Retirement requires an entirely different outlook on money. Unlike then, you were working and the bucks kept rolling in. Now, all you have is a retirement account and any money you’ve managed to save. With more than half the nation nearing retirement having no savings to bank on, chances are your retirement income isn’t going last forever. Therefore, poor financial habits will only speed up the process causing you to blow through your retirement income.
No one wants to have to return to work after having done so for 20, 30, or 40 years. Retirement is meant to be enjoyed. Unless you want to end up on the fast track back to being someone’s employee again, it’s probably a good idea to avoid these financial mistakes:
- Applying for Social Security Too Young
Yes, social security income is a huge part of your retirement income, but applying too soon will result in you getting way less money per month. Try using your retirement savings and other income to survive on if you’ve retired at 62. Then check your social security eligibility in a year or two which should get you an extra few hundred bucks per month.
- Not Having a Plan for Withdrawing Funds
You might think that once you reach retirement age that you’re free and clear to empty out your pension, 401K, or IRA accounts. That, however, is not true. Every account is taxed different. Therefore, you’ll want to be wise about how much you withdraw and when.
- Not Having a Budget
Budgeting doesn’t stop when the kids move out and the mortgage is almost paid in full. Thinking that you can manage your bills and spending habits without a budget can cause you to spend money recklessly.
- Supporting Adult Children
They’re your kids and you love them, but financially supporting your children can quickly drain your retirement account. While helping them out once or twice may not be so bad, you do have to set limits and ask them to understand you’re on a fixed income.
- Being Stubborn on Downsizing
If you’ve still got a pretty large mortgage payment and it’s consuming most of your retirement income, you may need to downsize. It may be hard to part ways with a home that you raised your children in, but if it will allow you to live on your retirement income for several more years, it’s definitely worth the move.
- Spending Too Much Early On
When you look at your checking and/or savings account it can be tempting to want to dip into it and take a few lavish trips or buy yourself something you always wanted. Although it may not hurt you now, impulse buys like that can cause you to blow through your retirement income before you know it.
- Not Considering Passive Income
Whether you have $10,000 or $100,000 it is not going to last forever. Failure to set up passive streams of income early in retirement could result in you having to head back to work when you should be enjoying the fruits of your labor.
Get a handle on your retirement income now and avoid the mistakes mentioned above. If you’ve made some of these mistakes, now is a good a time as any to correct them. You’ve done the hard work already. You’ve spent the last few decades of your life working and earning a living for your family. Now, it is time for you to sit back and enjoy life for yourself. Poor financial practices are a surefire way to make retired life stressful and ultimately force you to end up working again like so many American seniors do.