Follow these steps to avoid them
With the workforce finish line finally in sight, many previous workaholics dream of their retirement moment. After all, you’ve spent decades working hard, providing for a family and crafting financial independence. Retiring can feel like a reward for all the years you put in. While it should be treated as such, there are some retirement mistakes many retirees make that can put their financial health at risk. We’ve collected the three most common retirement mistakes, so you’ll know what they are and how to avoid them.
Failing to Update the Plan
Financial planners note that even the best-laid retirement plans can go astray when the plan isn’t revisited and updated as the market and economic landscape changes. While outside sources can be a significant factor, many people forget to look at how their life circumstances have changed too. If you’ve received a big promotion, bought a new house, or are currently caring for an additional child, your retirement plan should be updated. Changes in your budget and lifestyle may signal significant changes to your plan, too.
Financial experts suggest dusting off your retirement plan every five years and retooling it to fit in with your current lifestyle and budget, or any time there is a significant lifestyle change. Tweaking your plan as your life changes can help ensure you stay on track and that your goals are attainable when retirement finally comes.
Retiring Too Soon
Everyone dreams of the day they can trade in the daily grind for a leisurely lifestyle. According to Social Security data, many people are retiring too early and running out of money quicker than they anticipated. 75% of retirees opt in to social security benefits at age 62, the first year they are eligible. Opting in at 62, however, has hidden costs and will drastically reduce your monthly benefits. If you wait an additional four years, you’ll get 25% more in your monthly benefits check than you would if you retired at 62.
Experts suggest holding out for that 66 benchmark if you are in good health. Life expectancy is increasing, so it is likely that you’ll have many years of enjoyable life ahead of you. Retiring too early, however, can leave you stretched thin with finances.
Spending too Much too Fast
Retirees want to enjoy their time. Data shows that retirees are big spenders, but that probably isn’t the best idea. Retirees often succumb to impulse shopping, or luxurious travel and expensive hobbies. Economic experts call this phenomenon “deferred spending.” Retirees do all of the things they’ve held back on doing during their working years. While it is plenty of fun, it can wreak havoc on a budget.
Experts suggest planning out a long-term budget and sticking to it. Where possible, include a budget for travel and hobbies. When there is a plan in place, it is easier to stick to it and forgo impulse purchases and travel plans that might cost you big in the long term.
By avoiding these retirement pitfalls, you are sure to enjoy your much-deserved reprieve from the workforce. Travel happily, enjoy your social life, and get involved in hobbies you’ve dreamed about for years. Just remember to keep your financial health in mind and in check at all times.
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