Retirement Strategies to Avoid Pitfalls

There are numerous articles about the financial mistakes made by corporations, businesses, charities, and start-ups, but these missteps are not unique to organizations. It is equally important for individuals to be aware of potential mistakes that could plague them in retirement.

As you approach retirement, there are a few potential pitfalls you should be aware of in order to fully prepare yourself for your most successful financial future. Not all of these “pitfalls” represent errors in judgment; instead, they highlight the ways a knowledgeable financial adviser, such as our team members here at GDS Wealth Management, can help you to better prepare for both expected and unexpected financial circumstances. Below, you will see a list of potential retirement pitfalls – feel free to reach out to one of our team members to discuss these and any other issues in greater detail.

1. Longevity
It is reasonable to plan for a long retirement. As the average life expectancy grows for adults in the United States, retirees should ensure that their retirement plan is prepared for increased longevity. According to the CDC, the average man in the United States lives for 17 years after the age of 65, and the average woman lives for 20 years.¹ Many people exceed this average life expectancy, so it is reasonable to plan for a twenty- or thirty-year retirement.

2. Social Security
The minimum age to start receiving Social Security retirement benefits is 62. However, if you were born after 1943, choosing to delay receiving your benefits will give you a yearly 8% benefit increase. Although the benefits increase stops when a person reaches the age of 70, choosing to delay for a mere eight years will result in a substantial benefit increase when you do choose to receive your Social Security benefits.²

3. Medical Costs
CNBC News reports that the average retired couple at age 65 spends approximately $315,000 on retirement health care expenses.³ This number accounts for healthcare coverage and demonstrates the significant expenses that can occur during retirement. Planning for these medical costs will help ensure that you are truly prepared to retire.

4. Taxes
As you enter retirement, you may have accounts with both taxable and tax-advantaged accounts. A qualified financial adviser, such as one of our skilled team members here at GDS Wealth Management, can help you determine which accounts you should draw money from first. Having these conversations with a qualified professional who is equipped to help you review your financial situation can help prepare you for a retirement that is suited to your individual financial goals.

5. Additional Expenses
If you expect to contribute to additional areas of expense, such as your children or grandchildren’s education, vacations, or other substantial purchases, it is recommended that you review your anticipated income and expenses with a financial adviser to help ensure that you are on track for your long-term strategy. Having a solid plan in place will enable you to accomplish your individual goals for retirement – whatever those goals may look like.

6. Withdrawals
Typically, financial professionals suggest taking out no more than 4% of your retirement savings annually. This is called the 4% rule, and it allows retirees to live off the interest in their retirement accounts without depleting the existing funds. The 4% rule can vary for each individual, so it is important to discuss your annual withdrawals with a qualified financial adviser. Our team members here at GDS Wealth Management are happy to help you discuss the best practices for you to utilize in your retirement.