In an excellent piece for usnews.com headlined Retirement Planning Decisions You Might Later Regret, Emily Brandon writes that “many decisions you make during your career have a big impact on how comfortably you will be able to live in retirement. Something as simple as passing up a 401(k) match or failing to save even a little bit during your 20s can result in a significantly smaller retirement nest egg. Signing up for Social Security too early or Medicare too late can also negatively impact your retirement income.” Among “common retirement decisions that you might end up regretting later in life,” Brandon includes:
“Passing up a 401(k) match. A 401(k) match is likely to be the best possible return you can get on an investment. “Even if you can’t put very much away, you want to at least contribute up to the match,” says Anjali Jariwala, a certified financial planner for FIT Advisors in Chicago. If your employer will give you 50 cents for each dollar you save in the 401(k) plan, that’s a 50 percent return. Companies that provide a dollar-for-dollar match give you a chance to double your money.
“Leaving before you are vested. If you leave a job before you are vested in the 401(k) plan, you may not get to take the entire 401(k) match that was provided with you, or sometimes any of it. “Assume that you are going to stay there and meet the vesting schedule,” says Michael Powsner, a certified financial planner and founder of Upstart Wealth Management in San Francisco. “If you don’t, your employer is going to get to keep some of that money.” While you may not want to pass up a better job, pay attention to the vesting schedule when making job change decisions, especially if you are close to becoming vested. Sometimes sticking around for a few extra weeks or months could add thousands of dollars to your retirement savings.
“Signing up for Social Security early. You can claim your full Social Security benefit at age 66 for most baby boomers and 67 for everyone born in 1960 or later. If you sign up for Social Security before then, your monthly payments are permanently reduced. If you start your Social Security benefit at age 62, your monthly payments will be 25 percent less if your full retirement age is 66 and 30 percent smaller if your full retirement age is 67. If you pass away at a young age, you might come out ahead by starting payments at age 62, but if you end up living a long life, you will collect more over your lifetime by starting your payments at an older age.
“Signing up for Medicare late. You can first sign up for Medicare Part B during a seven-month window that begins three months before the month you turn 65. If you don’t sign up during this initial enrollment period, your Part B premiums will increase by 10 percent for each 12-month period you were eligible for Medicare but didn’t enroll in the program. If you didn’t sign up for Medicare because you are covered by group health insurance through your job, you can avoid the late enrollment penalty if you sign up within eight months of leaving the job or the coverage ending. “