1. You don’t know when to claim Social Security benefits
The age at which you begin receiving Social Security retirement benefits is a major factor in the size of your checks. So, take time to educate yourself before making this decision. Read articles from reputable sources and consider buying a customized analysis from a service like Social Security Choices.
There is no one-size-fits-all answer here. The best time for you to claim Social Security depends on multiple personal factors, including things like your financial circumstances and your marital status.
For example, Michele Clark, a certified financial planner and senior portfolio manager at Acropolis Investment Management in St. Louis, recommends couples delay at least one of their Social Security checks to let the size of that benefit grow as much as possible.
She tells Money Talks News:
“When one person passes away, the smaller check of the household will stop and only the larger check will continue, which means the household loses an entire Social Security check. To help prepare for this, letting one check grow as much as possible will help offset the sting of losing an entire source of income when one spouse passes away.”
2. You started saving late
Don’t worry: There are things you can do to catch up on savings.
Andy Tilp, a Sherwood, Oregon-based certified financial planner at Trillium Valley Financial Planning, advises people who are 50 or older to start by making catch-up contributions to tax-advantaged retirement accounts.
For tax year 2021, for example, someone who is 50 or older can deposit up to $6,500 more in a workplace retirement plan like a 401(k) than younger workers can. For 2019, the catch-up amount for individual retirement accounts (IRAs) is $1,000.
Margot Dorn, a San Diego-based certified financial planner with Dorn Financial, also recommends that you consider:
Investing in a taxable brokerage account: Just be sure to first make the most of tax-advantaged accounts.
Moving to a more affordable state: This isn’t for everyone, but moving for retirement can significantly lower living expenses for some people.
Getting a reverse mortgage: This route to freeing up funds has its downsides, but it can help eligible retirees who aren’t planning to bequeath their home to heirs.
Gallery: Is an Annuity a Good Investment? (Money Talks News)
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3. All your money is in one place
Keeping all your funds in one spot risks all of your hard-earned money. To reduce this risk, diversify your retirement portfolio.
The main way to do this is to distribute your savings across multiple types of assets, such as stocks, bonds and cash.
How much of your money should you put in each asset type? Money Talks News founder Stacy Johnson offers a simple rule of thumb:
Step 1: Subtract your age from 100, and use the result as the percentage of your savings to put into stocks.
Step 2: Divide what’s left equally between bonds and cash.
So, if you’re 60, you’d have 40% of your retirement savings in stocks, 30% in bonds and 30% in cash.
“Flipping from creating the savings to using the savings can be difficult, especially if there is no plan on how to structure the money and disperse the money over your lifetime. Without a plan, you are essentially guessing and hoping.”
You could also consult retirement withdrawal calculators. But tread carefully if you are considering scrimping on this retirement planning step, especially if you have multiple sources of retirement income. How you draw down your retirement funds can be a deciding factor in whether you outlive your money.
5. You didn’t plan together with your spouse
Has one spouse done all the financial planning in your house while the other spouse has been in the dark? Time to share the knowledge. Tip says:
“It is not uncommon for one spouse to handle the majority of the money matters. However, if this spouse dies or is incapacitated and the ‘hands-off’ spouse had no idea of their general financial situation, it can leave the surviving spouse vulnerable to being taken advantage of by unscrupulous salespeople and relatives.”
So, bring each other up to speed on finances, and save yourselves from financial surprises down the road.
6. Your retirement needs have changed
Has your health or financial outlook changed? What about your spouse’s? You may need to revise your retirement plan or create a new plan.
Skip Fleming, a certified financial planner with Lodestar Financial Planning in Colorado Springs, Colorado, recommends re-assessing goals and reviewing spending and projected income at least once a year.
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