Retirement should be a time to enjoy and relax with family and friends. Financial preparation and diligent spending are key so that you don’t feel stressed to make ends meet in retirement. After all, the last thing you want to do is go back to work in your 60s or 70s or become a burden to your family financially.
To help yourself adequately prepare for your future, read our list of the three biggest mistakes to avoid in retirement that will drain your account.
Once you reach a certain age you can’t go back in time and recover financially from the mistakes you’ve made.
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Here are three of the biggest mistakes to avoid in retirement that could negatively impact your financial future:
Americans like to spend, bottom line. The issue is that bringing debt into retirement can be a “silent killer” for retirees as interest adds up when trying to pay off credit cards and loans. It can be hard enough to make ends meet with healthcare expenses and inflation, let alone the outstanding debt.
To help prevent this mistake, take a hard look at your finances five years before retirement to assess your debt and discretionary and non-spending. At the three-year mark, cut down and pay off big-ticket items that have high interest and large monthly payments, such as a boat or car.
Downsizing is one thing, but buying a second home that drains your income can be very risky.
While some people might argue that homes always go up in value, this isn’t always true. Jeff Girard, co-host on “Total Financial Solutions Safer Money Hour,” noted that he saw the ownership of additional homes “decimate people’s retirement” when the real estate market crashed in the mid-2000s.
It’s important to remember that when you’re not working, you’re not bringing in new income. An issue with home ownership is that mandatory fees and property taxes tend to increase significantly year after year. Not to mention, home improvement or normal wear and tear; the extra expense can significantly drain your nest egg.
As a parent, you want to help your children succeed. Life presents challenges and you might feel you need to bail them out of their financial issues. The problem is that your 30s, 40s and 50s is your time to diligently save for your retirement. Compound interest helps increase your savings exponentially and giving large, or even small, sums of money to your children to ‘help’ them can wreak havoc on your own retirement.
If you are already in retirement, giving your adult child $5,000, for example, can significantly affect your monthly and yearly income you’ve set aside. So, unless you’re wealthy, don’t let guilt cause you to give away your money. Instead, offer advice for loans or alternative methods of getting your children money so that your financial future can stay intact. Learn whether enabling your children is endangering your retirement.
How are you preparing for your retirement? What other mistakes to avoid in retirement should we add to this list? We’d like to hear your plans in the comments below.