One of the keys to retirement is to continue to make smart money moves throughout your post-work life. Saving for your golden years is important, but so is what you do with that money once you retire. Here are some risky money moves that could derail your retirement.
It might be tempting to make large withdrawals from your investment accounts early in retirement. You’re feeling healthy and you’re excited about what lies ahead. However, if you take a large withdrawal early and the market dips, it could spell trouble down the line. You’d need even more time for your accounts to recover. Instead of taking a big chunk from your accounts, it’s wise to start with a small amount — like four percent — and gradually increase it as time goes by.
Underestimating Medical Costs
As USA Today notes, almost 70 percent of adults require some type of long-term care during retirement. You need to be mindful of medical costs. One of the best ways to be prepared for those costs is to use a health savings account (HSA). A HSA offers tax-free contributions and tax-free withdrawals for medical expenses.
Failing to Plan for Taxes
If you’ve been saving in a 401(k) or a traditional IRA, you must remember that a big chunk of that money is going to taxes. Make sure you know the details about how much of your savings in those vehicles is going to get taxed. You can also use an account like a Roth IRA, which is tax-free in retirement.