June 23, 2016
Avoiding the Big Retirement Mistakes
For most of us, building a comfortable retirement is one of the lengthiest and most difficult accomplishments of our lifetime. Yet, plenty of us end up tarnishing that accomplishment with a simple misstep (or two). After spending decades working towards a goal, too many people set themselves back with easy-to-avoid mistakes.
Here are a few tips to avoid these pitfalls.
Moving Without Knowing the Place
Many people move to a new state once they retire. Whether it’s for a lower tax rate, a better climate or to be closer to family, it may not be the optimal choice for you. Unfortunately, moving is expensive and some find out the hard way that they don’t actually like their new home, the community, or the neighbors.
A number of publications list the best (and worst) places to retire. The lists change annually but it can be helpful in doing some research and exploring different options. Additionally, a little common sense and patience is advised – give the new place a lengthy trial before committing yourself. If it’s a vacation destination, see what it’s like in the off-season when the tourists are gone. Then, if you decide to relocate, rent a place for at least a year to get a good feel for the area before you jump in and buy property in your new hometown.
Not Having a Safe Withdrawal Rate
One way that retirees burn through their savings too quickly is by not knowing how much they can safely spend. The solution is simple: go over your investments with a trusted advisor and find out how much you can withdraw each year without depleting your savings too quickly. The average recommendation is 4%, however yours may be different depending on your current nest egg and lifestyle. Each case is unique and delicate.
You should also make sure you have enough savings left over in case you live longer than expected. Running out of money in your 90s is definitely not what most people would consider an ideal scenario.
Not Knowing How to Spend Your Time
Knowing how to spend your money in retirement is important, but it’s also vital to know how to spend your time. Working can take up more than half of our waking hours, and many people are surprised to find they aren’t sure what they want to do once they clock out for the last time.
To avoid this dilemma, I like to reference Jim Craft, Live Life by Design founder. In his program he talks about how to live a life with 30 years of Saturdays. He recommends taking time before retirement to find a hobby or side job that you enjoy. “One of the common retirement mistakes is simply that people assume they will be happier in retirement. A lot of people spend their working lives dreaming of retirement when it’s not really retirement they want, but a job they can enjoy and more control over their work.”
The Bottom Line
There are as many ways to screw up your retirement as there are to save for it. Thankfully, many mistakes are small and easy to recover from. If you’re able to avoid these mistakes listed above, and you’ll give yourself the best chance for smooth sailing during your golden years.
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