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Senior Resources » Top 10 Retirement Blunders Most People Make (And How You Can Avoid Them)

Top 10 Retirement Blunders Most People Make (And How You Can Avoid Them)

Did you know that half of American households have NO retirement savings? Yikes! That’s just one of the many financial blunders that can make or break your retirement. Navigating the financial landscape after retirement can be tricky. However, you don’t have to fall prey to common pitfalls. Here are TEN of the most common retirement blunders and a few ways you can avoid them.

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1. Not Adjusting Your Lifestyle Post-Retirement

So, you’ve retired! A much-deserved congratulations. While retirement is a time of leisure, it can also become a time of stress if you don’t adjust your lifestyle to match a fixed income. While eating out and buying new clothes certainly can be done, your spending should align with your newfound retirement budget. Plus, you should always have money set aside for healthcare and long-term care expenses. A little budget adjustment and careful planning can help you enjoy your lifestyle without hitting your wallet where it hurts.

2. Not Shifting Your Investment Strategy

Financial losses at any age can be devastating. However, they can really hurt retirees. While financial advisors often suggest sticking with the market’s ups and downs for the long haul, retirement requires a shift in strategy. Consider keeping some money in growth investments, but not at the same level as when you were younger. With this method, you may not see huge gains, but you’ll be safeguarded against significant losses. Always seek the counsel of a financial advisor if you’re unsure where to begin.

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3. Claiming Social Security Too Early

mature older woman with a grin and a fan of hundred dollar bills thumbs up

Just because you can apply for Social Security at 62 doesn’t mean you should. Starting benefits at age 62 means receiving about 30% less than what you would get at your full retirement age of 67. Waiting until age 70 could increase your benefits by as much as 8% a year! If you can manage your expenses, consider delaying your application for retirement benefits. The increase in benefits maxes out by age 70, making it an optimal target age for retirement.

4. Not Being Vigilant About Frauds and Scams

Sadly, retirees are often the target of scammers. Always consult an advisor before making significant investments or spending large amounts. Keep a healthy level of skepticism about investment opportunities presented to you. Don’t open email attachments unless you can trust the sender. Be skeptical of texts you receive from unknown numbers. Don’t trust callers asking for money, even if they claim to be a relative. Do your homework, ask questions, and research like mad. It could save you from falling prey to a scam!

5. Cashing Out Pension Prematurely

piggy and happy woman

The promise of higher returns can lure retirees into cashing out their pensions for other investments. But remember—investments are unpredictable. Finding one that pays as much, or more, than your pension can be challenging. Cashing out your pension early can come at a high cost. Be cautious and weigh your options carefully. The longer you live, the more you stand to lose from cashing out your pension too soon!

6. Overpaying Taxes

tax cutting with scissors

Navigating the tax landscape can be tricky when you have multiple retirement accounts, each with its own set of tax implications. If not handled strategically, you might end up paying more taxes than necessary. Keep in mind that every dollar saved on taxes is a dollar added to your retirement fund. It can be a complex process to figure out the most tax-efficient way to withdraw your savings. Remember to explore your options and always seek professional advice!

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7. Financially Supporting Adult Children

piggy bank with lots of pennies

As much as we love our family, it’s important to remember that retirement changes our financial dynamics. You’re on a fixed income now, and you may now have many opportunities to earn more money. On the other hand, your adult children have a longer time to recover from financial setbacks. Unless you’re absolutely sure you have spare funds, you should avoid large monetary gifts or loans. Remember—your retirement income is primarily meant to cover your personal expenses which are expected to have reduced by now.

8. Not Staying Socially and Physically Active

happy strong African-American woman with yellow background

Retirement isn’t just about managing finances. It’s also about enjoying life to the fullest! Isolation and inactivity can lead to both physical and mental health issues. Physical and mental health problems, in turn, can result in big bills. Fortunately, there’s an easy solution! Keep your social connections alive, engage with friends and family, and join social groups and activities. Remember, your mind is like a muscle—it needs regular exercise to stay sharp. Reading, solving puzzles, or even engaging in lively conversations can help keep your brain active. Similarly, physical activity shouldn’t take a backseat in retirement. Avoid spending too much time in front of the television. Instead, put on some comfy shoes and hit the nearest walking trail.

9. Jumping Right Into a Big Move

The idea of trading in frosty winters for sunny beaches is a tempting thought for many retirees. Perhaps you’re dreaming of Florida’s warmth or other popular retirement destinations known for their mild climates. Our friendly suggestion—try before you buy. Many retirees enthusiastically relocate to what they believe will be their ideal retirement haven, only to discover it doesn’t quite meet their expectations. Spend some quality vacation time in your prospective retirement spot to get a real sense of the local culture and lifestyle. You don’t want to spend a lot of money on moving, unless you’re absolutely sure you’ve found your new home!

10. Not Saving for Long-Term Care

Nobody really wants to face the possibility of moving into assisted living or other senior living facilities. However, it’s better to be prepared for any eventuality. Plus, you need to brace yourself for the potential financial impact of long-term care. Medicare (and most health insurance plans) doesn’t cover the majority of long-term care costs. Therefore, you should have a savings account set aside to cover any long-term care costs that arise later on down the road. In fact, planning for long-term care is an essential part of retirement planning. Fortunately, it’s never too late to start exploring your options!

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Originally published September 25, 2023

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