Retirees: Avoid These Expensive Money Blunders at All Costs

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Retiring is a huge accomplishment. It’s the end of a hard-working career life and the start of a resting phase.

However, retirees often have financial problems that prevent them from enjoying retirement. These problems can be anything from debt to lack of long-term care insurance.

If you’re preparing for retirement in the coming years, this list will help you avoid common financial regrets.

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Saving Late for Retirement

Starting your savings plan late means you won’t have enough money to retire comfortably.

If it’s possible, try to start saving in your 20s or early 30s. If you start in your mid-30s to early 40s, you can still retire comfortably but there’s more urgency. Your mid-40s to 50s impose even more urgency, while 55+ is quite late.

Still, you can recover lost time by contributing more and pursuing aggressive investments that bring more returns.

By saving early, you’ll enjoy more benefits as your investment earns compound interest over the years.

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Retiring Early

If you retire earlier than the traditional age of 65-67, you may lack sufficient savings and deplete your funds too soon.

Still, some choose to do it for reasons such as:

  • Achieving financial freedom at a young age
  • To pursue personal projects
  • Health issues

Others like George Burns, the late comedian, think 65 is young:

“Retirement at sixty five is ridiculous! When I was sixty five I still had pimples.” — George Burns

If possible, wait until the full retirement age to receive the full benefits. Retiring early, say at 60 years, may slash your benefits by 30%.

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Incurring Debt

It’s possible to carry debt into your retirement years. This could be in the form of housing, medical, or credit card debt.

Debt reduces the amount of money available during retirement, forcing you to reduce your purchases, travel plans, and other leisure activities.

To clear your outstanding debt fast before retirement:

  • Create a plan focusing on paying off loans with high interest first
  • Create a budget that identifies where to reduce expenses
  • Explore other opportunities to increase your income

If you’re debt-free, live within your means and maintain an emergency fund to avoid relying on loans during emergencies.

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Failure to Account for Inflation

The price of fuel, grocery, housing, and services increases periodically, implying that the dollar you save today will buy less in the future.

This is dangerous for retirees living on a fixed income without a Cost of Living Adjustment.

If you budget that your annual retirement expenses will be $50,000, and 20 years later into retirement inflation rises at 2.5%, you’ll need to increase your spending to $82,000 per year, which you may not have accounted for.

To account for such inflation, invest in inflation-protected securities that adjust your principal according to the inflation rate.

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Lavish Spending

Spending money beyond what you can afford can lead to financial regrets later in life.

The most common ways retirees spend lavishly include:

  • Traveling frequently to exotic destinations
  • Purchasing expensive cars and homes
  • Dining frequently at expensive restaurants
  • Lavishing gifts and money on other people
  • Indulging in expensive hobbies and entertainment

Besides depleting your retirement savings, lavish spending reduces the amount of money available as an inheritance to your family.

Control a lavish lifestyle by identifying where you are overspending and creating a budget to curb it.

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A Non-Diversified Portfolio

A diversified portfolio ensures your investments are spread across different assets, industries, and regions to reduce the risk of loss if one asset performs poorly.

You could spread your investments across commodities, real estate, stocks, bonds, or cash.

On the other hand, a non-diversified portfolio concentrates investments in a single asset, industry, or region.

With non-diversification, your investments are exposed to market volatility. You may suffer large losses that force you to deplete your retirement funds.

To start your portfolio investment, seek a financial advisor to help you plan an investment strategy.

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Lack of Emergency Funding

An emergency fund covers you during emergencies such as urgent medical bills or in case of a job loss. This fund isn’t a nest egg for paying tuition or purchasing a new car, it’s only for sorting out emergencies.

Without an emergency fund, you’ll experience stress each time you dip into your retirement savings.

Recent Bankrate Statistics indicate that only 44% of U.S. adults can pay for a $1000 emergency from their emergency funds.

How much should you put in your emergency fund? It depends on your income, lifestyle, and dependents, but strive to have at least 3-6 months of expenses covered.

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Ignoring Healthcare Costs

Older adults often require increased medical care due to age-related complications, making it an expensive issue for retirees.

Since Medicare and standard health insurance don’t cover all the medical costs for retirees, you need an alternative plan, because Ignoring health care costs is one of the most common financial regrets of retirees.

Prepare for future medical costs by opening a healthcare savings fund. Consider Health Savings Accounts (HSAs) since they offer tax advantages.

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Fully Supporting Adult Children

Most parents are happy to help their children out of financial difficulties, so they chip in by paying tuition fees, housing, and utilities, but overdo it.

When savings.com conducted a study of 1000 parents of adult children without disabilities, 47% of parents said they support their adult children financially.

“Parents should have an idea of what they want for themselves, then plan how much their kids should receive.” Carolyn McClanahan, founder of Life Planning Partners in Jacksonville, Florida, tells CNBC.

Instead of fully supporting your adult children, teach them how to budget, manage debt, invest, and understand taxes.

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Not Seeking Professional Financial Help

Seeking financial advice is one of the most important things you can do to prepare financially for retirement.

Some retirees ignore this because they believe they can manage their finances or simply don’t want to share their financial details.

The downside is that you may make huge mistakes leading to financial regrets later in your retirement years.

As much as you want to plan your retirement single-handedly, seek a financial advisor. They have vast knowledge of budgeting, getting out of debt, and how to invest and save for retirement.

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Don’t Spend Your Golden Years In Regret

Retirement is supposed to be an enjoyable phase of life, but it can be full of regret if you don’t plan your finances and investments.

“The goal of retirement is to live off your assets, not on them.” — Frank Eberhart

Don’t be a victim of financial regrets. Diversify your portfolio, account for inflation, and do all you can to enjoy your retirement years.

This article was produced and syndicated by MediaFeed.

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