If you’re heading into your retirement years, you might think it’s all smooth sailing from here. While it can be, there are some financial hiccups that could seriously put a dent in your retirement fund. We’ve got 25 of these bad financial decisions to completely avoid unless you want your nest egg to completely disappear.
Savings Shortfall
So you thought you saved enough for the long haul, but thanks to modern medicine, we’re all living longer than ever, which means your money has to stretch further, too. If your savings look a bit thin, you need to beef them up, potentially through a part-time gig or cutting back on luxuries. Every little bit helps so you don’t run out of cash when you need it most.
Dangerous Debt
Carrying debt into retirement can really cramp your style and budget. If you can, try to pay off those high-interest debts before you retire because being debt-free means more of your retirement income will go into your pocket. And let’s be honest, the feeling of being debt-free is priceless.
Healthcare Hurdles
Nobody likes surprises, especially when they come in the form of big medical bills. Healthcare isn’t getting any cheaper, and as we get older, we unfortunately need more and more of it. Putting a little cash aside now can help you with those future bills, or, better yet, you could try investing in a health savings account.
Avoiding Check-Ups
Similarly, ignoring health check-ups can cost you some big bucks further down the line. Visit the doctor regularly to catch any issues before they become serious and expensive. Staying on top of your health will also mean you get to enjoy your retirement to the fullest without being stuck in bed.
Make Yourself Known
Don’t forget to create an estate plan, as avoiding it can lead to all sorts of complications and headaches for your loved ones after you’re gone. Take the time to set things out clearly because it’ll save everyone a lot of trouble. Plus, you’ll also rest easy knowing that your assets are going exactly where you want them to.
Long-Term Care
You never know what the future holds, and that includes needing long-term care. You might end up needing in-home help or going to an assisted living facility, both of which cost a pretty penny. Long-term care insurance is an extra expense now, yes, but it’s definitely a lot cheaper than paying out of pocket later.
The Big House
Hanging onto that big family home might cost you more than it’s worth, so it could be better to downsize. Why? You’ll save on your utility bills and cut down on those maintenance costs. Plus, selling your home will free up some cash for your retirement funds and simplify your life. What could be better than that?
Tax Troubles
Even after you stop punching the clock, the tax man still comes, so be prepared. Any withdrawals you make from certain retirement accounts or even some pensions can be taxed. You’ll need to get a handle on what’s coming out, and you can do this by talking to a good tax advisor to save yourself a headache.
Tax Breaks
Speaking of taxes, many retirees miss out on tax deductions and credits that are actually available to them, which could be for medical expenses or even donating to charity. These tax breaks can lower your tax bill by quite a lot, so it’s worth talking to a professional. You might be surprised at what you’ve been missing.
Don’t Be Shy
Lots of places have senior discounts and these deductions can actually add up to some big savings. All you have to do is ask. The worst thing that could happen is that they say no, and the best? You could end up saving quite a bit. Every penny counts when you’re managing retirement funds.
Inflation Issues
Inflation is something that’ll eat away at your purchasing power without you really noticing until it’s too late. If your retirement income isn’t keeping up with inflation, you’ll end up pinching pennies. Adjusting your investments to make sure they can cope with rising prices should do the trick.
Timing is Everything
Don’t be tempted to dip into your retirement pot too early or late, as this could trigger penalties or even put you in a higher tax bracket. Instead, plan your withdrawals carefully to keep more of your money working for you. You should also check out any minimal distribution rules to avoid unnecessary fines.
Social Security Strategy
Similarly, if you hold off on claiming Social Security, your monthly benefits will go up, and waiting a few extra years to claim can make a huge difference in your checks. It’s worth working out the numbers to see if you can afford to delay and cash in on bigger benefits later. Who knew being patient could be so rewarding?
Finding the Balance
One of the most important things to do is to balance your investments. Playing too safe with them can be just as damaging as going all-in on high-risk investments. To avoid this, make sure you’ve got a well-rounded investment portfolio that’ll help you ride the ups and downs of the market without too much trouble.
Don’t Do It
There’s absolutely no reason to retire without a solid financial plan. Even during your retirement, you should check in regularly with your financial advisor to stay on course and adjust your plans as things change. They can give you better ways to secure your financial future, depending on your life and the market.
Checking Up on Insurance
Every time your life changes, so do your insurance needs. Make sure you’re not spending on coverage you don’t need by reviewing your insurance policies now and then. Doing this once a year will stop you from overpaying on things you’re not using or don’t need, which can save you a lot over time.
Talented With Technology
The upfront cost of certain technology might be high, but it can actually save you quite a bit in the long run. For example, FaceTime’s a free way to keep in touch with your family, while financial apps can help you manage your money. There’s also a bunch of tech out there that’s made just for people over 50, so give it a go.
High-Maintenance Homes
Maintaining older or larger homes can get pretty costly, and then there’s also the issue of unexpected repairs. You might want to switch to something a little more manageable to avoid these steep costs and hassle. Plus, smaller spaces are a lot easier to manage, particularly with cleaning.
Investment Fees
If you’re not careful, investment fees can end up costing you more than the income you’re getting from the investments themselves. Keep an eye on what you’re paying and shop around if you need to because lower fees mean more money stays in your account. Take the time to adjust things where you can.
Pension Pitfalls
Pensions are great, but putting all your retirement hopes on them is a big mistake, especially since so many pension funds are under pressure. Get a few income streams, like rental income or annuities, so you’ve got a safety net to rely on. The key to retiring without worries is to diversify your savings.
There For You
Your local community probably has a ton of resources that you might not even know about, like financial planning workshops and health services. Some are free, most are low-cost, and all of them will give you great advice and support. You might even make some friends while you’re there.
Be Prepared
Just because you’re retired doesn’t mean your emergencies will stop, so set some money aside for any unexpected expenses. Being proactive with your savings means you’ll be ready for anything that comes your way, like sudden car repairs or medical emergencies. Do you really want to risk it?
Saving On the Go
Car maintenance and insurance don’t come cheap, and when you factor in the cost of gas, you’ve got a nightmare for your bank account. If you’re living in a place with good public transportation, take advantage of it to make some big savings. Better yet, it’s a great way to stay active and engaged in your community.
Forgetting Credit Scores
Your credit scores are still important, even when you’ve retired. Good credit can help you to refinance a mortgage at a lower rate or even get a car loan with good terms. Keep an eye on your credit score and make sure it stays healthy so you can keep your financial options. It’s also great for your mental health.
Ignoring Passive Income
Passive income can completely change your retirement prospects, so don’t forget about it. It doesn’t matter if you’re renting out a property or investing in dividends because both of these can give you a steady cash flow without clocking in or out. Even just a little extra money can cover your daily expenses or occasional splurge.
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