Knowing common retirement blind spots can make a big difference

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Planning a successful retirement isn’t only a matter of understanding the obvious steps along the way. An alarming study by The American College pegged 80% of older Americans as illiterate when it comes to basic retirement planning knowledge.

You don’t need to have eyes in the back of your head, but knowing common retirement blind spots can make a big difference in mapping out your futures. Here are five to consider:

1) Claiming Social Security
More than half of people claim their Social Security benefits at age 62 instead of waiting until full retirement age or later. That means many people are leaving money on the table. Understanding your options is important so you don’t rush into a Social Security claiming decision. Social Security likely will be just one part of your overall retirement income plan — and maximizing that plan is key.

2) Medicare Enrollment
Enrolling in Medicare is a daunting task. The terminology is confusing and the options are seemingly infinite, but turning 65 is the time to deal with this. The government will not automatically enroll you, unless you are already drawing Social Security benefits.

Letters from various insurance carriers will began appearing about six months before your 65th birthday. The decisions you make may differ from those made by friends, relatives and even your spouse.

You may be like many people who have chosen to delay receiving Social Security payments until at least age 66 to ensure the full monthly payout. But you’ll be sorry if you do that with Medicare, because there’s a very strict enrollment period that runs from three months before your 65th birthday to three months after it. If you miss that, you will be penalized, unless you have health insurance through your job or your spouse’s.

3) Asset location
You’ve heard it said about the value of real estate: location, location, location. But if you’re not thinking about retirement asset location too, you might be missing out on smart tax planning. Understanding how different types of accounts are taxed — or not taxed — in retirement can help you make better decisions.

4) Required minimum distributions (RMDs)
Chances are you have a good deal of retirement savings stashed away in tax-qualified accounts like IRAs and 401(k)s. While you may know that when you turn 70½, you have to start withdrawing some of that money via RMDs, there are number of strategies that can reduce your taxes either before you reach age 70½ (like Roth conversions), or while you are taking RMDs (like qualified charitable distributions, or QCDs, which allow you to make direct charitable contributions tax-free that count toward your annual RMD amount).

5) Not asking for help
In today’s one-click-away world, there’s no shortage of available resources to help you do just about anything yourself. Maybe you’ve found an online calculator or subscribe to a financial YouTube channel. Whatever the case, you may feel like you don’t need any ‘professional’ help. I would argue that there’s a lot to be aware of; some obvious, some not so much. A financial professional can help you think holistically about your retirement and catch things that you may miss or help you avoid some common (or not so common) mistakes.

If you think you could use some help, contact us and we’d be happy to learn more about your situation and see if we can help.

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About the Author:

Paul is the co-founder of Concentus Wealth Advisors and currently serves as the Chief Operating officer of the firm. After graduating with his Finance degree from Georgetown in 1997, Paul spent three years working for Credit Suisse First Boston in New York on their institutional sales desk and then as Director of Global Equities Information Technology. Paul continues to use his technology expertise to bring cutting edge resources to the Firm and their clients. He currently resides in Berwyn, PA with his wife and four children.

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