Top 10 Retirement Mistakes That Could Cost You Your Happiness
The ultimate goal in your retirement is to be happier.
Ideally, you’ll spend your days in a happier state because you’ll be doing the things that you enjoy, in a location that you love, surrounded by the people that you love.
Unfortunately, there are common mistakes that retirees make that cost them their happiness. The good news is, these mistakes are avoidable – especially if you plan ahead.
Failing To Plan
The first, and biggest, retirement mistake that many people make, is not having an adequate retirement plan in place. A 2020 report from the Federal Reserve found that fewer than four in ten non-retired adults felt their retirement savings were on track. That same report stated that a quarter of non-retired adults surveyed have no retirement savings at all.
There’s a saying that “those who fail to plan, plan to fail,” and it’s true. Without a solid plan in place years before retirement, you’re setting yourself up for failure in your golden years. Retirement planning takes careful consideration, thoughtful strategy, soul searching, and insightful self-inventory. Often, you’ll need to meet with a professional to help you determine your retirement goals and create a plan that enables you to meet those goals.
Not Accounting For Marital Strain From Retirement
While retirement is an exciting time, it can also be stressful for a marriage. Retirement changes your daily routine, and these unexpected changes can be disorienting if you haven’t discussed how you’ll handle them before retiring. You and your spouse may not be on the same page regarding the amount of money you anticipate spending during retirement, or how you’ll spend your time, or even where you’d like to live. You may wish to spend your time in entirely different ways – one of you may want to golf all day, while the other is more interested in watching the Olympics. The more you discuss your goals, dreams, and lifestyle in the years leading up to retirement, the less of a chaotic transition you’ll experience together.
Neglecting To Make A Realistic Retirement Budget
While you may adhere to a budget in your working life, that same budget might not be realistic once you’re retired. There’s also the case where many people go along without a budget for their retirement at all, which can lead to over-spending their retirement withdrawal too quickly. Without the steady income that comes from working, you’ll likely rely on your retirement income such as Social Security, pension, and savings. Properly accounting for your budget, and including any big expenses like vacations or trips, will enable you to be more prepared and feel secure throughout your retirement.
Overspending In Retirement
Overspending at any point in your life can be problematic, but it can be a detrimental mistake in retirement. Burning through your money quickly at the start of retirement can leave you with nothing left towards the end, and that’s the worst-case scenario: lots of life left to live, with no money to support you. While you can enjoy your life and spend your money on the things that make you happy, you’ll need to do so in a way that is adhering to your budget and your financial plan, so that you can ensure you’ll have enough money to keep you happy all of the ways through your retirement years.
Underspending In Retirement
Underspending, and being too stingy with your money for fear of running out, is a huge mistake that retirees make that steals their happiness during their retirement. There’s no need to underspend and live so frugally that you’re unhappy and miserable. Working with a professional to have a sound financial plan can help you to feel secure that you’ll have the amount of money available to you during retirement so that you’ll be comfortable spending what you like on your hobbies and needs.
Investing In The Wrong Allocations
Traditional investment advice is to invest in conservative allocations as you near your retirement goals. There is no one-size-fits-all solution when it comes to investment and asset allocation though, and investment management must take many other factors into account. While you’re retired, you’ll still need growth in your assets – so a super conservative allocation may not be the best fit for you. Your retirement may be multiple decades, and you’ll need your money to continue to grow during that time. Don’t lose out on potential income growth because you’ve invested too conservatively in your allocation. Work with a trusted professional who will analyze your risk tolerance and determine the correct asset allocation for your needs.
Underestimating Your Medical Costs
Healthcare is a massive expense during your working years, and often your employer-sponsored plan foots part of the bill. When you’re no longer employed, that responsibility falls solely on your own shoulders as a retiree. Fidelity estimates that an average retired couple age 65 in 2021 may need approximately $300,000 saved (after tax) to cover health care expenses in retirement. While Medicare may be an option, you can’t utilize it until you turn 65. Plan ahead for your medical expenses, and be sure to account for potential medical expenses within your retirement budget.
Taking Social Security Too Early
The earliest age to begin taking Social Security benefits is 62. However, if you’re able to defer taking your benefits at age 62, there is an increase each year until you receive the full amount at age 70, per the Social Security Administration. By living off of other savings and assets during this time, you can increase your Social Security payment amount in the long run.
Buying Retirement Purchases Instead Of Renting
If your retirement dreams include expensive hobbies, like boating or exploring the country in an RV, these big-ticket purchases may be better financially as a rental. Instead of purchasing a second home in another location, really think about how much time you’ll spend there, and potentially rent a home for a few weeks instead. You’ll save money on maintaining the home, utilities, and taxes.
Not Testing The Waters Before Retirement
If you haven’t put some serious thought into how you’d like to spend your time in retirement, or where you’d like to live, you’re setting yourself up for failure. Testing the waters before you dive into retirement full time is a great way to ensure that you’ll be doing what you actually love once you are retired. Explore places that you may want to relocate to once you’ve stopped working, and try out hobbies that you have in mind post-retirement. You’ll certainly want to test out living on your monthly retirement budget while you’re still bringing in an income from work, just to make sure that it works for your lifestyle.
This post first appeared in Forbes.