Like so many things in life, you can learn from the mistakes of others. When it comes to retirement planning and spending, there are some classic pitfalls to avoid.
Seasoned professionals who work with retirees hear cautionary stories on a daily basis. The need to plan wisely and make savvy choices is apparent from the mistakes made by other retirees, according to Kiplinger’s article, “4 Big Retirement Regrets That You Should Avoid.”
Retirees often consider their regrets and the things they'd do differently if they could. The following are a few of the more common mistakes retirees make:
- Quitting too soon. After all those years of working, it's hard not to dream of retirement. This decision, however, can be more emotional than logical. If you retire too early, you cut down on the time you have to save money, and you also lengthen the time you'll need that money.
- Depending too much on hope. When you retire, your amount of financial risk needs to change. Don’t keep the same investment strategy and look for big returns. In retirement, it's not as much about how much money you can grow, but rather it's about taking distributions. It’s not a gamble with the future. No, you’re risking money you need to live on right now. If there's a serious downturn, you could lose much of your lifetime saving, which may not be easy to recover.
- Cashing in too early. Many retirees regret drawing Social Security at age 62 rather than waiting until they reached their full retirement age (or even longer)—when they would have received bigger monthly checks. Without a strategy to address taxes and other expenses, they fail to address the potential issues when it comes to sustaining the lifestyle they want on the money that remains.
- Spending too much, planning too little and enjoying too late. Retirees frequently overspend in the first few years when they have their good health and freedom. Unfortunately, they don't have a plan to address their income needs, so they withdraw too much too fast to pay for that new life without considering the future.
You don’t want to be one of the retirees who regret saving every penny and not doing the things they had planned or who never figured out what would make their leisure time fulfilling and rewarding. Plan for how to use your time and energies as well as for how to use your money.
Achieving a successful retirement is like any other part of your life in that you have to balance what you want with what you can afford. Your best ally before and during retirement is good planning and the help of experienced professionals to achieve your goals.
Reference: Kiplinger’s (August 2016) “4 Big Retirement Regrets That You Should Avoid”