Retirement is a time to enjoy life, but even small missteps can lead to big financial headaches. As a financial advisor with decades of experience, I’ve seen three common mistakes that retirees often make. Let’s go over them and explore how you can avoid these pitfalls.
Many retirees are shocked by just how much they’ll spend on healthcare. It’s not just routine check-ups or prescriptions—it’s unexpected costs like hospital stays, specialized treatments, or long-term care that can strain your finances.
Consider this: healthcare spending in the U.S. has skyrocketed, climbing from 5% of GDP in 1962 to 17% in 2022. And according to the Congressional Budget Office, Medicare spending is projected to nearly double in the next 30 years.
What can you do? Look into supplemental Medicare coverage or long-term care insurance. If that’s not the right fit, start building a health savings fund specifically for medical expenses. Planning ahead can make all the difference in staying prepared.
Without a steady paycheck, many retirees struggle to balance enjoying life and staying financially secure. Some overspend on travel or hobbies early on, while others underspend, afraid to dip into their savings.
Here’s my advice: track your expenses during your first few months of retirement. Use that information to create a realistic budget that lets you enjoy your new lifestyle while keeping spending sustainable. Retirement isn’t about denying yourself—it’s about finding the right balance so you can live comfortably now and in the future.
One of the biggest surprises for retirees is the tax impact of withdrawals. Every time you take money from tax-deferred accounts, it’s added to your taxable income. Large withdrawals can even push you into a higher tax bracket, leaving you with a bigger bill than you expected.
To avoid this, consider a tax-efficient withdrawal strategy. Work with your financial advisor to create a plan that pulls from a mix of taxable, tax-deferred, and tax-free accounts. This strategy can help reduce your tax burden while ensuring your funds last longer.
Retirement is full of possibilities, but avoiding these common mistakes can make it even more rewarding. What are you most excited to do in retirement? How are you planning to manage your budget? Let us know by scheduling a complimentary Retirement Tune-Up financial review.
