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Early retirement allows retirees to view retirement as a financial condition, especially for those who are careful in their saving, spending, and investment decisions. This opens the door to new fulfilling chapters and lifestyles.
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However, there are some mistakes that are easy to make when planning an early retirement. Here are some common mistakes to avoid when planning early retirement.
don’t know or understand numbers
One of the most difficult transitions in retirement is moving from a salary or sustainable income to living on a fixed income. According to Your Moneyline’s AFC and financial guide Stacey Livingstone-Hoyte, making this transition successfully requires a thorough examination of your income, expenses, and other financial sources.
Livingstone-Hoyte said that rather than assuming retirement is fine, retirees should consider alternative sources of income and the duration of these sources. Additionally, consider whether these sources of income are adjusted for inflation and take into account changes in the economy.
Livingstone-Hoyte recommends retirees, especially those seeking early retirement, to simulate retirement.
“Early retirees should simulate the retirement lifestyle they envision with their future source of income. It should be a meaningful and ongoing experiment,” said Livingstone-Hoyte.
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Oversight of health insurance premiums
It’s not uncommon for most retirees to underestimate how much money they’ll need to retire. Early retirees, especially those retiring before her age 65, often overlook budgeting for health and medical insurance.
Retirees are eligible for Medicare at age 65. Until then, Matt Callum, wealth advisor and CFP at HCM Wealth Advisors, said those retiring before age 65 will have to rely on their healthcare exchange.
“Healthcare Exchange premiums can come as quite a shock to retirees,” says Calme. “Retirees are expected to receive the full monthly premium when they had health insurance from their employer, rather than receiving only a portion of this premium. The difference in health insurance premiums for Americans can be thousands of dollars a year.”
Can early retirees combat these costs? There are two possible solutions. The first, according to Calme, is to investigate whether early retirees can enroll in their spouse’s employer’s health insurance. If an early retiree has a partner, this will reduce her premiums until age 65, allowing retirees to benefit from reduced premiums. A second solution is to negotiate a retirement package with health insurance coverage with your employer until you reach age 65. While not usually very common, Calme says this helps keep costs down for those who can negotiate.
Applying for social security benefits too early
Early retirees can start receiving Social Security benefits as soon as they turn 62, but we recommend that you reconsider the length of time before you receive these benefits.
Martha Shedden, president and co-founder of the National Association of Registered Social Security Analysts, said you don’t have to retire and collect Social Security at the same time. Some retirees may find it beneficial to delay collection of Social Security until the age of 70 and receive the full amount.
“Determining when to claim Social Security is a more involved and complex decision than most people realize, and choosing the best strategy for your situation can help you maximize your potential income for the rest of your life. could add tens of thousands to hundreds of thousands of dollars,” Shedden said.
Good news for those who feel they made the mistake of pulling out Social Security too soon? They have time to reverse this decision. According to Sheden, a retiree has 12 months from the time he first filed to start over for Social Security elections.
waste
It’s not uncommon to hear that early retirees, or retirees in general, are wasting their time in retirement.
This is where the use of a retirement simulation can be very helpful. Livingstone-Hoyte said the simulation can help uncover spending leaks and identify where budget plugs are needed.
It also helps retirees make better decisions about what to prioritize in their retirement budget. “Waste can take the form of the gifts retirees give to their families. How can retirees change their gifts to establish better boundaries with family, friends and even organizations We need to be prepared to talk about it,” said Livingstone-Hoyte.
not planning for longevity
As life expectancy continues to rise, so too must the size of retirement funds. Individuals who decide to retire early should increase their retirement savings in light of their age.
Think about your future ten years from now and adjust your retirement savings accordingly. This can help you avoid depleting your retirement savings and struggling to maintain a low standard of life later in life.
Planning to Retire Alone
Young and old alike, one financial decision retirees rarely regret is working with a trusted and qualified financial professional to help them with their retirement needs.
Even if you think you’ve planned everything out, working with a financial professional can be very reassuring for retirees. Financial advisors and planners can help you build, monitor, and manage your financial plans to find your best interests. They understand your goals and will be there at each stage of your transition to retirement. With this kind of guidance, retirees can feel at ease. They are in good financial shape and have a chance to enjoy the next chapter of their retirement lifestyle.
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This article originally appeared on GOBankingRates.com: 6 Mistakes You Made To Retire Too Soon
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