After years of working hard, retirement is an excellent reward.

But if you don’t prepare properly, your golden years may not be all you hoped they would be.

Preparing to retire isn’t only about saving money. It’s also about learning which mistakes to avoid so you can maximize your savings.

There are a few mistakes that can put a significant dent in your retirement savings, so you’ll have to learn to avoid them.

Below, we’ll outline five common financial mistakes that people often make in retirement. Hopefully, this advice prevents you from making any bad decisions.

1. Not Having A Plan In Place

If you’re reading this, you’re probably already planning for retirement. If you’re not carving out time to plan your financial future, that’s a big mistake.

To plan for your future, create a strategy and follow through with it. It should be something you can stick with before and after retirement.

Your plan should outline how much money you’ll need in retirement. This amount should dictate a lot of decisions.

In your plan, you should focus on the following:

  • Maximizing Social Security benefits
  • Selecting a Medicare plan
  • Selling property at a competitive price
  • Minimizing taxes
  • Focusing on investments

Retirement planning can get complicated. That’s why if you create a strategy and stick to it, it’ll make the process that much easier.

2. Cashing Out Your 401(k) Accounts

Don’t cash out your 401(k) accounts until you’re at least 55 years old. If you withdraw earlier than that, you’ll pay a tax penalty.

And even if you wait until age 55 to cash out, you may want to wait even longer.

It turns out on some plans you can continue to gather earnings until you have to take distributions.

Say your 401(k) has $20,000 when you leave your job. If you were to keep growing your 401(k) for another 20 years, you could get up to $90,000 if the growth rate is 8%.

Having this much more money can significantly benefit you in retirement!

3. Having Debt When You Retire

Not everyone is in debt when they retire. Some are lucky enough to pay theirs off before retirement or shortly after.

If you’re in debt when you retire, you may have to pay it off with your retirement savings. That’s a problem because it could cause you to run out of money, and that’s not a situation you want to be in.

If you are in debt, try not to make withdrawals from your retirement fund to pay it off.

Instead, create a plan that allows you enough time to pay off your debt before you stop working.

Consulting with a financial advisor can help. Or if you have a financially savvy family member, they may be able to help you as well.

Whatever you do, try your best to pay off debt and start your retirement with a clean slate.

4. Not Understanding Healthcare Costs

Healthcare gets expensive. Unfortunately, many retired people don’t take that into account.

The 2018 Retirement Confidence Survey revealed that only 19% of people know how much money they need for healthcare.

While it’s impossible to know exactly how much money you’ll need, it’s essential to have a rough idea.

According to the Center for Retirement Research at Boston College, the average retired person spends roughly $4,300 on healthcare costs. And those healthcare costs are out-of-pocket!

As the years go by, these expenses can add up quickly. For your sake, try to estimate how much money you’ll need.

There are a few things you can do to ease the healthcare burden:

  • Select a good Medicare plan
  • Work on staying healthy
  • Think about getting long-term care insurance
  • Get regular healthcare screenings
  • Cut back on spending to save more money

5. Not Maximizing Your Social Security

Are you maximizing your Social Security?

There are many ways to increase your benefits. One method is to wait to collect them after your “full” retirement age.

You can also suspend your Social Security benefits until after you reach retirement age.

Say you voluntarily suspend your benefits at age 66. During each month of suspension, you could earn more retirement credits.

Typically, delayed Social Security credits are worth up to 8% more per year. It’s incredible how much money you’ll earn by suspending your benefits for just a few years!

Another way to boost your Social Security is to coordinate taking it with a spouse.

For example, your spouse could start taking theirs while you hold off. That way, you can pay your bills with their benefits while allowing your account to grow.

Using techniques like these can help you save the most money when you retire.

As you can see, understanding which financial errors to avoid is time well spent.

And there are many benefits to learning how to maximize your retirement savings.

Retirement gets expensive. But with careful planning and consideration, you can end up with a good nest egg.

It’s okay to live a little and enjoy your retirement to the fullest. But while you soak up the freedom, don’t forget to make sound financial decisions along the way.

Dominique DanielsAuthor Bio

Working with Bria, Dominique Daniels has more than five years of experience in the multifamily industry. In her free time, you will find her enjoying life on the Lake and spending time with friends.