No matter what you see yourself doing during retirement, your goal is to no doubt ensure that you’re financially secure throughout your senior years. But the wrong choices on your part could result in the opposite happening. Here are three decisions that may end up backfiring on you in a very serious way.
1. Claiming Social Security early
You’re entitled to your full Social Security benefit based on your personal wage history once you reach full retirement age, or FRA. FRA is either age 66, 67, or somewhere in between, depending on what year you were born in.
You’re allowed to sign up for Social Security starting at age 62, but for each month you file ahead of FRA — which is what we mean when we talk about filing early — those benefits will take a hit. And that could put you in a tough position later in life, especially if your nest egg runs out of money and you’re forced to manage your expenses on Social Security alone.
Now if you’re entering retirement with a huge amount of personal savings, you may be just fine to claim Social Security early. But if that’s not the case, consider waiting until FRA or even beyond.
If you’re entitled to your full benefit at age 67 but you delay your filing until age 68, you’ll score an 8% boost to your Social Security checks. And while you can only delay your filing for financial gain until age 70, it’s a move worth considering if your nest egg isn’t as robust as you would’ve liked.
2. Dumping stocks in your IRA or 401(k)
It’s a good idea to shift toward more conservative investments, like bonds, as retirement nears. But that doesn’t mean you should unload your stocks completely.
Quite the contrary — you’ll need to retain stocks in your portfolio so your nest egg continues to generate growth even once you start tapping it. If you don’t hang onto any stocks, you’ll risk a scenario where you either deplete your savings prematurely or find yourself forced to limit your withdrawals, leaving you with too little money to really enjoy your senior years.
3. Not enrolling in Medicare on time
Medicare eligibility begins at age 65, and your initial enrollment window begins three months before the month of your 65th birthday and ends three month after that month. If you have access to a group health plan through an employer (yours or your spouse’s — it doesn’t matter), then there’s no penalty for delaying your Medicare enrollment. But if that’s not the case, and you don’t sign up for Medicare on time, you’ll pay a penalty on your Part B premiums for each one-year period you were eligible for coverage but didn’t take it.
Medicare Part B premiums already eat heavily into seniors’ Social Security benefits. And so the last thing you want is to lose even more money to Medicare by virtue of enrolling too late.
Sometimes, we don’t realize the consequences of our actions until it’s too late. Now that you understand the repercussions of claiming Social Security too early, unloading all of your stocks, and delaying Medicare too long, you can take steps to avoid what could be a series of terrible mistakes.
