As I have been researching retirement, there has been a lot of advice about what to do and what not to do when it comes to working with your retirement accounts. I have learned that there are a lot of retirement money mistakes that people make, mostly because they are in new territory, and don’t know any better. Well, I thought I would put all of this research together and list some retirement money mistakes, and perhaps tell you how to avoid them, or fix them if you find yourself in one of those pitfalls. So, here are the main issues. Let me know what you think.
Not Tracking Your Spending
Remember, if you are on social security, your income is fixed and will not change. You need to be mindful of where your money is going. It’s a great idea to track at least weekly where your money is going . Use a spread sheet, or get a free app on your phone. I found Money Manager in the Google Play Store, which gets 4.8 out of 5 stars. Also, I have an app with my bank that helps with money management.
Not Having a Budget and Sticking To It
Because your income is fixed, you need to make your lifestyle fit with the money coming in. You need to figure out what is important to you, and what you can live without. You will need money for electricity and heat, so perhaps you need to cut back on eating out at restaurants.
Obsessing Over Your Portfolio
The ups and downs in the stock market can make for a true roller coaster ride in your investment portfolio. Looking at your account balance every day may cause you emotional problems that will keep you up and worrying all night.
If you have put a plan in place with your financial adviser, give that plan time to work. “Instead of getting worked up over short-term movements, set aside time once or twice per year to review your plan and confirm you’re still on track. The rest of your year should be dedicated to enjoying life and the financial freedom you worked so hard to achieve.
Filling Empty Time With “Stuff”
Keep in mind that at some point, your children and grandchildren will be cleaning out your garage, basement, and attic. Don’t put the burden on them to have to clean out a lot of stuff. Just because you have all this free time doesn’t mean you should visit garage sales. De-clutter! Get ready to downsize, because at some time in the near future, you will have to.
Refusing to Downsize
Keeping your house for sentimental value is not a good idea. I had to have this conversation with my husband. He wanted a big house with a lot of bedrooms for when the kids come to visit. I talked him out of it, saying that there’s no way they would be visiting often enough to have their own bedrooms. Sure enough, we are few years down the line from that conversation, and we have looked back at how much the kids visit. Once or twice a year. They have careers and lives and families of their own, and don’t have time to visit like we wish they did. More often, we go to them. My husband now sees the logic in my argument that we don’t need a whole lot of bedrooms.
Big old family homes take a lot of money to maintain. They cost a lot to heat or cool. Plus it takes a lot of your own personal work to keep a house up. You don’t need the expense and drain on your time. And at some point, you won’t be able to climb a ladder or even mow a lawn. So downsize, and enjoy freedom from the bills and the honey-do list.
Withdrawing Retirement Funds for Remodeling
You will need that cash later when your medical bills start to pile up. Any financial planner will tell you, and if they don’t, see what I have written here about long term care costs, medigap insurance costs, etc.
Think about it. If you are trying to remodel the home to sell, don’t bother. You will spend cash to remodel to get more cash for the sale. Or, you will not spend the cash, and sell for the lower price. Either way, you will likely end up with the same amount of money. So don’t put yourself through it.
And if you are remodeling for your own sake, how long do you think you will be able to stay in that home? I know out house is in a remote area where we are far away from medical care, and, as I have discussed before, we are at a high elevation, and we are already having difficulty breathing, and expect it to only get worse as we age. It does not make sense for us to remodel out house to fit out needs when we will likely have to, and want to move.
Over Committing
Some retirees are worried that, now that they have all that time on their hands, that they will get bored or be at loose ends for things to do. Often they over commit for volunteer work, classes, crafts, and many other occupations and hobbies. First of all, signing up for every opportunity can get expensive. Second, it can be too much to handle once you commit. It’s much easier to scale back if you have not committed too much in the first place. Donating to charity is great, and should be encouraged, but not to the detriment of your retirement account.
Collecting Social Security Too Early (or Too Late)
There are two schools of thought on this. One thought is the obvious one. You get more money per month if you wait until you’re 70, vs. taking your monthly payments at age 62. That’s of course if you live to age 70.
On the other hand, if you start taking the lower monthly payment (Let’s say it’s $800). That’s a total amount of $76,800 for years 62-70 you will be collecting. And you would be locked in at the $800 per month. But if you wait to age 70, and take the higher monthly payment (Let’s say $1500), it will take almost 10 years to make up that lost $76,800 that you didn’t collect. And who knows what will happen in that amount of time? Will Social Security still be able to pay me $1500 once I hit 70 years of age? Hard to say. But here’s my research on Social Security, so you can understand more about this issue. And definitely see a financial planner to help you decide which option is best for you.
Hoarding Cash
Don’t hoard cash. Just don’t do it. Banks are insured by FDIC, and you will get at least a portion of your money back if something happens. Plus if you have it in a Certificate of Deposit (CD) then it will at least be making some interest money for you. If you are hiding money in your house, there’s no insurance if anything happens to it, and it’s just sitting there, not gaining any equity.
Too Much Support to Adult Family Members
This is a difficult one. Hopefully by the time you are retiring, your children are to the point where they can support themselves. But if they aren’t, you will have to have the heart-to-heart talk with them and let them know that, on your fixed income, you just can’t support them.
