure your money lasts. While it’s a good framework to begin thinking about what you’ll need, it’s not a strict rule that you should follow, given that it’s not based on your unique needs. With a financial professional in your corner, you can adjust your strategy based on market performance and personal needs.[1]
- Overlooking Tax Implications
Different income sources, like 401(k)s, IRAs, and Social Security, have varying tax implications. Without proper planning, you can make costly mistakes by mistiming withdrawals, violating retirement account rules, claiming Social Security at suboptimal times, and more, like incurring penalties, fees, and taxes unnecessarily. Ultimately, taxes can take a significant chunk of your retirement income. It could be helpful to work with a financial professional to optimize withdrawals and reduce your tax burden.[2]
- Neglecting an Estate Plan
Without an updated will, trust, or beneficiary designations, your assets may not be distributed as intended. Estate planning also helps minimize taxes and legal disputes that can diminish your inheritance and split your family up; that’s likely not the legacy you want to leave. So, consulting an attorney or financial professional can help ensure your legacy is protected.[3]
- Failing to Budget for Retirement Lifestyle
Transitioning to a fixed income requires a clear understanding of your post-retirement expenses. Track your current spending and project future costs, factoring in travel, hobbies, and unexpected expenses. Create a realistic budget and adjust as needed.[4]
Avoiding Mistakes to Achieve Financial Security
Retirement planning can be intricate, but steering clear of common pitfalls is key to securing your financial future and maintaining peace of mind. As you get closer to retirement, mistakes can have a greater impact, making it even more important to have a solid plan in place. Partnering with financial professionals, staying informed, and regularly reviewing your strategy can help you build a strong foundation for a rewarding retirement. Contact us today to start planning for the retirement you’ve worked so hard to achieve.
