Are you planning to retire and enjoy more freedom, a slower pace of life, and just your everyday life? If you are, you need to be aware of these 6 retirement mistakes that can and will cost you a lot. Read on to find out more.
The Lack of a Retirement Plan
Did you know that according to a 2020 survey by FinanceBuzz, about 35% of the participants revealed that they did not have any retirement savings? Another 2019 study even found that 56 percent of Americans are unaware of how much money they need during retirement. If that is you, you need to correct this retirement mistake as soon as possible. Regardless of what situation you may be in, you should plan for your retirement as soon as possible.
Failure to Maximize Your Retirement Savings
If you do have a retirement plan, the next thing you need to do is ensure you maximize your retirement savings. After all, you will lose out lots of money by not maximizing your retirement savings. Specifically, if you are 50 years old and above, the Internal Revenue Service permits you to make higher contributions to tax-favored retirement funds. The maximum permissible contribution to an Individual Retirement Arrangement will also increase from $6500 to $7000 yearly if you are in your golden years.
Using Retirement Funds Too Early
Another costly retirement mistake? Using your retirement funds too early. While it may sound obvious because early usage means lesser funds for you in the far future, did you know that it can also result in significant tax penalties? That is because the IRA retirement accounts and 401(k) scheme usually have such penalties for early withdrawals.
Not Applying for Medicare in Time
Did you know that as long as you are above 65 years old, you are eligible for Medicare when you leave your employment and employer-based insurance? While it is a great retirement benefit, many miss the Medicare deadline and suffer from this retirement mistake. To ensure you do not become ineligible or have lower coverage for Medicare, or suffer from a 10% late-enrolment penalty, you need to enroll within seven months from when the end of your employment.
Applying for Social Security Too Early
While you can apply for Social Security benefits for your retirement, applying for it too early is a costly retirement mistake. This is because the difference between the years is significant. For instance, just a four-year difference from 62 to 66 years old results in 8% more social security benefits. In fact, you can even earn 32% more social security if you wait until you are 70 to apply.
Falling for Financial Scams
Unfortunately, those in their golden years are more frequently targeted by scammers and are also especially vulnerable to them. And falling for such financial scams can result in the loss of your entire retirement savings overnight if you are not aware. Therefore, you need to keep control of your money and assets at all times and never invest in anything you are not sure about. In addition, seek the help of a financial adviser or a family member during an unknown transaction. Even if the other party merely sounds like a courteous salesperson, remember that many scammers purposely do so to gain your trust.
