Author: Maria Alfano
Nothing hurts more than the retirement mistakes you could have avoided with proper planning. The good news is it’s not too late. Whether you are 20 years or 5 years away from retirement, you can take action today. Stop kicking yourself for your past indiscretions. They are what molded you into the person you are today. Learn from them and move on. Take each challenge and turn it into a positive way to make your last few decades successful, fun, and fulfilling.
Sadly in North America statistics say that folks by the time folks reach the age of 65 they are either dead or broke. Don’t become a statistic. You can change your path with a few simple steps. Live more comfortably in retirement than you imagined you could. All it takes is a little grit and determination, as well as a good support system.
When we were small children we couldn’t wait for the school year to end so we can start our summer vacation. Two glorious months of fun with friends. In high school, we dreamed of the days when we would finally get to college. By the time we got to college all we wanted was to be out in the workforce. The problem is, there are no courses to prepare you for what happens after you leave the j.o.b. Everyone is more focused on making a successful employee that they forget that you will no longer be one in the future.
Preparing for your eventual retirement should start as soon as you start working to avoid these 11 retirement mistakes. Having said that it is never too late to start. Doing something, even at the 11th hour, is better than doing nothing at all. This post will draw your attention to the top retirement mistakes that you can avoid with some good old-fashioned planning and what you can do to circumvent these mistakes.
11 Retirement Mistakes You Can Avoid By Planning
The education system is a little broken when it comes to teaching people about life and how to properly plan for each phase of life. Thank goodness for what my hubby likes to call “the university of YouTube.” What you didn’t learn in school you can learn there. Take what you see with a grain of salt and do some further research to confirm your understanding. Proceed with what makes sense for your personal situation.
Work
1 – Savings – savings can be a blessing and a curse. Either way, you need enough in the bank to sustain your lifestyle for years to come after you retire. Some folks fail to participate in benefits for 401K (RRSP in Canada) or pension plans offered by employers. They are throwing away free money, mostly due to their lack of knowledge of how this will benefit them in the long run.
Not enough savings will cause undue stress and force you to live a lesser lifestyle than you had while employed. Too many savings has some people spending more than they would normally by giving to their children, a local charity, or just making purchases they may not need.
2 – Retiring too early – so many North Americans rely on government pensions like social security to get them through their golden years. The younger you are when you decide to draw from your government pension, the less you will receive each month. That amount stays fixed except for nominal increases for inflation each year. You could be setting yourself up for hardship by drawing from the plan too early.
3 – No plans for income – so many times when I was younger I would see older folks I worked with retire, then show up back to work on Monday as contractors, doing the exact same job they retired from on Friday. For years I could not understand why. Today it makes sense. They needed an extra form of income to support their lifestyle. What will you do for extra cash after retirement?
Personal
4 – Too many debts – credit cards seem to be the way most people make it from month to month these days because their expenses are too high. The average household carries a balance on their credit cards between $7,500 and $30,000 a month. Paying these off would be essential to living well post-retirement. If one could barely afford to survive on the full salary with all these debts, one could not expect to survive on 65% of their salary when they retire if they continue to carry all this debt load.
It is easier said than done but here are a few tricks I learned along the way. Cut out anything you don’t need. We cut our cable down from $200 per month to $28 by removing all the bells and whistles. Freeze your credit card in a block of ice and spend only what you have in cash. If you have more than one credit card, pay the minimum each month on the card with the lowest interest rate. Pay as much as you can to the card with the highest rate. Make payments weekly to this card and you will save on the interest. And, you will see the balance go down faster.
5 – Boredom – one of the biggest issues retirees face is boredom and the sense of feeling needed. Work made them feel like they were doing something worthwhile like they mattered. Now they are constantly under their partner’s feet wanting attention. Be careful because this can cause trouble in paradise. Before you take the plunge into retirement, figure out what you want to do after you stop working. Write a book? Become an independent consultant? Start an online business? Take up golf? Whatever you decide make sure you have the plan in place.
Financial
6 – Health care – one of the most forgotten parts of the retirement plan. Take into account how much you need each month and add an extra 25% to the cost. The older you get the more you will lean on the medical system, the more it will cost you. Plan well for this.
Health care for a relatively healthy person in America costs approximately $370,000 per annum. With each ailment that cost goes up exponentially. You need good insurance to cover unexpected costs.
7 – Monthly budget – surprisingly, not many people actually know how much they spend each month on the basics like shelter, food, transportation, and clothing. And, the incidental costs are furthest from their minds. Write it all down, create an excel spreadsheet, or use an app like Quickbooks online to help you stay on track. You will be surprised how much spending you can cut by preparing a budget. Check out this easy to use monthly budget calculator from NFCC
8 – Inflation – what goes up does not come down when it comes to the cost of living. Plan to save extra to make up for the cost of goods in the future. Statistics show that prices double every ten years. Whenever possible, add 10% more to your savings.
9 – Financial advisor – find someone you can trust to help you plan for your retirement. Do your due diligence. Don’t just accept your cousin Buster’s word for it. Make sure you agree with the financial planner’s point of view. Ask for and check references. Research them online. Verify their successes and understand their shortcomings before you hire them.
Estate
10 – Estate planning – is important no matter how big or small your family is. Even if you are leaving the bulk of your estate to your pet rabbit, you need to consider how to handle matters once you are gone. Ensure your assets will be distributed per your instructions. You may even want to set up a Family Trust to relieve some of the burdens of estate taxes for those left behind. A family trust will generally protect the assets and the beneficiaries from outstanding estate debts, and it can protect the estate from the lavish spenders in the family/
11 – Last Will and Testament – depending on how young you were when you created your will, you may need to update a couple of times. Your situation changes. You may have acquired or disposed of assets over the years. It is important to ensure the will is accurate and as updated as possible.
In Summary
Retirement mistakes happen but there are so many things you can starting today to make sure you won’t be panhandling when you turn 70. No matter how old you are, you can make your retirement a happy and fulfilled one. For me, it is writing blogs on matters that impact folks like you who are approaching, are in midlife, or are living out your golden years.
Tell us how this post helped you with your retirement mistakes. We would love to hear about your journey and tips you can share with us.
This post was all about the 11 biggest retirement mistakes you may not have known about, how you can plan for them starting today, and some ideas on what you can do to help yourself going forward.