8 Money Mistakes That Could Harm Your Retirement
Retirement is an important chapter of life, but there are so many financial pitfalls that retirees can make. If you fail to save enough for your retirement, this chapter could be filled with stress and anxiety as opposed to relaxing days spent traveling or in the garden. Take a look at these eight common money mistakes that can affect retirement, and be sure to avoid them as you prepare to transition out of the workforce.
1. Failing To Plan
Benjamin Franklin declared, “If you fail to plan, you are planning to fail.” The 18th-century quote still holds up to this day, especially when it comes to retirement planning. Simply thinking that your retirement will work itself into a positive situation without putting any planning into it will likely end up leaving you in a bad position.
2. Not Saving Early Enough
If you don’t start saving for retirement in your best wage-earning days, then you will be scrambling later in life. Only 39% of adults who are saving for retirement started in their 20s, according to a study from Morning Consult. Slightly more than 25% of Americans in their 30s begin saving for retirement.
According to the Insured Retirement Institute. most workers over the age of 40 don’t have sufficient retirement savings and aren’t setting aside enough to catch up. In short: Save as much as you can as early as you can.
3. Retiring at the Wrong Time
Retiring at the optimal time can be tricky since you don’t have a crystal ball to tell you the future. If you retire too early and live longer than anticipated, you could run out of funds. Plus, retiring at a younger age could result in lower Social Security benefits.
Conversely, you could retire too late and forfeit all of your work-free golden years. Knowing the status of both your savings and your health will help you make an informed decision as to when retirement is right for you.
4. Underestimating Medical Expenses
Speaking of health, you need to be realistic about possible health catastrophes and the potentially exorbitant costs related to your issues. Medicare doesn’t cover long-term care, most dental care, dentures, eye exams related to prescribing glasses, routine foot care, and hearing aids and exams.
5. Ignoring Inflation
Inflation could cause your savings to be significantly worth less than you anticipated. The Federal Reserve expects a 2% inflation rate each year. However, higher inflation rates can catch people off guard. If prices for health care, food, and energy spike, the excess costs can blow up your budgeted retirement savings and damage your purchasing power in the future.
6. Overspending
A smart retirement plan will have a set budget, but if you veer off that economic program, then it can demolish your savings. Taking up expensive hobbies or pricey vacations may sound perfect for retirement, but these expenses can drain your savings quickly.
7. Hiring the Wrong Financial Adviser
If you employ the advice of an incompetent financial advisor, then your retirement planning could suffer. Be sure to ask around for recommendations, read reviews, and thoroughly vet the person you trust with your money.
8. Taking Too Much Risk
If you employ high-risk/high-reward investment strategies in your retirement and they fail, you won’t have the consistent income to overcome the financial losses. Be strategic about your investments, even if that means playing it safe.