Here’s a scary statistic: More than more than half of retirees surveyed last year by the folks at Global Atlantic said they have retirement planning regrets. Their top mistakes, they reported, included not paying off debts such as mortgages before retiring and not having saved enough for retirement.
Here’s a closer look at some other blunders many retirees make — and then regret. Learn from them so that you don’t end up in the same boat…
Mistake No. 1: Assuming Social Security will be enough
If you’re thinking that Social Security will be enough to support you in retirement, think again. It was never meant to replace all of your working income, and the average monthly retirement benefit was recently $1,470. That amounts to about $17,640 per year. If your earnings have been above average, you’ll collect more than that — but not a whole lot more. The overall maximum monthly Social Security benefit for those retiring at their full retirement age was recently $2,861 — or about $34,300 for the whole year, while those who delay starting to collect until age 70 max out at $3,770 per month, or $45,240 per year.
To find out how much you can expect from Social Security based on your earnings so far, head over to the Social Security Administration (SSA) website, and set up a my Social Security account. Once you know what to expect from Social Security, develop a plan to build any additional income you’ll need.
Mistake No. 2: Not signing up for Medicare on time
One of the worst mistakes you can make as you approach and enter retirement is to be late enrolling in Medicare. Why? Because your Part B premiums (which cover medical services, but not hospital services) can rise by 10% for each year that you were eligible for Medicare and didn’t enroll. That increase will then stay with you for the rest of your life. Yikes!
Here’s the scoop: You’re eligible for Medicare at age 65, and you can sign up anytime within the three months leading up to your 65th birthday, during the month of your birthday, or within the three months that follow. Those seven months are your Initial Enrollment Period.
Fortunately, there’s a helpful loophole that saves many people from facing the penalty: If you’re already receiving Social Security benefits by the time you reach age 65, you should be enrolled in Medicare automatically. (Don’t assume this will happen, though — take the time to check.) You might also avoid the late-enrollment penalty and be able to skip the deadline if you’re still working (with employer-provided healthcare coverage) at age 65, or if you’re serving as a volunteer abroad.
Mistake No. 3: Failing to take RMDs on time
This mistake can be even more costly than the last: Failing to take your required minimum distributions (RMDs) on time.
Some retirement accounts, such as traditional IRAs and 401(k)s, feature RMDs, expecting you to withdraw certain sums each year. The deadline to take your distribution each year is December 30, except for the year in which you turn 70 1/2. For that year, you have until April 1 of the following year to take your RMD. (It can be better to take it before the end of December regardless, though, lest you end up taxed on two distributions in one year.) It’s a good idea, if possible, to set up your account so that your RMD is sent it to you automatically each year.
If you’re late taking your RMD, the penalty is a whopping 50% of the amount you didn’t withdraw on time, so if you were supposed to withdraw $7,000, you’re looking at forfeiting $3,500! (The IRS does let you appeal for a waiver, so if you do run afoul of the rule one year, do look into that.)
Mistake No. 4: Not considering fixed annuities
It can also be a costly mistake to not look into fixed annuities. If you buy one or more of them, they can provide almost guaranteed regular income, like a pension, for the rest of your life. Here’s the kind of income that various people might be able to secure in the form of an immediate fixed annuity in the current economic environment…
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