Common Retirement Mistakes to Avoid
Retirement is supposed to be a time of relaxation, enjoyment, and financial security. However, many retirees find themselves regretting their retirement planning decisions. One of the biggest regrets among retirees is not saving enough money. To help future retirees avoid these pitfalls, we have compiled a list of common retirement mistakes and advice on how to avoid them.
One mistake that many retirees make is relocating on a whim. They are enticed by the idea of living in their dream destination, only to discover that it is not what they imagined. The slow pace of life, unfamiliar faces, and monotonous activities can quickly turn their dream into a nightmare. To avoid this, it is important to test the waters before making a permanent move. Renting before buying a property can give retirees a better understanding of whether a location suits their lifestyle and preferences.
Another mistake is planning to work indefinitely. While it is true that more than half of today’s workers plan to continue working in retirement, unforeseen circumstances can force early retirement. Poor health or a layoff can abruptly end your working years, leaving you without the financial stability you had hoped for. It is essential to save early and often, assuming the worst-case scenario. By doing so, you can ensure that you have enough funds to support yourself in retirement.
Many retirees also make the mistake of claiming Social Security benefits too early. Although you can start receiving benefits at age 62, waiting longer can result in a larger lifetime benefit. For example, if your full retirement age is 67, claiming Social Security at 62 will lead to a 30 percent reduction in your monthly benefit for the rest of your life. However, if you delay claiming, you can earn an 8 percent boost in benefits each year between ages 67 and 70 due to delayed retirement credits. It is advisable to live off your portfolio for a few years to delay claiming and take advantage of these guaranteed returns.
Borrowing from your 401(k) retirement savings account is another common mistake. While it may seem tempting, especially in emergencies, it can have long-term negative consequences. Taking a loan from your 401(k) often leads to a reduction or suspension of new contributions, resulting in a shortfall in your retirement account. Additionally, you miss out on the investment growth from the missed contributions and the cash that was borrowed. It is best to explore other options and only tap into your retirement savings as a last resort.
Lastly, putting your children’s needs before your own retirement savings can be a costly mistake. While it is natural to want the best for your children, sacrificing your financial security can have detrimental effects on both parties. Instead of solely relying on your 401(k) plan to fund their education or extravagant events, consider alternative avenues such as scholarships, grants, and less expensive in-state schools. Community college followed by a transfer to a four-year college can also be a cost-effective option.
In conclusion, avoiding these common retirement mistakes can help ensure a comfortable and secure retirement. By saving diligently, making informed decisions about relocation and Social Security benefits, refraining from borrowing against your retirement savings, and carefully balancing financial priorities, you can enjoy the retirement you have always dreamed of. Remember, it is never too early to start planning for your future.
