10 Biggest Retirement MistakesDavid Macino
Retirement may be both one of the most anticipated and feared milestone events in each person’s life. For most of adulthood people plan, save, and dream of the day when they no longer have to build their lives around their occupation and are free to pursue what they enjoy. Once they get there, it’s often different from what they expected. Some common blunders can turn a hoped-for dream into an anxiety-filled nightmare. When entering retirement, watch out for these common retirement mistakes.
When your retirement savings are going fast, it’s an urgent financial issue. The first step is to figure out if the problem comes from spending too much or from a budget that is too small.
Analyze your spending habits to see where the money is going. Consider using an app to track income and expenses. If you’re spending too much on travel or splurging on luxury items, identify areas you can cut back to stay within your budget.
If you’re only buying essentials and you still don’t have enough to get by, you need to find additional ways to reduce expenses or take steps to improve your income. A part-time job or different investment strategy might help.
Misjudging Healthcare Costs
When you no longer have employee benefits for healthcare, you may find healthcare costs to be higher than you thought. As people age, they often have to pay more to maintain their health. Some experts recommend people prepare to spend 30 percent of their retirement funds on healthcare. AARP offers a planning tool that helps estimate retirement healthcare costs and see how small changes can result in savings.
Buying Services You Don’t Need
Analyze your habits to cut services you no longer use. If you walk instead of going to the gym, cancel your membership. Go through your stack of magazines and cancel subscriptions to the ones you keep meaning to read but don’t. If you mostly use Netflix and Vudu, cancel your cable.
Downsizing Too Soon
When your kids move out, you might be tempted to move into a smaller home. Sometimes, getting rid of a few hundred square feet doesn’t save you enough to be worth it. Before you downsize, weigh real estate fees, taxes, and utility costs to see if selling will provide you with more retirement money or just give you less space.
Miscalculating How Much You Need
Most individuals should save enough to replace between 70 and 90 percent of their annual income, but that varies widely depending on how you want to live during retirement. Some people plan to have their home paid off, but they want to spend more on travel. The more you intend to spend, the more you’ll need to save. Online retirement savings calculators can give you a general idea of what you need to save to reach your goal.
Misunderstanding Social Security Benefits
Social security plays a big part of most peoples’ retirement plans. Many people are confused about when they should start claiming their benefits, how benefits are determined, and what they can expect in the future. There’s no foolproof way to estimate social security benefits before retiring, but creating an account at www.ssa.gov provides access to estimated benefits.
Retiring Too Soon
Social security benefits depend on when you were born and when you decide to retire. Determine your full retirement age in order to successfully plan for your retirement. Retirement is not a decision to be taken lightly. Many people who retire early fail to properly prepare and can encounter unforeseen financial problems. Some people retire early and yearn for the responsibilities and purpose they felt from their career. It is important to consider a wide variety of factors when thinking about retirement.
Underestimating Future Cost of Living
It is important to keep your future cost of living in mind when planning for your retirement. If you are planning to relocate to a different area, it is imperative that you research the cost of living in that area. Many retirees fail to properly account for the rising costs of medical care as they age.
Saving and Investing in the Wrong Places
Those who are planning for retirement generally start saving more and investing in safer places. If you are putting more money into savings, you should make sure you are putting your money in the right place. Once you begin saving for retirement, you should consult with a professional to ensure your hard-earned money will work towards your goals.
Not Planning for Life Events
One of the most costly retirement mistakes is failing to prepare for unforeseen life events. A tragedy in the family, a natural disaster, or any other unexpected event can cause emotional strain for you and your family. Failing to prepare for these types of events can add financial problems on top of the emotional strain. Preparing for these events can make them a little bit easier to deal with.
As you plan for retirement, it’s best to plan, prepare, and save far more than you think is necessary. When you enter retirement with the right information and resources, you set yourself up to enjoy the next phase of your future.
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