Crucial Retirement Mistakes to Avoid

Planning for retirement can be quite tricky, even for those who are usually financially savvy. Money moves that seem innocuous or even positive can actually be massive mistakes that doom planning before it even begins. Never fear though, we’ve assembled seven typical retirement mistakes to avoid according to experts.

-Taking Social Security Too Early:

Many workers begin taking their Social Security benefits at ages 62, 66, or 67. However, what many don’t know is that these aren’t their maximum benefits. In fact, maximum Social Security retirement benefits don’t kick in at age 70. so those who claim before are not getting their full entitlement.

-Borrowing Against Retirement:

Unless it’s an emergency, borrowing against your 401k is a bad idea. Instead, consider a loan. As explained by an expert, “While any interest you pay on the loan is paid back into the account, you also have to consider the opportunity cost of missing out on market returns while the money is absent from the account. You also run the risk of having to pay income taxes and withdrawal penalties if you’re unable to pay it back within five years or before leaving your job.”

-Making Withdrawals from a 401k RMDs Kick In:

RMDs (AKA Required Minimum Distributions AKA being legally required to take money out) are not required until you turn 72, and frankly, you should be taking any money from those accounts until you need to. Use any other income stream you can and let your retirement money continue to grow interest as long as possible.

-Tapping Into Roth to Early:

Similarly to a 401k, avoid taking money from a Roth IRA early unless you absolutely have to do so, as your Roth IRA also will grow tax-free, which in turn means you also don’t need to take RDMs and the account can keep growing for as long as you don’t touch it.

-Hiring the Wrong Advisor:

Make sure your advisor is a licensed fiduciary an individual who by definition is ethically bound to act in another person’s best interest. If they’re not, be wary that they could be working in their own interest to sell you on investments and etc.

-Not Using a Partner’s Social Security Benefits: 

According to SmartAsset.com, “You can delay claiming your own Social Security benefits and reap half of your partner’s payout if your marriage (current or not) has lasted a minimum of 10 years (although several conditions apply). This can be beneficial if your spouse was a higher earner since the calculation for spousal benefits will be based on the spouse’s salary. Widows and widowers are also able to benefit from a spouse whose earnings were higher.”

-Trying to DIY Retirement: 

Arguably, all of the above mistakes can be wrapped up in this issue: Don’t try and set up your retirement on your own. Seek out a trustworthy and licensed fiduciary/financial advisor to help you avoid retirement mistakes and get everything set to ensure a financially savvy retirement and future for your family.