8 Things Not to Do in Retirement

By Fool.com


Your financial strategy also must shift when you leave work, or there can be huge consequences for your nest egg and standard of living. Here are eightretirement mistakesyou should avoid making:

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1. Taking Social Security too earlyAccording to certified financial planner Eric McClain ofMcClain Lovejoy, "Don't start Social Security as soon as you are eligible. It may make sense to delay, perhaps even draw on your other assets first."

McClain is right. While you might be eligible to start taking your benefit at age 62, waiting until your full retirement age (FRA), which is 66 or 67 if you were born in 1960 or later, results in a monthly payment that is about 30% higher than you would receive at age 62. If you can wait until age 70, your benefit will max out and be another 32% higher than at your FRA.

Also worth noting is that any cost-of-living adjustments will be based on these higher benefit amounts as well.



2. Not investing aggressively enoughRetirement is not the end of your financial journey; in many ways it is only the beginning. According to the Society of Actuaries (via Vanguard Investments):

What this means is that you still need to invest at least a portion of your retirement nest egg for growth. What percentage and how your overall portfolio should be allocated will vary based on a number of factors unique to each retiree's situation. However, being too conservative can result in outliving your money in retirement given today's longer life expectancies.

3. Ignoring the impact of inflationAt a somewhat normal rate of 3% inflation, your purchasing power will be cut in half in 24 years. Given the statistics above and the fact that we are living longer, inflation is every retiree's worst enemy.


  • Invest aggressively enough to stay ahead of inflation.
  • Plan conservatively for inflation. Inflation for retirees is higher in part due to higher healthcare costs.

4. Not meeting with a financial planner for retirement planning helpEngaging the help of a qualified,fee-only financial advisorfor retirement advice can help both pre-retirees and those already retired ensure that they are on-track.


You only get one shot at retirement, so don't let your pride or a reluctance to spend the money deter you from getting the help you need.

5.Not planning for healthcare costsA couple retiring in 2014 would need $220,000 to cover healthcarecosts in retirement, according to astudy by Fidelity Investments.This is a significant amount of money even for someone with a $1 million plus nest egg. For 2016, it is expected that there will be no cost-of-living adjustment for Social Security, yet for many retirees Medicare premiums will increase.



It is far better to know that you need to make adjustments than to go blissfully into retirement and spend at a rate that you can't sustain and run out of money.

7. Failing to have a retirement income strategyOne of the most complex aspects of managing your finances in retirement is managing distributions from your various retirement accounts along with other sources, like a pension or Social Security.

Which accounts should you tap and in what order? What are the tax ramifications? How will your income affect Medicare and other benefits?The ramifications of not having aretirement income strategycan be catastrophic.

8. Not factoring in the impact of taxes in retirementTaxes can be a huge factor in retirement. Withdrawals from retirement accounts, such as IRAs and 401ks, are usually subject to full taxation at ordinary income rates.Further, these withdrawals are added into any other income you might earn. For example, if you have $50,000 in income from other sources and withdraw $50,000 from an IRA, you will be taxed on $100,000 in income.


A Roth IRA is not subject to taxes if all rules are followed, and a Roth 401k can be rolled into a Roth IRAto receive similar treatment.Pension payments are usually taxable. However, some state pensions might be exempt from state income taxes in that state. Social Security also can be taxable depending upon your income.


If you take a partial lump sum from the annuity account, the assumption is that the distribution is from the gain portion of the account and all partial distributions will be fully taxed until the gains are used up.In a qualified annuity that is inside a retirement account, the same tax rules apply. As with any IRA, the full amount of any distribution would be subject to ordinary income taxes.


This article originally appeared on gobankingrates.com.

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