Financial planning is more important than ever when you turn 50. After decades of working hard and saving, it’s time to make sure that your finances are in order.
Here are the top mistakes that you should avoid.
Withdrawing early from a retirement account
This ranks as one of the most common senior money mistakes. Although retirement accounts and pensions are designed to support you in later life, many people still choose to withdraw from them early. It might not seem like the end of the world to withdraw a small sum, but that can quickly add up once you factor in other costs. Tax and early withdrawal fees both play their part and mean that the cumulative cost of the withdrawal is often much higher than it initially seems. Leave the money where it is and save it for when you truly need it.
Forgetting to review life insurance
Once you’ve taken out life insurance, it’s easy to simply forget about it, but that’s a big mistake and can be costly when the term expires. Instead, you should review your life insurance policy frequently and update it with any new circumstances or health conditions. It’s inevitable that the needs of even the fittest person will change as they age, and not reflecting these in your policy can be costly. Ignoring life insurance can make some nasty financial surprises further along the line, so pay due care and attention.
Under-budgeting for retirement
Most people imagine that retirement will be cheaper than it really is. When you take out things like the daily commute, meal preparation, and the various other expenses that come with working, it’s easy to think that you’ll make some big savings. In reality, retirement tends to be at least, if not more, expensive than your working life. While some expenses are removed, you also gain much more free time for new hobbies, travel, and activities. These all cost money, so you should always save with the idea that you’ll be spending at least as much as you did while working.
Carrying debt into retirement
It’s highly advisable to clear as much debt as possible as you near retirement. Some debts simply won’t be sustainable when you leave work, and your regular wage falls away. Debt repayment can really eat into your pension and write off a large portion of your savings. Worse still, many people see approaching retirement as a time to make investments (a new car, for example), saddling themselves with additional debt that will make the retirement budget far harder than it needs to be.
Balance security with new experiences
There sometimes seem to be two types of a retiree: the one who spends their days maintaining a careful budget and the other who spends freely on life-enhancing activities to tick off their bucket list. Both have their pitfalls. In reality, it’s best to fall somewhere in the middle. Always ensure that you have enough money to feel secure and safe, but don’t lose sight of the core principle of retirement. If you’ve been working hard all your life you deserve to spend on the things that make you happy.
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