Retirement is a golden opportunity to kick back, relax, and enjoy the fruits of your lifelong labor. But be careful, there are certain financial missteps known to derail retirement bliss. In this article, we’re highlighting three common retirement pitfalls so you can steer clear and proactively take steps to secure a more worry-free future.
Carrying Debt into Retirement
Debt, that word alone makes most cringe. While some of you avoid debt at all costs, many others avoid talking about it. Unfortunately, ignoring debt doesn’t do any good. Monthly payments towards loans can quickly become a significant financial burden when you're no longer earning a steady income. Debt not only disrupts your budget, but the interest can quickly erode your savings. Debt altogether limits your ability to enjoy retirement to the fullest.
Solution: There’s no time like the present when it comes to tackling debt. Prioritize paying off small debts, like auto loans and consumer debt. One of the best ways to do this is to apply extra funds to the principal each month. If your loan payments are tied to toys (think sports cars, a boat, etc.), it may be time to consider selling. There’s no shame in taking a bit more of a minimalistic approach to life, especially if your debt is interfering with your ability to retire under your ideal timeline.
We can’t talk about debt without mentioning what is likely your largest debt. It’s more common than ever for retirees to carry a mortgage into retirement. While paying off your home is a great goal, if it’s not in the cards, you may consider downsizing to reduce your monthly payment. Think of the pros — a smaller residence may mean less yard work, not as many toilets to scrub, or fewer stairs to climb.
Avoid Overspending in Early Retirement
Don’t deplete your savings by overspending. Without a steady paycheck, it's crucial to establish a sustainable budget that reflects your new financial reality. Overspending often inevitably leads to stress and can even force you to head back to work.
Solution: Create a detailed retirement budget that accounts for your essential expenses, discretionary spending, and potential emergencies. Stick to this budget, track your expenses regularly, and make adjustments as needed. A well-planned budget will help you enjoy retirement without worrying about running out of funds. No matter how techie (or anti-technology) you are, budgeting has never been easier thanks to online banking, automated savings tools, and the numerous apps available to help you create a budget, track spending, or monitor your progress toward short-term financial goals.
Neglecting Long-Term Care Planning
It is important to not underestimate the potential costs of long-term care, such as nursing homes, home healthcare, or unexpected hospital stays. Without proper planning, these expenses can leave you financially vulnerable.
Solution: Take the time to understand the potential cost of your ideal living scenario for later in life. This is also a great time to talk to your family to make sure you’re on the same page, especially if you have hopes of your loved ones caring for you. Some will invest in long-term care insurance to help cover the costs of potential future care needs. Regardless of what path you take, start planning for long-term care well in advance. Additionally, consider setting up a healthcare power of attorney to ensure your wishes are followed in case you become unable to make healthcare decisions.
Retire into a Life Filled with Relaxation and Fulfillment
While there’s no crystal ball showing us what’s ahead, proper retirement planning helps you navigate toward a fulfilling retirement with reduced financial stress and worry.
By addressing these three retirement pitfalls – carrying debt into retirement, overspending, and neglecting long-term care planning – you can pave the way to the retirement of your dreams.
Is it time to make a few adjustments to your retirement plan? We’re here to help. Contact Integrated Wealth Management today to learn more about how we can help you prepare for the road ahead.
About Integrated Wealth Management
Integrated Wealth Management is owned by Burt Hutchinson, CPA, CFP®. We’re a CPA-led organization, meaning we’re here to handle your complex tax scenarios and provide cost-saving insight related to your financial plan.
We’re here to guide you through the 3 stages of retirement:
Uncertainty Stage: When you are within 10 years of retirement and have questions about how to make it work
Stability Stage: When you have reached the financial milestone to retire comfortably and confidently
Reflection Stage: When you are looking to leave a legacy
We are also here to provide experienced, empathetic support during times of loss, such as the death of a life partner. You need confidence and a sense of security to enjoy retirement. As fiduciaries with a fee-only structure, we never receive commissions. Free of ulterior motives, you can be sure we’re focused on your goals.
Disclosure Statement:
This presentation is not an offer or a solicitation to buy or sell securities. The information contained in this presentation has been compiled from third-party sources and is believed to be reliable; however, its accuracy is not guaranteed and should not be relied upon in any way whatsoever. This presentation may not be construed as investment, tax, or legal advice and does not give investment recommendations. Any opinion included in this report constitutes our judgment as of the date of this report and is subject to change without notice.
Additional information, including management fees and expenses, is provided on our Form ADV Part 2 available upon request or at the SEC’s Investment Adviser Public Disclosure website, Past performance is not a guarantee of future results.