Don’t Get Fooled in Retirement

April Fool’s Day is celebrated every year on April 1st by playing practical jokes and spreading hoaxes with your family and friends. What was your favorite prank to play as a kid? Maybe you tied your siblings shoe laces together, put a fake spider in the shower, or blasted the volume on the stereo to scare the first person who turned it on. No matter what joke you played or hoax you spread, hopefully it was all in good fun. As we age, some of us lose interest in April Fool’s Day, but that doesn’t mean people around you will stop trying to pull a prank on you. And, if you’re not careful, you might think that you’re ready to retire, but are fooled into thinking this because of an unexpected event that occurs and derails your target retirement date. So, as we all recover from April Fool’s day, here are a few “jokes” to look out for so that you don’t get fooled in retirement.

The markets will settle down. April Fools! As you age, and depending on your personal financial situation, you may want to consider taking certain steps to help prepare your retirement plan for volatility in the market. It’s important for those at or nearing retirement to approach the market differently than they had earlier in their career. Focusing on preservation of principal is key because as you age, you most likely cannot afford to suffer a double-digit loss in your retirement funds. You may not have the ability to make the money back and cover expenses, so now is the time to fine-tune your spending, saving, and expectations to best protect your retirement income plan against the uncertainties surrounding the market.

No more paycheck means no more tax planning. April Fools! When it comes to investing, and in particular, retirement planning, having a tax minimization strategy might be one of the single most important things you can do to help secure your financial independence. One of the biggest expenses retirees face are taxes, so make sure you’re not overpaying them because at this stage of the game, you no longer have a steady income. Also, make sure that you’re on the lookout for potential tax scams that are occurring online and over the phone. A tax scam can happen to anyone, anywhere, and at any time. If something seems a bit out of the ordinary to you, then be sure to consult with a qualified tax professional to make sure you’re not being scammed into revealing your personal information or money.

My monthly Social Security check will be plenty to get me through retirement. April Fools! Social Security income will only represent a portion of the retirement income needed to last you throughout the rest of your life. According to the Social Security Administration, approximately 73% of Americans are currently taking a reduced benefit. As the full retirement age increases (by two months each year) until it reaches age 67, individuals who begin collecting their Social Security checks at age 62, with a full retirement age of 67, will receive about a 30% reduction in their payments. So, how can you go for the maximum benefit? If during 35 of your working years you earned more than the Social Security taxable wage limit, then you may be eligible for the highest possible benefit. New retires in 2018, claiming at full retirement age, can now receive a monthly benefit of $2,788, which is $101 more than in 2017. As a comparison, the maximum monthly benefit you can receive claiming at age 62 is $2,159. And, if your personal situation allows you to wait to claim until age 70, then you can receive up to $3,698 for your monthly benefit.

Ultimately, it’s important that you strategically plan ahead in order to enter the retirement game on the right foot, and don’t get fooled anything that can potentially derail your life in retirement. It’s crucial to plan for what can go wrong, before being able to afford the luxury of what can go right. We help our clients have money conversations that matter to their financial future. You’ve worked hard for a large portion of your life, and so you deserve to retire with confidence that you’ll be able to do all that you’ve dreamed of. When was the last time you had a one-on-one retirement review? Schedule your complimentary, no obligation review today and we can work together to develop a solid plan to help you achieve your retirement goals without taking on unnecessary risk.