In many finance websites, blogs, and articles, a lot has been said about how to prepare for retirement, but I believe there hasn’t been enough written about what to do when you get there. More specifically, there’s a lack of content about mistake, or mistakes, to avoid.
In this article, we’ll explore several mistakes to avoid when you reach this milestone.
Spend beyond your means
This seems obvious, but once the psychological barrier of spending versus savings is breached, people (not everyone) develop this mentality of “I saved for 40 years for this moment, why shouldn’t I enjoy it?”
You should enjoy it. You worked your butt off for it, right? There are strategic ways to do this, however. The mistake is going gangbusters right away.
- Create a budget/spending plan – Your budget in retirement will be different than your budget before retirement. Create line items for everything, and get real granular with your discretionary spending (i.e. sub line items to breakdown where the discretionary spending is actually going).
- Plan for healthcare – Healthcare costs, generally speaking, will be your largest expense in retirement. Plan accordingly.
- Income strategy – More than likely, you’ll have a few different income sources (social security, pension, retirement distributions, etc.). Create a line item for each source.
- Senior discounts – Take advantage of every single one. There might be a psychological hesitation with this, as it forces you to come to terms with your age/where you are in life
- Spoil grandkids – Every grandparent wants to spoil their grandkids to death, but it must be done within reason. Get creative and be strategic about when and how much.
Make Quick Decisions
Another mistake is making quick decisions. Don’t do it. Any decision you classify as BIG needs to be well thought out. This could be anything like moving, downsizing, vacations, or eliminating a vehicle.
I would argue that any decision about an expense that’s not in your budget/spending plan, should be thought about for several days. My rule of thumb is a week. By then, the euphoria of such a purchase has gone away, then you think more logically about it.
Investing Aggressively
Over the years, a big mistake clients make is the desire to invest more aggressively than they should. Oftentimes, this is to compensate for an inadequate savings rate during their working years or a significant market pullback that hurt their portfolio.
While capital appreciation is still an investment objective in retirement, it’s no longer the primary goal.
This primary goal should be capital preservation. Limiting losses on what you have. This has less to do with time and more to do with your decreasing ability to go out and make more money. Allocate your portfolios accordingly.
Ignoring Estate Planning
Estate planning is a key ingredient to your financial planning recipe. It mustn’t be ignored. Every debt and asset you have needs to be accounted for, listed, and given a task for when you pass.
Estate attorneys can be expensive, but I believe it’s 100% necessary to find one you trust, so your estate is well taken care of.
Isolating Yourself
Your social life is more important than ever. Countless studies show that people with strong relationships outlive those that don’t. So the mistake here is not making your social life a priority.
Join a community, volunteer, retain, and nourish friendships. Whatever flavor of social life sounds desirable, make it a priority.
Letting Yourself Go
Taking care of your mind and body is always important, but especially now. It will keep you healthy, therefore, lowering your healthcare expenditures, but it’s also another way for you to meet people.
Go for walks with neighbors and/or friends. Join a gym. Many of which have reduced rates for seniors. Additionally, many health insurance companies have “silver sneaker” programs that offer inexpensive services and programs for seniors.
Expecting it to be easy
This is a BIG life change and the transition will not be easy.
Not only will you shift from saving to spending, but those social connections you developed over your working years can reduce in frequency and strength.
Go easy on yourself and be patient.
Taking Social Security too early
Unfortunately, there are situations and scenarios where taking Social Security Income (SSI) distributions early is necessary. However, for those of you where this does not apply, speak with a trusted advisor about optimizing your SSI strategy.
Getting Swindled
Scammers adapted. They’re smart and they know how to target susceptible people. Unfortunately, elderly individuals are inherently more at risk than the general population.
Any email, phone call, or text that you receive (unsolicited, of course) should be greeted with a fair amount of skepticism. Don’t willingly give out any pertinent information (name, DOB, social security number, etc.).
Doing it alone
A BIG mistake people make is thinking they can plan by themselves. It would behoove you tremendously to consult with several experts. Estate attorneys and financial advisors should be at the top of this list.
Do your research, check online reviews, and get testimonials from trusted contacts. Having capable professionals in your corner could set you up for success and put your mind at ease.
Related reading:
Why Your Will Should Be Up To Date
Moving: Another State, Another Country
Registered representatives offer securities through Securities America, Inc. Member FINRA/SIPC. Advisory services offered through Securities America Advisors, Inc., an SEC Registered Investment Advisory Firm, Jacob Sensiba, Investment Advisor Representative. CRG Financial Services, Inc. is not affiliated with the Securities America companies. Securities America and its representatives do not provide tax advice. Please consult with your tax advisor regarding your specific situation. The opinions and forecasts expressed are those of the author, and may not actually come to pass. This information is subject to change at any time, based on market and other conditions and should not be construed as a recommendation of any specific security or investment plan. Past performance does not guarantee future results.
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