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8 retirement mistakes to avoid

As you’re planning for retirement, it’s natural to be thinking a lot about how to do things the right way—whether it’s savings, budgeting, or staying active. But you might not be thinking about the common retirement mistakes you should try to avoid. Here are 8 things to watch out for as you’re nearing and beginning to live in retirement.

1. Avoid moving somewhere you won't like

Sometimes the grass seems greener in another part of the pasture. But then it turns out, it’s not. Be sure to thoroughly test any place you plan to move to. 
 
Keep in mind, although you might enjoy visiting somewhere on vacation, it’s another thing to live in a certain place full-time. Also be sure to consider how close you’ll be to friends, family, and communities you want to stay involved with. 
 
It’s also important to consider how well a location will work for you as you continue to age. Mobility around the house—as well as around town—is going to become more important each year. You may want to think about finding a walkable community or a home with good access to public transportation to help ensure you can get around easily and safely, helping you maintain independence as long as possible. 

2. Avoid claiming Social Security too early—or forgetting about taxes on your benefits

If you’re able to wait to claim Social Security at your full retirement age, you’ll get 100% of your monthly benefit. If you can afford to, waiting until age 70 may be even better: Your monthly benefit will increase 8% per year between your full retirement age and age 70. 
 
It’s also important to keep in mind that, depending on your income sources during retirement, you may have to pay taxes on your Social Security benefits. If your Social Security benefits are your only source of retirement income, then in most cases your benefits will not be taxed. On the other hand, if you have substantial retirement income in addition to your Social Security benefits, like a pension or income from investments, you’ll likely need to pay taxes on your benefits. 
 
Also, depending on what US state you live in, you may have to pay state tax on your Social Security benefits, in addition to federal tax. Currently, 11 US states tax Social Security benefits.1

3. Don’t ignore inflation

Investing may sometimes seem risky, but not investing can be risky as well. Investing in a way that at least keeps up with inflation can help ensure that you’re able to keep up with increasing prices. After all, your retirement planning likely included saving a certain amount, so nobody wants to see inflation erode that saving’s buying power over time.

4. Don’t forget to plan for longevity

No one knows how long they might live. It can be a good idea to make sure you're planning for a retirement that lasts longer than expected. Products like deferred income annuities could help ensure that you have a source of guaranteed income.2

These products might not be appropriate for everyone. Consider speaking with a financial professional to evaluate your potential guaranteed income needs and to see if they make sense for you. 

5. Avoid retiring too soon

Even if you can afford it, you may just not be ready to retire. It can make sense to check both your emotional readiness for retirement as well as your savings and finances. Many people also choose to ease into retirement by cutting back to a part-time job or volunteering work before retiring altogether, so that could be something to consider too.

6. Don’t forget to plan for health care expenses

Getting sick or injured can seriously derail retirement plans. But even relatively minor issues like root canals and other dental emergencies can be financial setbacks. 
 
Saving in a health savings account (HSA), if you have access to one, can help cover the cost of some of these expenses in retirement. If you’ve already signed up for Medicare, you could consider saving in an IRA if you have earned income. 
 
After age 70½, you can keep saving in a workplace savings plan if you’re still working (if the plan allows), or you can save in a Roth IRA—up to the annual contribution limit or an amount equal to your earned income for the year. 
 
Of course, you can also save in a savings account or other taxable account. However you do it, saving for unexpected expenses is always a good idea—even in retirement. 

7. Avoid being too generous with family

It’s natural to want to help family. But it’s important to put some limits on the help you can give as a person who’s retired. It’s very likely your budget will have a little less flexibility in retirement than it did when you were working, so be sure to plan for sensible gift-giving that won’t harm your finances in the long-term.

8. Avoid falling for scams

Fraudsters often target older adults because they’re generally less savvy with social media privacy settings, likely to answer calls from unknown callers, open junk mail rather than discard it, and they live off their savings.3  
 
To clarify, being a victim of crime is not a mistake. However, you can create a few safeguards for yourself by registering your cell phone and any landlines with the National Do Not Call Registry, for example. 
 
If you have an established relationship with a financial advisor, they may be able to spot signs of elder fraud. You can also add a trusted contact to your investment accounts so that if fraud is suspected, your advisor will have someone they can reach out to. 

What could your Social Security benefit be?

See how claiming at different ages could affect your benefit.

More to explore

1. Cheryl Lock, “Which States Tax Social Security Benefits?,” NerdWallet, September 5, 2023, https://www.nerdwallet.com/article/investing/social-security/which-states-tax-social-security-benefits. 2. Annuity guarantees are subject to the claims-paying ability of the issuing insurance company. 3. "Protecting Seniors from Financial Exploitation," FINRA, March 17, 2022, https://www.finra.org/investors/insights/senior-financial-exploitation.

Investing involves risk, including risk of loss.

This information is general in nature and provided for educational purposes only.

Fidelity does not provide legal or tax advice. The information herein is general in nature and should not be considered legal or tax advice. Consult an attorney or tax professional regarding your specific situation.

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