In our last post, we talked about what type of questions you should ask yourself when putting together a strategy for retirement. But even retirees with a retirement strategy in place can make mistakes. Some of the snares people fall into are these:
Spending too little
Believe it. It happens. Some retirees make the mistake of spending too little money. As they grow older, they have successfully saved their funds. But they may not be fit enough to enjoy a trip or adventure they could have easily afforded when younger. These folks aren’t suffering from illness. But they’ve slowed down enough that they may not keep up with an overseas tour or active vacation.
Spending too much
The freedom from work gives you much more time to enjoy friends, hobbies or traveling. With that extra time, many people end up spending too much money. For instance, while they were working, a person might have time to meet friends for dinner once a week. With a week full of daylight hours to enjoy, a retiree might find themselves playing golf in the morning and eating lunch afterward at a restaurant with friends, plus an activity in the evening.
Spending indiscriminately
Be disciplined about saving. But it’s also important to be methodical about considering where money is coming from. Namely, all money isn’t the same. And retirees sometimes forget this. The most successful retirees are the ones who identify a specific use for different parts of their portfolio. If a retiree has earmarked one of his or her funds for vacations and it’s not performing well, they might think about postponing their trip instead of dipping into shares of an individual stock to make up a shortfall.
Retirement presents difficulties and opportunities. Ideally, people should begin some planning for retirement as early as their 20s. That’s because, regardless of what someone’s net worth equals, we tend to live at or near the level of our means. It’s important to educate yourself financially as early as possible.
Whether you’re a multi-million dollar athlete or the average retiree, financial education doesn’t stop the day you retire. In fact, some of the best advice I ever received about retirement planning was this: Study before you spend what you’ve saved.
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