10 Worst Mistakes People Make
After Retirement
from
"The Financial
World"
1) Not Changing Lifestyle After Retirement
Among the biggest mistakes
retirees make is not adjusting their expenses to their new budget dependent
life.
Those who have worked for many years usually
find it hard to reconcile with the fact that food, clothing and entertainment
expenses should be adjusted because they are no longer earning the same amount
of money as they were while in the work force. For example, you might need to do
a little less dining out and learn to enjoy more home cooked
meals.
Many retirees also tend to forget to take into
account healthcare and long term care costs that usually come into play as a
person ages. If you have never considered this before, it’s time to talk to a
trusted financial planner to iron out your retirement planning. With some
appropriate adjustments to your budgeting and proper planning, you’ll
make sure you are set for any eventuality.
2) Failing to Move to More Conservative Investments
Once you have retired, you
can’t afford large negative
swings in your savings.
You regularly hear financial advisors
recommending a long term strategy and touting the strategy of leaving money in
the market regardless of the ups and downs. That’s because over time, the
market, while very volatile at times, has historically ended up rising in the
long term. When you retire however, you have to think more short term as you
will need to access the cash. It’s still probably smart to keep some money in
more aggressive growth investments, but not nearly at the level you did when you
were younger. A financial advisor can offer advice on how your investments
should be diversified. You might not make as huge gains in net worth, but you
will be protected.
3) Applying for Social Security Too Early
Just because you are
already eligible to apply for Social Security at 62 does not mean you should. If
you start taking benefits at age 62 will get you about 25% less than what you
would get on your full retirement age of 66. You will also get 32% less than if
you wait until age 70.
If you have the means to pay your bills, try to
delay your application for retirement benefits for a few years more. The benefit
increase is maxed out by 70 years old and will not increase any further, so
that’s the target age you should shoot for.
4) Spending Too Much Money Too Soon
Before finalizing your
retirement, you must take into consideration that you will only be living on a
fixed amount of money.
Oftentimes the amount of retirement savings
looks pretty large, but retirees must keep in mind that money will have to last
a very long time – hopefully a very, very long time!
Avoid the temptation to spend large chunks of
that nest egg early in retirement. The temptation to spend your money can be
almost irresistible, but discipline is vital. Depleting your money beyond the
interest that it earns will hurt the principal and would leave you with nothing
after just a few years.
5) Failure To Be Aware Of Frauds and Scams
Retirees unfortunately are among the
most targeted for scams. Be sure to consult an advisor prior to making any
investment or laying out a large amount of cash on anything. Scammers will prey
upon your desire to grow your savings.
Even if you are not retired or about to retire, always keep
a certain level of skepticism when it comes to the investments being presented
to you. Do your research first: ask about it and search for it online. You might
just find out that this whole system is just an elaborate way for people to get
money out of you.
6) Cashing Out Pension Too Soon
Retirees are easily swayed
by the promise of a higher return once they try to put their money on a
particular investment vehicle thus pushing them to cash out their entire
pension.
This is not always the best move to make:
investments are highly unpredictable and it can be difficult to look for one
that could pay just as much, or even more, as the pension over the long
term.
Remember that cashing out on a pension early
oftentimes comes at a big cost. Be extremely wary and weigh your options well.
The longer your life, the more you are going to miss out on the benefits of the
pension if you have cashed out early.
7) Not Being Effective Tax-Wise During Retirement
Having multiple retirement
accounts may sound ideal but you have to remember that each retirement account
is being taxed differently.
If you do not find a way to take out your money
from your assets and your accounts, you could end up paying more taxes that you
actually have to.
Finding the most cost-efficient way of being
taxed during retirement is a complicated manner so you might want to make sure
that you have a trusted financial planner to help you along the
way.
8) Supporting Adult Working
Children
Family is often hard to
refuse, but you have to remember that your savings are fixed for the most part
and your ability to earn back money taken from savings is greatly diminished in
retirement.
Your children are going to be much better
equipped to recover from financial difficulties. Unless you are really sure you
have the money to spare, avoid giving large monetary gifts or loans, especially
if you are already out of the work force.
Remember that you will no longer be earning the
same as you did when you still had a job. It is expected that your expenses will
have already gone down by this time. This means that whatever money you get
should be enough to cover only your personal expenses.
9) Being House-Rich but Cash-Poor
People often pay for their
mortgage for most of their life and, by the time they retire, end up with a lot
of equity in the home and with little cash left.
While houses appreciate in value, the costs of
upkeep including taxes, utilities, services, repairs and maintenance is too much
for a retiree to handle.
Once you have decided to get out of the work
force, it is assumed that your children should have already moved out of your
house.
You can downsize your living expenses by
selling your house and moving in to a smaller home that you can afford.
You can also invest the remaining money on more
predictable income in order to support your new retirement
lifestyle.
10) Not Staying Active Socially and Physically
Possibly one of the worst
things you can do when you retire is become reclusive and
inactive.
It’s important to maintain social connections
and frequently enjoy the company of friends and family or join social groups and
activities that will enable social interaction with peers.
The mind is like a muscle – if it is not
exercised, its capabilities will fade.
So in addition to continuing some sort of
regular exercise habit, seniors should also exercise their brains.
Reading books, solving puzzles and just simply
engaging in conversation are all great ways to keep the brain sharp and
functioning well into later life.
Becoming reclusive and spending a lot of time
in front of the television, while on occasion may offer relaxation, should not
monopolize your time.
Keeping active will not only help keep you
mentally sharp and physically healthy, but will also elevate your mood and help
you be happy well into your golden years!
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We have many friends that suffer from mistake #8.
IMHO you are doing your children a did-service by your continuation of support....emergencies are one thing - but paying for their expenses like gasoline an cell phones is a recipe for disaster...they need to realize that the National Bank of Mommy and Daddy won't be around forever!