After hustling your whole life, you finally reach that point when you’re about to be free of the shackles of the corporate world. This is your time to enjoy and do things you couldn’t do before. However, the path to retirement isn’t as easy as you think, so you should watch out for red flags along the way.
1. Mortgage
When you’re considering retirement, make sure you pay off your mortgage beforehand. Having a lump sum of mortgage left that still needs to be paid can lead to problems down the line because your whole pension might be going towards it, making you put your plans on hold until it’s settled. It’s better to check this box beforehand.
2. Not Having a Plan To Keep You Occupied
While the prospect of not working sounds spectacular, many people struggle with filling that void after they retire. It’s essential to have a solid list of things you want to do after you’re fully rested so you’re not sitting at home bored out of your mind. We’re so used to working hard that when we don’t have something to do, it feels like something is missing.
3. Not Having Backup Assets
It might seem unnecessary when you do the math at the moment, but trust me, having some backup assets or another source of revenue is really important. In case something goes wrong, you don’t want to be going back to work. Mapping it all out from the get-go is the way to go.
4. Not Considering Your Spouse
Being married means you need to take your spouse and family into consideration before making any decisions. If your spouse has already retired, how do you plan on managing the retirement process? And if your partner is also retiring with you, they should also have a plan in motion that will set you both up for a successful and comfortable life.
5. Dismissing Long-term Care
Initially, when you leave the corporate world behind, you might not be facing any health problems. However, once you grow old, health becomes a significant expense you must consider before leaping. A person advises, “I would just look for long-term care planning if you’re in the U.S.; that’s one thing that can really upset planning.”
6. Not Talking To Social Security About Your Options
When we’re talking about life-changing decisions, it’s important to consult people who do this daily for some advice on the matter. By not talking to Social Security, you might miss out on a golden opportunity they could’ve easily shed light on. What do you have to lose anyway?
7. Retiring Before the Designated Age
One person mentions, “You and/or your spouse should hold out until full retirement age, or depending on your ages, you might be able to take spousal benefits for one of you and delay taking Social Security for the other.”
They go on to explain, “ Most people don’t know about the penalty of taking Social Security before full retirement age.” If you’re under the age of 62 and are able to hold out for a bit longer, you should.
8. Forgetting About Tax
To assess the feasibility of your portfolio, you should calculate the after-tax real rate of return because that’s what you’re going to end up with. Investment returns are usually taxable, which is something that’s often overlooked if you’re not crunching numbers before you make your retirement decision.
9. Not Thinking About Your Social Network
Working a 9 to 5 your whole life means you have a very established work network that gives you daily human interaction. However, when you’re going to leave that world behind, you’re no longer going to interact with those people every day. While everyone frets over finances, no one thinks about how they’ll be able to stay connected with others.
10. Not Taking Inflation Rates Into Account
In terms of severe long-term repercussions, this is the one that will land you in hot water if you don’t consider it. People have a longer lifespan than they once did, so we don’t want to outlast our savings. This essentially means keeping inflation rates in check and adjusting your math accordingly.
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