10 Financial Mistakes That Derail Way Too Many American Retirements
Edging closer to retirement can be stressful! Will another ’08 happen months before your retirement? Will you need to find a job in a few years? Will a surprise emergency cost mean you have to let go of the home your children grew up in?
Retirement should be the most relaxing years of anyone’s life (well-deserved after decades of hard contribution to the American economy). So here’s 10 painfully common financial mistakes to look out for so that you can have the retirement you deserve.
Mistake #1). Not Planning at ALL For Your Retirement
Congrats! By reading this article, you’ve started preparing. Only 41% of Americans have estimated how much money they need in retirement. That is scary.
The topic of retirement savings can be scary too, but address it early and often. Even if you already have a 401K or IRA set up, regularly re-evaluate your savings and investment plans.
Mistake #2). Getting Blindsided by Natural Inflation
Remember when you could catch the Sunday matinee for $2.50? You can thank the average U.S. inflation rate of 2-3% per year for that one.
Inflation can seriously do some damage on your nest egg too if you’re not careful. With an inflation rate of 2%, if you’re 40 years old and have saved $50k for your retirement, by the time you turn 65, that $50k will be only worth $30k. You could lose almost half of your money by doing nothing!
The best way to fight inflation is to invest your money in something that gets returns higher than the 2-3% inflation rate. Don’t let it sit under your mattress!
Mistake #3). Taking Heavy Debt With You Into Retirement
Emergencies happen. Cars break down, insurance companies won’t cover a procedure, or sometimes family members need help. Truth: a lifetime of responsible budgeting can unfortunately still land some in debt.
Approaching retirement with debt may feel like driving straight toward a brick wall, but fortunately there’s companies like Freedom Debt Relief that can help.
To date, they’ve resolved over $7 billion in consumer debt and helped thousands of ordinary Americans regain control of their debt. If this sounds like it could help you, read our article to learn more. Debt is not something to mess around with, especially in retirement.
Mistake #4). Collecting Social Security... At The Wrong Time?
Did you know you can increase or decrease your benefits by changing the age you start receiving Social Security?
Suppose a retiree was able to retire at age 66 but holds off taking any benefits until they are 70 years old. This retiree could receive a total benefit 32% higher than what they would have received at age 66.
Of course, you end up having to do a little more planning, but it’s definitely worth considering. You could end up with $10,000’s more than you expected!
Mistake #5). Assuming All Reverse Mortgages Are Bad
Reverse mortgages give you access to your home’s equity, and defers payment of the loan until you sell, pass away, or move out.
Many retirees have worked hard all their lives and have most of their money tied up in their homes, but don’t want to sell because they enjoy the area they live in. This is where a reverse mortgage can really help out.
10 years ago, these loans were considered an option of last resort, but now stronger policies and consumer protections have made reverse mortgages into a real lifeline.
If you’re considering a Reverse Mortgage we suggest working with LendingTree. They’ve facilitated more than 65 million loan requests in the last 20 years. Just visit the site and enter your information, and they’ll give you a call.
And if you're still making payments on your home, you could stand to save thousands by making banks fight for your refinance.
Mistake #6). Forgetting About Long-Term Healthcare Costs
If your retirement plan consists of living on the same amount of inflation-adjusted money every year you could still be forgetting about long-term healthcare.
The U.S. Department of Health estimates that around 70% of Americans in retirement will need long-term care (in-home or a nursery) at some point to the tune of $138k.
You’re in luck if you have family nearby that can help you around the home, but that’s not everyone’s situation. Long-term care insurance is an option but tends to be pricey. A better option could be saving more in your retirement or dropping your annual planned allowance.
Mistake #7). Getting Surprised by Costly Repairs in an Older Home
If you’ve been living in your home for a long time home repairs are more of an eventuality than a possibility. The older the home, the more likely and the more expensive a break could be.
A surprise expense of a few hundred or even a few thousand dollars could throw your budget out of whack for months. A home warranty plan can cover virtually any breakdown or fix for a low scheduled fee every month.
Check out Choice Home Warranty for a free quote on a home warranty plan. If you have questions they can hop on the phone as well.
Mistake #8). Not Realizing How Long Retirement Could Last
What if everyone started living until 100 years old?
Pro: spending many more years with your family and seeing your grandkids grow up.
Con: stretching to make ends meet or asking family for support.
Most financial planners say a good rule of thumb is to use 95 years old as a conservative estimate, but who really knows what crazy medical marvels science will come up with in the next few decades.
Mistake #9). Living in More Home Than You Really Need
Houses are expensive. Even if it’s paid off, there’s ever-increasing property taxes, insurance, heating and cooling, yard maintenance, house maintenance, cleaning, gas and electricity, furniture and appliances.
You already know to have a Home Warranty Plan for surprise breaks and you should consider using a Reverse Mortgage, but sometimes the best move (especially if the nest is empty) is to plain old downsize.
Mistake #10). Assuming Social Security Will Cover Everything You Need in Retirement
Social Security is FDR’s great contribution to American society, but he never intended for it to entirely replace an older American’s livelihood.
The average Social Security retirement monthly payout is around $1,400 which comes out to about $16,800 per year. These figures will vary depending on your income but not by much.
The Bottom Line
Retirement is the pot of gold that’s been waiting at the end of the rainbow for most everyone’s working life. It’s a dangerous road, filled with pitfalls that can tank anyone. Keep up your constant vigilance if you’ve built up a good nest egg, and don’t give up if you’ve still got a ways to go.
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