You’ve saved for years – and more likely, decades, and now retirement is looming. While you’ve worked hard to build a nest egg and to retire without worrying about money, a few common mistakes could derail your golden years. The most common retiree money errors include:
Overlooking Tax Penalties
Ignoring tax penalties when you withdraw money for retirement is a big mistake – and a common one. Rather than targeting the biggest or most convenient account, review all of your options to make sure you are drawing money in a truly efficient way. Keeping your tax burden low helps you retain more of your own income and live more comfortably in your retirement years.
Revisiting Your Budget Annually
If you have a set amount of money coming in it is tempting to simply purchase what you need and are accustomed to, regardless of changes in price and your own lifestyle. Discretionary expenses can and do creep up after retirement, and reviewing your budget annually can ensure that you are spending your money as efficiently as possible.
Bailing Out Adult Children
An adult dependent with a disability is one thing, but one of the most common mistakes retirees make is bailing their adult children out of financial trouble. If you are constantly funneling money to an adult child (or to their family), you need to stop. The consequences of running out of money in retirement are disastrous.
Underestimating The Costs Of Retirement
While many costs will go down – you won’t need that work wardrobe or worry about funding your daily commute, other expenses may be higher than anticipated. One of the most common expenses retirees underestimate is healthcare, according to NNN. Make sure you have a realistic idea of what your monthly and annual healthcare expenses will be and that you know how they will change when you are no longer on a traditional payroll.
Spending Too Much, Too Fast
Overspending in the early days or retirement is a common issue. Between the extra free time and fewer commitments, shopping, and new hobbies could fill the void. Spending too much in the first years of retirement can derail your carefully laid plans and require you to live on less later.
Careful planning and attention to your new budget and expenses can make the difference between a comfortable, worry-free retirement and being overly stressed about your money and obligations. Not at retirement age yet? We’ve covered the most common financial pitfalls for your 40s, 50s and 60s, too to help you prepare fully for retirement.