Advertising
Advertising

7 Common Retirement Pitfalls You Need To Avoid

7 Common Retirement Pitfalls You Need To Avoid

All of us will hopefully reach retirement age. This means we all need a retirement plan. Sadly, even those of us who have such a plan often don’t plan correctly for retirement.

Here is a list of 7 common mistakes and the problems they cause:

1. Overacting to market volatility

Many retirees prefer lower yielding bonds and similar funds because they believe these funds are safer. While it’s a good idea to include bonds in your portfolio, the best bet for return on your investment remains the stock market. Most investment counselors suggest that a retiree invest in the stock market a percentage equal to 120 minus their age. Be sure to keep up with inflation, especially on the products you need to buy each month. Most bond funds don’t generate enough income to do this.

Advertising

2. Relying on factors outside of your control

Make sure your retirement program does not include unrealistic goals and expense levels. Yes, retirement will cause you to reduce some expenses. However, other expenses will increase as you age, including health costs, help around the house, and hired transportation. Can you rely on your pension or government income to always be there? Many retirees work part time to increase their budget.

3. Retiring without your first few years’ income set aside

No one’s retirement or pension is paid immediately. It often takes several months or longer for that first check to arrive. You will need to pay yourself during this period. You will also need some fall back money for unexpected expenses (you can’t work overtime any more). Having extra money in the bank is crucial while you are adjusting to your new level of income. Most of us will live 20 to 30 years in retirement. It is the longest span of life.

Advertising

Invest Spend

    4. Taking out a loan

    Taking a loan to tide yourself over is a poor deal. This is true whether you use a credit card or go through a bank. Most of your investments will not pay at the level of the interest you will pay on this loan. So, don’t do it. Find another way. One exception can be a reversed mortgage, especially for those are clearly outliving their retirement benefits. But, if at all possible, don’t take out loans to live. This is never a great strategy at any age.

    5. Not sticking to a plan

    As we get older, many of us become less able to manage our funds. This is why we need to have someone help us with this problem. This can be a child or a paid investment counselor. The idea here is to set up a lifetime plan and then stick with it. You don’t want to be spending your money uselessly by switching banks or other investments due to confusion. However, don’t hang on to stocks for too long either. Set up some investment standards and then stick to them.

    6. Giving too much to your children

    Your adult children need to support themselves. Don’t spend money on them that you need to live on yourself. It is okay to say, “No, I can’t afford that because I am on a limited income that needs to remain balanced.” It is fine to assist with an actual emergency, such as a car repair that crops up at a bad time, or give a gift to help with a new arrival, but don’t stray from your lifetime plan. A good idea is to consider these possible events while creating your retirement plan.

    Advertising

    7. Not looking at the cost of things

    A retiree needs to live on a fixed income. This means being careful with money. Some good ways to lower costs are

    • moving to a smaller, less costly home
    • changing your state residence to one with lower or no taxes
    • taking advantage of senior discounts, many which are not income dependent
    • buying Medicare gap insurance

    The last tip is especially useful, because paying that 20 percent that Medicare does not cover for a hospital stay can really sink a retiree.

    Overall, remember that retirement needs years of planning to be successful. Be sure to think ahead, and avoid these pitfalls for a successful life after retirement.

    Advertising

    Featured photo credit: StockMonkeys.com via flickr.com

    More by this author

    Hypnosis to Quit Smoking with Tim Thornton 7 Common Retirement Pitfalls You Need To Avoid 10 Ways To Save Money This Christmas Without Losing The Sparkle

    Trending in Money

    1Top 10 Recommendations on Money Management Apps 2How Much Should I Spend on Rent? Find Your Answer Here 3How Much Money Do I Need to Retire? Find Your Answer Here 4The Ultimate Guide to Make Saving Money Fast and Easy 56 Easy Ways to Treat Yourself

    Read Next

    Advertising
    Advertising

    Published on July 4, 2018

    Top 10 Recommendations on Money Management Apps

    Top 10 Recommendations on Money Management Apps

    Don’t want to overspend your budget, swipe your credit card too many times, and feel like a financial mess? Instead of beating yourself up for the bad financial decisions you’ve ever made, create a new plan!

    The solution is simple, save more and spend less. But, we all know it’s easier said than done.

    One problem is finding quality apps that save you time and money, and aren’t just hype.

    Luckily, there’re many great money management apps available at your fingertips. Here are 10 reliable money management apps that can help you save money, and crush debt.

    1. Personal Capital

      When was the last time you’ve tracked your net worth? Probably months ago or maybe never. Personal Capital allows you to easily track your net worth and plan for retirement.

      Here are some of its main features:

      • Sync many investment accounts, and expenses (mortgage, credit cards, etc.) in one place
      • Discover hidden fees and how much they’re affecting your retirement plan
      • Wealth management for investors requiring a long-term strategy

      With Personal you’re free to track your expenses and net worth.

