There is much to consider when preparing for retirement. New retirees are always more than eager to share stories, successes and mistakes they have made along the way. If you listen closely, chances are many of them will tell you something they wish they could do over or do different. Here are 5 costly retirement regrets we should all avoid.
1. Spending too much in your peak years.
When you were young, you wanted the finer things in life; Cars, houses, cloths, boats etc. As you get older, spending too much in your peaks years becomes a retirement mistake.
This is because you lose the power of compound interest. The longer you keep your money invested, the more of it you will get out. Most people in their twenties and thirties unfortunately do not think this way until it is too late.
The best way to avoid this retirement mistake is to first control your spending. Clean up your vision board, you don’t need all those material things to show how successful you are. As Dr Sues once said “Those who matter don’t care, and those who care don’t matter”
Next, get financially literate. Take some money classes to understand how to build a budget, get out of debt and invest.
Make sure you are also putting some money back in your youth. It may not seem like much right now, but little drops of water make a mighty ocean.
2. Not taking good care of your health and body
Entering into retirement with bad health can have some very costly consequences. When we are young, we spend so much time working, so much so that health and fitness is often the last thing on the mind. The mistake here is that too often; people pay the cost of their bad food and exercise choices when they have the least amount to spend – retirement.
This retirement mistake will not only have you running out of money too soon into your retirement, it will also rob you of precious time that could have been spent with family.
The best way to avoid this retirement mistake is to remember that your health is your only true measure of wealth, so take good care of yourself.
Start by making better food choices and also exercising to keep you looking young and vibrant. At retirement, you will probably be paying your own health insurance out of pocket, so it pays to have a solid foundation in health and wellness.
3. Borrowing from yourself
A major mistake people make heading into retirement is borrowing from their retirement accounts to fund large purchases. This could be a second home, a remodel, or a child’s college education. The big mistake here is not only will you have to pay taxes, penalties and fees to get your money out; you may also have to work longer.
The emotional attachment that leads you to justify making these large purchases will cost you big in the long run
The best way to avoid this money mistake is to remember why you started saving in the first place. These fees are put in place to remind you of the commitment you have made to secure your final future.
Maybe start a fund for whatever project it is you want to accomplish. Set measurable savings goals over a set period of time to meet this financial goal. You may have to get an extra job, however it will be well worth it.
4. Not downsizing soon enough
Life can often feel like one big roller-coaster ride. We leave the comfort and acreage of our parents homes to the small nest eggs of a bachelors pad or apartment. As we get older and have our own families, we also follow suit and acquire our own large homes to raise our kids in. However this becomes a retirement mistake if you do not know downsize soon and early enough. Whether it’s moving into a smaller home or selling off a second car, don’t forget that you must already be living below your investment income going into retirement. Most folks waiting to cut back at retirement will be drowned out by the cost of downsizing.
The best way to avoid this retirement money mistake is to make sure that you are not blinded by your pride. Do not be given to the temptation of keeping up the perceptions others have of you. At this age you should be travelling and enjoying the world with your spouse much more than you did when you were younger. Chances are you will not need the huge house. Not to mention, you will be paying lower monthly bills.
5. Not kicking a bad habit early enough
There is a feeling of invincibility we all feel when we are young. We develop vices too often as a means to socialize or pass the time. From alcohol consumption, smoking cigarettes to gambling, most people regrettably count the cost of their vices when it is too late.
While it is OK to indulge yourself in whatever past time you choose, the retirement mistake here is forgetting to count the cost. A regular smoker will very easily spend three thousand dollars a year on cigarettes. This is money that could have been put into a ROTH IRA.
The best way to avoid this mistake is to create an allocation system for yourself or a play fund. This is a reasonable amount of money you have allowed yourself to spend on all vices. Your need to live a comfortable life in retirement must be greater than your need to have too much fun now.
Approaching retirement doesn’t have to be all dark and gloom. Just remember that the choices and decisions you make now will affect the rest of your future.
Featured photo credit: http://theneotericgroup.com/experience/retirement-residences/ via theneotericgroup.com
