After a lifetime of planning and saving, you’re finally on the verge of retirement. However, retirement planning doesn’t stop just because you’re beginning to draw income from your investments. As you embark on this exciting new chapter of your life, keep your retirement goals on track by avoiding these common pitfalls:
1. Claiming Social Security Too Early It may be tempting to apply for Social Security benefits when you’re first eligible at age 62. But, doing so may be costly. Choosing to receive your benefits before your full retirement age (which varies depending on the year you were born, but is around 66 for most people nearing retirement) could reduce your monthly benefit by 25% or more. And if you continue working, for every $2 you earn above a specific threshold—$17,040 in 2018, $17,640 in 2019—your benefit is withheld by $1 until you reach full retirement age.1 Conversely, every year you wait to claim benefits beyond full retirement age, the benefit you receive increases by 8% annually until age 70.2 So, unless you really need the money, you may want to consider waiting to apply.
2. Taking on Too Much Risk When time is on your side, you may be able to afford to take on riskier investments for greater growth. However, as you begin retirement, the assets you’ve accumulated to meet your day-to-day expenses become harder to recoup if you suffer an investment loss. So, it’s important to make sure you’re not taking on too much risk. However, as retirement can last a very long time, you may want to consider maintaining some exposure to stocks, especially in the early years of your retirement.