Not Having a Financial Planner
You really need a financial planner. Perhaps the best option for getting a fee-only adviser. Fee-only financial planners are registered investment advisers with a fiduciary responsibility to act in their clients’ best interest. They do not accept any fees or compensation based on product sales. Fee-only advisers have fewer inherent conflicts of interest, and they generally provide more comprehensive advice.
Not Being on the Same Page as Your Spouse
This has got to be the most prevalent mistake that financial planners see when dealing with retirement accounts. It’s a great idea to go together to your financial planning meetings or have your adviser come to your home. You want to be a united front for making decisions about your financial welfare. Let’s say you want to save as much money as possible early on so that you have a healthy nest egg as you get older, and you want a more aggressive investment plan. Let’s say your spouse is happy to be done working and sees that big hunk of retirement money just sitting there, and she/he wants to buy the house with the pool and the 4 car garage, and wants to withdraw the money, and stop investing. This can cause resentment and distrust in a marriage, just as you are going into retirement, and are supposed to be enjoying your life.
You need to start having those conversations long before you retire, and keep having them as time goes on. Sure, life can make some pretty erratic changes, and plans change, so it’s very important to keep having financial discussions so that expectations are the same and are being met.
Having a Back Up Plan
You can see that there are a lot of aspects to think about when retirement is coming up. The more you plan, the better off you will be money-wise, and attitude-wise as well. Having a back up plan is always good, because you just never know what will happen. Having a job of some sort is great. Having an alternate place to live is advisable too, just in case.
My recommendation is to learn affiliate marketing with Wealthy Affiliate. This is my back up plan. Affiliate Marketing can be done anywhere at anytime. It takes very little capital, and very little physical labor. All you need is a lap top, a WiFi connection, and a great web hosting platform like Wealthy Affiliate. Along with the industry’s best hosting platform, you get the best training, tools, and community you can find. There is a free membership that offers A LOT in helping you get your site up and running. And the Premium Membership is only $49 per month (less if you pay by the year, around $29 per month!) So you see, it’s not that expensive. See my articles here:
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Please put your comments and questions below, and thank you for reading!
references:
https://my.wealthyaffiliate.com/melwaller/blog/recent-misleading-info-on-usa-soc-security-benefits-and-wa/a_aid/13c69a95
https://www.thesimpledollar.com/nine-money-mistakes-new-retirees-cant-stop-making/https://www.forbes.com/sites/…/2012/…/fee-only-financial-planner-whats-the-difference/
This is a really interesting idea. I have been looking at retirement plans, and wondering where I am going to assign some things. I have scoured the internet, and am lucky that I have come across you site. I think having a budget is critical in any venture that you partake. Thank you for the information. Way to go very good job.
Thank you so much, Trevor. Yes, budgeting is key to whatever you do in life, and super critical in retirement planning. I have never had to budget my money…living paycheck to paycheck, you really don’t have to budget, just don’t spend any money, easy as that! So, I think the first key to budgeting is figuring out exactly what you are spending, and where. Can’t budget if you don’t really know what you are spending your money on. So, that’s a good starting point. Anyway, thanks again for your complements, and thanks for reading! Rhonda
Nice article. I agree with all your points – My grandpa use to say , don’t be too excited to spend all your money. Take an experience expert advice and invest your retirement funds. This will really be helpful for all of us as we grow. thanks for sharing this informative article with all of us. Looking forward to more articles. Best wishes and Regards
Hi Jordan, thanks for reading and commenting. And thanks, going forward, for reading more of my posts. I like what your grandpa said, and I’m glad my article triggered that memory for you. And you don’t have to be ridiculously frugal (like someone I know that shares a small drink with her husband at the fast food restaurant because it can be refilled, yes, you Margaret!) (My husband says, “I’m getting my own drink!”) But just being careful on what you spend will definitely help. Besides, there are ALL KINDS of senior discounts to take advantage of. So, it doesn’t have to be difficult. Anyway, thank you again for your comments, Jordan. Rhonda
Hi Rhonda! It’s always good to be warned before hand about these pitfalls. I realize most people around us have these misconceptions and don’t realize that getting prepared for retirement involves many areas of our life. The one that has talked to me most is refusing to downsize waiting for the kids to come and visit. Thanks for sharing your experience and I’m sure your husband is grateful he heard you.
Hi Henry! Yes, that was a long conversation over several months to convince my husband that we didn’t need such a big house. And we seem to be on the same page now about retirement, and the need for a condo closer to the kids where the snow removal is DONE FOR US! It takes using logic and non-judgmental discourse to get on the same page as one’s spouse, but it can be done. Thank you for visiting my site and leaving your great comments! Rhonda
Being retired can be a tricky time in ones life if they are not properly prepared for it. Because the flow of income has seriously reduced if one is not wise on how they handle the money they have saved they might quickly run out of money. I think before one retires they need to have investments in place that would create cashflow for them. By doing this they would be almost guaranteed of having enough money during their golden years without having to rely on anyone or without having to been frugal in their spending.
Hi Jay, I completely agree with you. There are a whole lot of things a person can do, even if they have no money to invest. See my article about this here. And of course I am an advocate for affiliate marketing with Wealthy Affiliate, where retirees or soon-to-be retirees can earn extra cash to give them a comfortable living in their Golden Years. Thank you, Jay, for reading and commenting! Rhonda