4 things most retirees should never do

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As a retiree, making prudent financial choices can help ensure your continued financial security. Unfortunately, some mistakes could hamper your efforts and increase the likelihood that you will find yourself strapped for cash in your later years.

The good news is that you can easily avoid these costly mistakes if you are aware of the potential problems they could create. Here are four key things the majority of retirees should avoid if they are to avoid a future financial disaster.

1. Go without additional health insurance coverage

Medicare provides insurance for the elderly, but the coverage is not as comprehensive as most people think.

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In addition to coverage exclusions for common medical needs such as hearing aids, Medicare also has high coinsurance costs. Specifically, with Medicare Part B – which covers most outpatient care – you will have to pay 20% of your expenses. It can be a small fortune if you see the doctor often. And there is no limit on your coinsurance fee.

You don’t want to risk ending up with thousands of dollars in surprise medical bills. To make sure this doesn’t happen, consider purchasing a Medigap policy to supplement traditional Medicare coverage or signing up for one. Medicare benefit plan.

2. Borrow high interest consumer debt for discretionary spending

Borrowing through a credit card, payday loans, or even a personal loan can be a big mistake as a senior. This is because you do two things when you borrow: increase the cost of your purchases by paying interest and committing to a monthly expense while you pay off your debt. Neither is a good thing to do when you’re on a fixed income.

If you increase your costs by adding interest charges to your purchases, you will have to spend more of your Social Security money or withdrawals from your retirement account on anything you buy. And when you commit to paying big monthly bills, you’ll have less money available in the future to cover your basic needs.

Unless you have no other option and must make a purchase you need to borrow for, just say “no” to senior citizen debt. Instead, try to save for your purchases over time by living on a budget and putting money aside for big expenses.

3. Putting too much money in high risk investments

As a senior, you need to earn a reasonable rate of return on your money so that you don’t deplete your account balances too quickly. But you also need to adjust your risk tolerance to take into account that you have less time to recover from losses and you may not be able to easily rebuild after a devastating market crash because you simply can’t always go back to work and invest more. This means that you should limit the amount of money you invest in riskier investments.

Unless you have enough cash on hand, completely avoid speculative investments where there is a reasonable probability that you will lose a large portion of your money and never get it back, even if such investments are accompanied by potential for significant gains.

You will also have to take more calculated risks when it comes to the stock market. You don’t want to stop investing. After all, the stock market has historically provided the best balance between risk and return for any investment over a long-term horizon. But you should have some of your portfolio out of the market so you don’t have to sell at a loss during a downturn to cover your immediate costs when you rely on your retirement investments for income.

And unless you’re good at picking stocks and willing to take the time to get it right, you might want to opt for index funds, which might be safer than investing your assets in shares of individual companies, although your potential returns are more limited with these funds.

4. Withdraw money from retirement accounts without having a plan

Finally, you’ll want to avoid draining your retirement nest egg by withdrawing too quickly, which means you should decide on a safe withdrawal rate it works for you. There are many options, including following the 4% rule or some other percentage-based rule where you withdraw a small percentage of your account balance each year. Before you take any money out, pick one that makes sense to you and that you think will keep your money going for as long as you need it.

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