Let’s be honest! It’s really hard to plan for your retirement and there are a lot of money mistakes that you could make, but they are totally avoidable. By some chance, all of us will make some sort of money mistake when we plan for our golden years without even wanting to. After all, there are some details that we will miss, choices that were faulty, or some habits that we have that will set us back when it comes to our retirement funds!
However, it doesn’t have to be that way! It’s normal to have things a bit jumbled up even after you retire when you have to potentially juggle a 401(k) plan and how much you have to take out of it, Social Security, other savings accounts, and other investments. The best thing would be to make a plan beforehand for all of them, but that also requires hiring a financial or retirement advisor that can help you plan everything out.
Despite a lot of Americans hiring a financial advisor, there are still some mistakes that could have been prevented even before you ask for help. And even after you get the help, some people don’t always make the best choices. This is why we have gathered some of the most common money mistakes that people make, so you too can know what to avoid doing if you don’t want to ruin your savings accounts!
Let us know if you knew about these mistakes or if you have already made some of them!
#1 Premature retirement vs not retiring when you should have
A lot of us are thinking about retiring as soon as possible and maybe even have these big plans of getting to finally travel the world or just plainly quitting as we have had a long career in the same job. As much as some love what they do for a living, it gets repetitive at one point or you simply get tired of it. This is why a lot of us have this pressing question of when to retire, and sometimes our health makes that choice for us.
The bad thing is that this can end up being a money mistake and affect your fund in the long run. And all of it stems from insecurity and not taking into consideration all the potential and variables when you decide you may want to retire. This can lead you to retire too early and not have made all the calculations so that you can cover all your retirement expenses, which can cut down on your income and prevent you from doing what you truly love.
Likewise, it can lead you to retire too late and worry too much about this. If you’re already too stressed about what will happen after, chances are that you will end up working way more than you should have, and this will prolong your worry about your income unnecessarily.
The key to avoiding financial mistakes (or any mistakes, for that matter) is to keep everything in balance and to retire at the optimal time for you!
#2 Not planning accordingly!
The best and happiest retirement is the one that is as free of stress and worry as possible! After all, you have been worrying for most of your life. Why should you continue to do so? This can be easily achievable if you do one simple thing: plan! And while it sounds a bit redundant to mention it, you would be surprised just how many seniors didn’t plan accordingly and ended up making a lot of money mistakes.
When it comes to financial plans, it’s very similar to following a map to a destination and just planning accordingly! This means you need to know what your end goal is, what you are going to do, how you are going to do it, what the costs are and from where you will get the funds, and so on!
All of these are just parts of your plan, and if things change as you approach retirement day or something happens that alters your way, don’t worry! It’s your plan, and you can make all the adjustments you may need to make it work for you.
It sounds a bit daunting to do by yourself, but once you have looked into everything the investments, taxes, and retirement accounts entail, you will be able to understand them all. And if you need professional help, don’t be afraid to get some! The worst thing you can do when it comes to your money is to not have a plan at all, and getting the aid you need is way better than wandering around aimlessly!
Photo by William Potter from Shutterstock
#3 Not starting things at the right time because you believe there’s still time!
According to recent studies, the biggest money mistake and biggest regret that retirees have is not saving enough money, despite being able to do so. The reason why this happens a lot of the time is that they haven’t started to put money aside fast enough, always putting it off for various reasons; from not thinking you have the right amount to start with to believing there is still time to start later, there are a ton of excuses you can use!
But the sad part is, the longer you wait to start saving up money, the harder it will be to reach that amount you need for a comfortable senior life! And as is frequently the case, you shouldn’t wait to put aside a large sum of money in one go, as you may never reach that stage. Unexpected expenses happen, but you can always put aside as little as you can; in time, it will amount to more than you can imagine. In the end, if you can put aside that bigger sum, you will already have something in the account!
If you find yourself in this situation, there’s no shame in getting some financial advice from a professional or even from a friend that has already been through this once. There are things to prioritize before you start saving more, but remember, every penny counts. And you can start at any point in time, which is why you should always tell the youngsters in your family to start doing this too! Better early than too late!
#4 Not risking enough vs risking way too much!
This has always been a double-edged sword, and there are way too many horror stories that make a lot of us hesitant to take the risk. After all, this is the perfect path to the biggest money mistakes some people have ever made: if you risk too much, you can end up losing a sizeable amount of your savings; if you don’t risk enough at a good time, you may lose money to inflation later on.
The golden rule is to keep in mind that the money with which you start your retirement is money that cannot be replaced. After all, you will no longer have a steady income coming from a salary. And everything you have saved so far is lost. There is not enough time to replace it. This is why we always go for the lowest risk investments, but they also yield the lowest returns.
But between losing everything and not gaining much, a lot of people will prefer to not gain as much, or even nothing at all, by taking no risk. That is also a money mistake in itself, as without any risk, there will be nothing to gain, and you could have missed out on some very important investments.
This is why you should be calculated: take some risks, and make sure you have the guarantee that you will make at least the amount you invested in it and that you have inflation protection! That way, you take the safest bets without taking on too many risks while also making more money for your golden years!
#5 Biggest money mistake: Bad financial adviser
This may be the biggest financial mistake you could make. The others we mentioned have their own drawbacks, but as long as you are careful, you can always bounce back from them and not end up in a total slump! However, choosing a bad financial adviser can have disastrous outcomes, and this is what makes getting one such a big deal and a hard task!
You may have reached a moment in your life when you need some help, or you decided that instead of worrying and stressing about everything, you need a professional that knows the game well. Now you have to choose a financial advisor, and you shouldn’t rush into it. The digital age has made it so much easier than it used to be: you can see reviews, read all about people, learn about their reputation, and hear what others have to say with just a few clicks.
This doesn’t mean you should only rely on the internet; after all, not everyone is a good match. Make sure you meet with the people you are considering, ask some questions that interest you, and assess how good of a match they are for you and what advice they give before you make your choice. Ask a friend or two; they may have a recommendation!
And don’t rush! There’s time, and you should always make sure you deal with a fiduciary, not just an advisor. The fiduciary is legally obliged to put your interests first, so you know you are safer and more legally protected with them!
If you’re worried you won’t have activities or hobbies to do after you finally retire, don’t worry! We have gathered a whole list of activities you can do as a retiree that is sure to keep your mind engaged!