      Available for: iOS and Android

      2. Mint

        If your smartphone could only install a few apps, Mint would be one of them. Why? Because Mint tracks all your balances and bills in one place.

        Here are some of its main features:

        Advertising

        • Effortlessly track all your bills and balances in one dashboard
        • Categorized expenses to understand where you spend your money
        • Uncover hidden fees, and determine your investment style with sophisticated retirement tools.

        Feel at ease with managing your money by a reputable company that isn’t going anywhere.

        Available for: iOS and Android

        3. YNAB

          Everyone needs a budget, there’s no way around it. YNAB (You Need A Budget) is an easy to use app that will change the way you think about money. Their motto is to “give every dollar a job”, and you’ll quickly discover why.

          Here are some of its main features:

          • Easily sync all bank accounts in one place
          • Visually see your debt paying progress with eye-catching charts and notifications
          • Customized categories setting saving goals

          The best part about YNAB is the community that comes along with it. You can hop on the YNAB forum to receive support, listen to the YNAB Podcast or stay tuned for their weekly videos.

          Available for: iOS and Android

          4. Wealthfront

            Albert Einstein once said “compound interest is the eight wonder in the world”, and for a very good reason. The problem is, most people are scared or unwilling to learn the basics of investing. This is why Wealthfront is the perfect solution for the hands-off investors.

            Here are some of its main features:

            • Variety of investment account options including IRA, Roth IRA, and more
            • Your portfolio composed of 7 different asset classes
            • Automatically rebalanced portfolio
            • Daily tax loss harvesting

            Wealthfront is perfect for people requiring investment guidance, or prefer a hands-off solution.

            Available for: iOS and Android

            Advertising

            5. Clarity Money

              If you’re staying on top of your budget but want to take your finances to the next level, Clarity Money can help you. Clarity Money helps you stay under budget and build a personalized savings plan.

              Here are some of its main features:

              • Easily cancel subscriptions with one click
              • Synchronize bank accounts fast
              • Transfer money effortlessly between different accounts

              Clarity Money isn’t an app that does it all. But, it does make transferring money and canceling subscriptions fast and efficient.

              Available for: iOS and Android

              6. Acorns

                What if there was a way to quickly gain confidence in investing your money, without too much risk? There is, and Acorns is your solution. With Acorns’s technology, you’re able to make investments as small as $5.

                Here are some of its main features:

                • Automatic contribution option
                • Customized portfolio tailored to your needs
                • Low management fees ranging from $1-$2 per month

                Stop wasting dollars on expensive coffee. Instead, invest them towards a brighter financial future.

                Available for: iOS and Android

                7. Albert

                  Do you budget by only subtracting your expenses from your income? If so, how would you discover any overpayments or extra money you could save? This is where Albert shines, and it does it all free.

                  Advertising

                  Here are some of its main features:

                  • Receive notifications for overpayments, hidden fees, and low balances
                  • An Automatic budget that’s built around your spending and income
                  • Easily track debt and set new financial goals

                  While Albert does offer a paid option, most of its core features are FREE. So, what better option to save?

                  Available for: iOS

                  8. Prism

                    Have you recently forgot to pay a bill because life got in the way? Prism automatically tracks your bills and syncs your bank accounts in one place.

                    Here are some of its main features:

                    • View all your account balances in one glance
                    • Bill due dates are automatically pulled and tracked
                    • Receive early reminders for upcoming bills

                    If your budget is on “fleek” but can’t seem to stay on top of your bills, Prism is your go-to app.

                    Available for: iOS, Android, Windows, Amazon

                    9. Mvelopes

                      Remember hearing about people using envelopes to budget their money? Well, Mvelopes is the new envelope system for this generation. Easily create monthly budgets and track your saving goals.

                      Here are some of its main features:

                      • Connect unlimited bank accounts
                      • Real-time budgeting with auto transaction syncing
                      • Low monthly $4 fee or $40 annual

                      Mvelopes can help you crush debt, save more, and help you stop overspending. With its low monthly fee, it’s worth a try.

                      Advertising

                      Available for: iOS and Android

                      10. Wallaby

                        Most people don’t have time to track their credit card’s changing rewards and interest rates. Because of this, you need help reaping the most of your credit card’s rewards. Wallaby is the app that will help you do just that.

                        Here are some of its main features:

                        • Automatic recommendations for the best credit card to use for each transaction
                        • A friendly user interface, displaying credit cards with their corresponding images
                        • Free to use

                        If you’re using the same credit card to make your purchases, you may be leaving money on the table. Give Wallaby a try if you’re ready to maximize your credit card’s rewards.

                        Available for: iOS and Android

                        Take control of your finances and experience financial freedom

                        Picture yourself staying on budget and saving more money than you’d ever imagined.

                        It took hard work and dedication but you’d finally learned how to manage your money. You have to start taking control of your spending and saving habits.

                        You now have a list of reliable apps that can help you build better money habits, what are you waiting for?

                        Featured photo credit: Pexels via pexels.com

                        Read Next