Retirement should be a time to rejoice and relax, knowing that you have worked hard all your life to get to this point. However, many people fail to plan for this major life shift and find themselves stressed, anxious or unhappy. Here are five of the biggest mistakes that people make when planning their retirement:
Poor Financial Plan
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Have you worked out how much you need to retire comfortably? If you haven’t calculated your annual living costs and considered how much money you will need to live for the next twenty to thirty years, you are making a grave error. Even with your 401K, and investments such as home equity release, you’re likely to face a significant shortfall later in life.
To estimate your financial needs, you need to consider three important aspects. Firstly, your current living expenses, including bills, mortgages and spending money. Secondly, you must think about how these living expenses will change when you enter retirement. Will your travel expenses increase as you have more time available to take trips? What about potential increases in your medical costs as you age? Lastly, you need to consider your life expectancy. We are healthier than ever and consequently, we are living longer. This is fantastic news, as long as you have the finances to sustain yourself.
Relying on Social Security will most likely mean significantly reducing your budget and foregoing many of the things that you had planned. It is never too early to start investigating your options.
Beating the Boredom
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Whether you loved your job with a passion, or simply worked for a paycheck, most of us spend a high percentage of our lives working. Many retirees are surprised to find that they don’t know what to do with their time once they stop working.
It is worth thinking about how you will fill your days. You might revisit old hobbies, volunteer within your local community, or study a topic that you have always been interested in but never had the time to delve into.
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Are you planning a big move to coincide with your retirement? Relocation could give you just the new lease on life that you need. Plan any move carefully, making sure that you consider the climate, your support network and access to amenities and healthcare. Some people make the mistake of moving to save money or improve their lifestyle, only to find that they are lonely or isolated, particularly if they lose their spouse.
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You most likely have a clear mental picture of your retirement. Maybe it’s a family scene with all the children and grandchildren around you. Perhaps it centers around travel and exploring the world. Whatever the case, chatting through your retirement plan with your family is essential.
You might find that your children are busy living their own lives and don’t have as much time to spend with you as you had hoped. Alternatively, they may have assumed that you relish the opportunity to take an active role in caring for your grandchildren while they return to work. Talking through your plans early on and working out something to suit your health, fitness, and inclination will help ensure that everyone is on the same page and avoid any potential tension.
Failing to Budget
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Remember that retirement is a long-term plan, so don’t fall into the trap of blowing your budget in the early years. Some experts recommend trialing your retirement budget for a few years before you take that final step back from work, so you know you will be comfortable.
Avoid these errors, and you will lay down the foundations for a long and fulfilling retirement.