Make these errors, and the task of
retiring goes from "difficult" to "impossible."
Maryalene
LaPonsie • October 8, 2019
The
good part about being alive today is that we’re living longer. The bad part —
we’re living longer.
The
average 65-year-old can expect to live into his or her mid-80s, according
to federal
statistics. That means you will need a lot of cash to see you
through the golden years.
However,
if you make many — or any — of the following mistakes, you might not ever have
enough to retire comfortably.
1. Taking Social Security early
Will
Social Security be your primary source of income in retirement? If the answer is
“yes,” you better think twice about taking benefits when you turn 62 — the
earliest age at which you can claim them.
If you
were born in 1960 or later, claiming at age 62 instead of waiting until you
reach what the Social Security Administration considers your full retirement
age (about 67) could mean receiving $300 less a month. On the
other hand, waiting until as late as age 70 could mean an even bigger monthly
check.
There
are times when it does make sense to take your benefits early. Maybe you have
no choice if you are too seriously ill to keep working, for example. Or, maybe
you believe that you’re unlikely to live decades longer.
But
think it through. If your parents lived a long time and you are likely to do so
as well, starting to collect Social Security early — when the payment is
smallest — means you could be scrimping for a long time.
For
more, check out “2-Minute Money
Manager: Should I Wait to Take Social Security?”
2. Being too ‘safe’ with your savings
Stashing
retirement cash in a savings account or money market account sounds safe. And
it does avoid the risks of the stock market. But it invites risk from another
source: inflation.
If
prices soar, your expenses might quickly swamp your savings.
So, as
you approach retirement — and even after you’ve actually given up working — at
least some of your money should be in the stock market or real estate
investments. Otherwise, there is a good chance that cash is losing value.
Check out
“9 Tips for Sane,
Successful Stock Investing” for more ideas on growing your money.
3. Banking too much on retirement calculators
Retirement
calculators are fun — for some of us, anyway. They give a sense of control over
a difficult problem as you play with numbers and run “what if” scenarios.
But as
Money Talks News founder Stacy Johnson has pointed out, online calculators often are sales tools used
to lure readers into making a purchase. What’s more, they offer a false sense
of security unless you see them as just one tool among many.
Rely on
these calculators too heavily and you can badly miscalculate what your real
needs will be in retirement.
So,
take a more intelligent approach by digging in and reading all you can about
saving and investing for retirement. Start with “7 Tips for Stress-Free 401(k) Investing” for some basic rules
on retirement investing.
4. Failing to know what your fixed expenses will be in
retirement
If you
don’t understand what your monthly expenses will be in retirement, you might be
in for a rude shock once you actually get to your golden years. In fact, you
might find your expenses much higher than anticipated — forcing you out of
retirement and back into the workforce.
So,
before you retire, tally your expenses. To do this, add up your fixed monthly
costs — including rent or mortgage, utilities, food and transportation. This
roughly tells you the minimum amount of money you’ll need to get by.
Then,
figure your minimum income. You can use the Social Security
Administration’s Retirement
Estimator to get a rough idea of what you’ll receive each month
in benefits. To get a better idea, check out “Maximize Your
Social Security.”
5. Spending your savings on optional stuff
A
financial windfall — an inheritance, an insurance settlement or proceeds
from the sale of a business — can be a golden ticket to a richer
retirement. But not if you blow the money.
Spending
your windfall on fancy cars or boats, exotic travel, or even simply eating out
too often in fancy restaurants can burn up cash that would serve you better if
it was tucked away in a retirement account.
Want
your golden years to shine? Cut back on the extras right now.
6. Having no plan to cover income gaps
Once
you retire, you might unexpectedly find a big gap between the money you need
and what you have. Do you have a plan in place in case this happens? If not,
you might be forced to return to work.
If you
find yourself in this situation, get creative. It’s possible that you can earn
enough income from side gigs or other ventures so that you won’t have to return
to full-time work.
Check
out some of these ideas for making a little extra money on the side:
7. Failing to keep your eye on the ball
Planning
for retirement is not a set-it-and-forget-it kind of job. Keep running your
calculations and planning ways to stretch savings and cut expenses in
retirement.
Don’t
constantly worry about your rate of return on investments, or try to time the
market. If you are an investments worrywart, consider finding a cheap robo-adviser firm. Some of these firms
even offer human advisers to help with some of the decisions.
https://www.moneytalksnews.com/slideshows/9-tips-to-ensure-youll-have-enough-to-retire/?all
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