Seven Rookie Retiree Mistakes to Avoid
The newspaper then narrowed down the list to seven key missteps.
- Not having a financial or a life plan: A large number of people head into retirement without either a financial plan or a lifestyle plan. The latter covers what a new retiree intends to do to bring meaning and fulfillment to his life.
- Overspending: It’s easier to shop more or take more vacations in retirement because there is more time for such activities. Yet, if a new retiree tries to enjoy all of the activities he has been deferring during his working years, he may end reducing his savings more than he should.
- Claiming Social Security too early: Delaying the age at which benefits are claimed can make a big a difference in lifetime wealth.
- Being too conservative with investments and not considering inflation: Rising prices will erode a retiree’s purchasing power if too conservative of an allocation is followed. USA Today cited John Sweeney of Fidelity suggesting 65-year olds allocate half or more of the portfolios to stocks.
- Retiring too early: A retiree may never come close to replacing the income he realized during his full-time working years. Jeremy Kisner of Surevest Wealth Management told the newspaper that while 69% of people plan to work after retirement, only 27% actually do.
- Underestimating life expectancy: Retirees may live much longer than they expect to. Half of all men who reach age 65 will live another 17 years, while women can look forward to an additional 21 years. Longer life-spans extend the period a portfolio has to last.
- Not having a health care strategy: One of the biggest expenses retirees can expect to face is health care. Having a plan for long-term care can make a big difference protecting one’s finances.
Source: “7 Big Mistakes to Avoid in First Year of Retirement,” USA Today, December 4, 2013.