Marshall Loeb’s Daily Money Tip near the end of July was a list of three retirement gotchas you need to be aware of so they don’t catch you unawares when you retire. The first gotcha is an obvious one but the other two are less so.
Underestimating Your Budget. This refers to underestimating how much you’ll spend in retirement. The rule of thumb is that you’ll need 70-80% of your pre-retirement income to cover your expenses. However, given all the extra time you have, you might find yourself spending more. This is why it’s important to be realistic about your budget as well as keeping on top of it. If you plan for 70%, keep your spending within 70%!
Not Budgeting Benefits. When you retire, you often don’t get to keep your benefits such as medical, dental, and vision coverage. Those insurances can be very expensive so it’s important that you put them into your budget.
Divesting Takes Time. Lastly, you don’t get all your money immediately (nor may you want to) so be sure to plan your disbursements accordingly. You’ll learn that waiting until full retirement age will maximize your Social Security benefit payments so you’ll want to structure your disbursements to maximize that.
Get better prepared for retirement [MarketWatch]