7 things not to do when you retire

Some of the first things retirees need to do when they retire include applying for social security benefits, checking their investment accounts, and updating real estate plans. On the flip side, what should new retirees avoid doing?

Some of the answers may surprise you. Avoid making the following mistakes that can damage your retirement savings and lifestyle.

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Don’t be too rigid with your retirement spending plans

There is nothing wrong with carefully reviewing your retirement spending habits. However, it’s a good idea to avoid being too rigid in your plans.

The reason retirees need to be flexible with their retirement spending plans is due to the risk of a sequence of returns.

Jesse Cramer, Head of Relations at Cobblestone Capital Advisors, said that investments often have erratic returns. Quite often, we tend to see multiple consecutive years of good returns (bull markets) or bad returns (bear markets). Starting your retirement with a few years of bad returns causes a disproportionate amount of stress on your wallet.

“The main weapon retirees have to combat an unfortunate sequence of returns is staying flexible in their retirement spending plans,” Cramer said. “The risk of the sequence of returns worsens when a retiree withdraws money from their portfolio. The more money they withdraw, the greater the risk.”

Cramer advises retirees to consider delaying some of their spending, such as postponing a big trip. This will give the market and their portfolio time to recover and teach the risk of the sequence of returns.

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Don’t forget to plan for social security

You do not need to collect Social Security benefits at the same time as you retire.

Although you may be receiving benefits as early as the age of 62, think carefully about whether you should start collecting at that time or delay. It is possible to delay Social Security until the age of 70 to receive the full payment. Choosing the optimal strategy to suit your financial situation and general lifestyle, whether it means accepting payments at the age of 67 or waiting until the age of 70, can result in thousands of dollars more in income. potential during the retirement years. Senior couple paying the bills.

Don’t spend your investment capital (if you can avoid it)

Bob Sewell, CFA and CEO of Bellwether Investment Management, recommends that his clients avoid withdrawing more than 4% of their portfolio value from their accounts year-over-year. Withdrawing more than 4% means that you are spending some of your investment capital and retirees need this capital for the many years of retirement that lie ahead.

If you’re spending more than 4%, Sewell recommends creating a spending plan to see what amount of capital can be depleted from year to year without running out of money too soon. Part of this plan should be about optimizing where you withdraw funds across investment accounts. New senior flat screen TV

Don’t take on debt

Ideally, by the time you reach retirement, you should have paid off all your debts, including student loans, mortgages, and credit card balances. If you have paid off your outstanding debt, don’t take on any additional debt.

“You don’t need that burden in retirement when your income is potentially lower and you don’t have the same ability to supplement it through employment sources,” Sewell said. “Carrying month-to-month credit card debt, lines of credit, or a new mortgage rarely makes sense, so do your best to avoid it.” Senior woman cutout coupons.

Don’t count on an inheritance

Sewell often sees clients anticipating unexpected gains from an inheritance to help support them in their retirement. Relying on an inheritance, regardless of the amount, is not a retirement plan.

“The legacy you are anticipating may end up being much smaller than you expect, it may not be received for many years, or it may not appear at all,” Sewell said.

The best approach is to consider any inheritance as a bonus to your retirement plan.

senior health care

Don’t underestimate health care costs

Healthcare is one of the most significant expenses in retirement. It is not uncommon for retirees to underestimate the amount of money needed for health and medical insurance purposes.

Once you are eligible for Medicare, make sure you fully understand what your Medicare plan is and isn’t covered. This will allow you to better plan your medical bills and be ready to cover uninsured costs under Medicare. Financial advisor talking to senior couple at home showing documents.

You don’t do all your retirement planning yourself

You don’t need to do all of your retirement planning yourself. It can also be difficult to manage retirement planning on your own in the event of unforeseen circumstances, such as the death or inability of a partner who leaves the surviving partner with heavy financial burdens.

Sewell recommends finding a trustworthy fiduciary advisor or financial professional who can help ensure that your investments are well managed and that you and your family are in good hands when you retire.

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This article originally appeared on GOBankingRates.com: 7 Things Not to Do When You Retire

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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