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.
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.
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.
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.
This blog does not constitute advice or a recommendation or offer to sell or a solicitation to deal in any security or financial product. It is provided for information purposes only and on the understanding that the recipient has sufficient knowledge and experience to be able to understand and make their own evaluation of the proposals and services described herein, any risks associated therewith and any related legal, tax, accounting or other material considerations. To the extent that the reader has any questions regarding the applicability of any specific issue discussed above to their specific portfolio or situation, prospective investors are encouraged to contact GDS Wealth Management at (469)212-8072 or www.gdswealth.com or consult with the professional adviser of their choosing.
Investment advice offered through GDS Wealth Management, a registered investment adviser. GDS Wealth Management is an investment adviser in Texas. GDS Wealth Management is registered with the Securities and Exchange Commission (SEC). Registration of an investment adviser does not imply any specific level of skill or training and does not constitute an endorsement of the firm by the Commission. GDS Wealth Management only transacts business in states in which it is properly registered or is excluded or exempted from registration. A copy of GDS Wealth Management’s current written disclosure brochure filed with the SEC which discusses among other things, GDS Wealth Management’s business practices, services and fees, is available through the SEC’s website at: www.adviserinfo.sec.gov.
- 1. Centers for Disease Control and Prevention, 2023
- 2. Social Security Administration, 2023
- 3. CNBC News, 2023