Over the next 20 years, more than tens of thousands of Americans will retire. While earlier generations, could rely on pensions and Social Security benefits to help them manage their non-working years, there will be fewer pension funds and less Social Security benefits available in the future.
What does this mean for you if you’re planning on retiring in the next few years? It means that you will have to develop an excellent retirement planning strategy. To design a good strategy, you must be able to forecast how much money you’ll need when you retire, how much you should invest, how much you can afford to spend, and how to make the best use of your time.
Here are some expensive retirement mistakes to avoid making:
Avoid Putting Your Family in Financial Straits
If you don’t take care of your final expenses, your family members will not only have to pay for your funeral costs but will also have to manage your medical expenses and any remaining debts. This could easily come up to $12,000 or more.
One way to spare them these last expenses is to get burial insurance. First, select a plan that you like, and then designate a beneficiary. If you can’t decide on a beneficiary, then ask for an insurance assignment, which will direct the insurance company to pay out your final expense insurance directly to the funeral home.
Once your policy is set up, you’ll pay a monthly premium, and the final expense insurance will be paid out quickly after you pass away. It’s always a good idea to establish a simple will to designate how you wish your beneficiary to use any remaining money.
Avoid Overspending
Since your savings and passive income sources must last the rest of your life, you must examine your money habits to detect where you may be overspending. In fact, if you get into the habit of budgeting your money before you retire, you’ll find it much easier to live on less than you think you need.
One way to get a grip on your spending habits is to look at your bank statements for a year, add the total debits and then divide by twelve. This will give you a better idea of your cash flow over an extended period of time.
Avoid Underspending
Once you’ve developed a budget, it’s possible to go the other extreme and become miserly, watching every penny and wincing every time the grocery bill is a little more than you reckoned.
Depriving yourself of the things you need will either result in one of two extreme outcomes: you’ll either start thinking of necessities as luxuries or you’ll go on a spending binge during your first year of retirement. By keeping a realistic balance between needs and wants, you’ll avoid the perils of acting out because you’ve deprived yourself for so long.
It’s Not All About the Money
There are many free or low-cost things for seniors that you can do that will give you plenty of pleasure. Many artistic or intellectual pursuits can be fairly inexpensive. Similarly, you can travel to visit family and friends without having to stay in hotels or dine out. You’ll also discover that many corporations offer free senior events or provide discounted goods and services.
In the final analysis, retiring comfortably is a combination of things. It’s taking care of your health so that you can enjoy the remaining years of your life. It’s developing a mindset that savors the good things in life. And it’s learning how to manage your money in a sensible, balanced, and practical way.
