Retirement is one of the biggest life transitions adults will ever deal with. After 20, 30, or 40 or more years in the workforce, new retirees can find it hard to adjust to the reduced amount of structure in their daily lives. But after a few years of the retired lifestyle, what would retirees warn their younger selves about? Read on for three things you’ll likely wish you knew before retiring.
When you’re still getting used to not pulling in a regular paycheck, it can make sense to avoid large expenses like the cost of a bucket list trip. But frontloading your travel expenses into the early years of retirement can often make sense, especially if you or your spouse are already battling health issues that might make future travel tough. The last thing you want is to miss out on your once-in-a-lifetime vacations because you didn’t take them when you were physically able to.
Though COVID has put a damper on many travel plans, it has also presented some unique opportunities to secure vacation destinations at unusually low prices.
Retirees may be tempted to get rid of their “family house” and move to a retirement home. But hastily-planned purchases can often lead to regrets, and some retirees may find themselves regretting the nosy neighbors, hefty HOA dues, or high property taxes of a retirement house they didn’t properly vet. In other cases, retirees may purchase a large home assuming that they’ll often be playing host to houseguests, only to find that these rooms remain vacant for 90 percent of the year.
In most cases, unless you truly can’t afford to remain in your current location, it makes sense to avoid the major life change of a move until you’ve spent at least six months to a year living as a retired person. Moving can be expensive, and retirees should carefully consider a home purchase before committing to a move. Spend time in your new neighborhood, interview members of the community, and be sure you’re looking at all relevant factors before you make such a major purchase.
Retirees have usually been in saving mode for decades, and transitioning to a withdrawal mindset can be an adjustment. But just as important as deciding how much to withdraw is deciding where to withdraw funds from. The tax treatment of various retirement accounts can vary widely, and structuring your withdrawals in the most advantageous way can help you save each year in tax payments.
It’s usually worthwhile to see a financial professional early in retirement, if not before retirement, to sketch out an asset withdrawal to address your need for steady income while managing your total tax bill.
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which investment(s) may be appropriate for you, consult your financial professional prior to investing. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and cannot be invested into directly.
The information provided is not intended to be a substitute for specific individualized tax planning or legal advice. We suggest that you consult with a qualified tax or legal advisor.
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