Four retirement income planning mistakes you need to avoid

When it comes to planning for your retirement, there is a lot of information out there about what to do. We have covered extensively in the past some tips for what you need to do to save for your retirement. However, just as important as it is to hear about what you do need to do, you need to hear about what not to do.

We want you to have a smooth and enjoyable retirement. To help you get there, we have put together a list of retirement income planning mistakes you need to avoid.

1. Collecting Social Security as soon as you qualify

American citizens are eligible to collect Social Security benefits once they are 62 years old. However, the payments you receive by collecting benefits at 62 are smaller than the benefits you would receive by waiting until your full retirement age (65 to 67 depending on when you were born). Once you start collecting benefits, you are locked in at that amount for the duration of your retirement.

By waiting a few years to collect retirement at your full retirement age, you can collect higher Social Security benefits.

2. Panic-selling your investments

The market goes through periods of volatility. This is a normal pattern that occurs at least once every few years. It is important to not panic-sell your investments out of fear of loss during a bear market or volatile period. 

Remember, you do not truly lose your investments until you sell them at a loss. Bear markets have a tendency to last a short period of time before resuming a lengthy and generous bull period. 

Make sure your portfolio is balanced. Have a spread of short-term and long-term investments that can carry you through both bull and bear markets. Bear markets do not tend to harm long-term investments, so having these can keep your investment savings healthy when your short-term investments are struggling for a brief period of time. 

3. Not having a distribution strategy

Having funds to live off during retirement is not as simple as selling investments and making a profit. You need to pay attention to the required minimum distributions (RMDs) of your retirement investments, such as your 401(k) and IRA accounts.

Some retirees make the mistake of selling investments and earning a lot of money, but they still have to make RMDs, which push them into a higher tax bracket in combination with their profits. 

Make a distribution strategy for your monthly retirement income, so you can make sure you have enough money to live off but are not withdrawing too much and pushing yourself into a higher tax bracket when you have to meet your RMDs.

4. Ignoring your portfolio

You need to regularly review your investment portfolio to keep up with the changing market or as your retirement nears. For example, if you are nearing retirement or already retired, you may want to shift your portfolio from higher exposure to equities and increase your percentage of bonds for more effective long-term stability.

Talk to a ProVise CFP® professional about preparing for retirement

It would be nice if saving for retirement was as simple as following the recipe for baking a cake. However, when it comes to saving for retirement, the recipe is constantly changing depending on the health of the current market, your individual financial circumstances and how close you are to retirement. 

At ProVise Management Group, our CERTIFIED FINANCIAL PLANNER™ professionals can get to know you and your current financial circumstances, goals, risk tolerance and personal values to help you develop a plan that works for you. We can also create a written plan for you at a fiduciary standard of care. All our written plans come with an unconditional money-back guarantee. If you are unhappy with your written plan, you can return it to us, and we will refund 100% of the fee paid.

Are you ready to talk to a professional about preparing for retirement? Contact ProVise today to schedule a complimentary consultation.