One of the several reasons why people seek advice from a financial planner is to know when they should retire. Moreover, they don’t want to make any deadly mistakes before retiring that will cost them a fortune later. For some people, just the thought of retirement is enough to make them feel overwhelmed. One of the biggest fears they have when it comes to retirements is the act of balancing expenses with the absence of a steady monthly income.
There are a few common, yet avoidable mistakes that push people to work harder and not retire on time. However, with some planning, it is possible that you avoid making decisions that will derail your retirement plan.
Here are 6 things you must avoid to have a good retirement plan:
- No Financial Plan
- Not Diversifying Your Portfolio
- Spending Too Much
- Being Too Optimistic
- Not Updating Your Retirement Plan
- Retiring Too Early
The biggest mistake an individual can make is to retire without knowing where the money will come from once they are no longer working. This is the biggest mistake people can make when running into problems. You can have huge retirement plans, including traveling the world or spoiling your grand kids. However, make sure you save or invest money in lucrative ventures for living a luxurious life even after retirement.
When a financial adviser suggests you to diversify, he means you should not invest all your money in one place. It also means that you don’t have to direct all your investment efforts into high-risk and high-gain assets. A diversified portfolio with several funds, investments and annuities is eventually more beneficial and healthier.
There are many people who reduce their expenditures once they retire. However, a large percentage of people are likely to become reckless with their expenses. It is not uncommon to come across someone who worked all his life to save enough for his dream vacation after retirement. But a dramatic and lavish excursion should not leave you with an empty bank account for the rest of your life.
People who have been living on a shoestring budget all their life to afford retirement, losing track of their expenses can make it difficult for them to manage expenses successfully in the long run. Set a withdrawal rate and stick to it. A moderate rate is suggested for anyone who wants to lead a happier life even after retirement.
Even rational and logical people become too optimistic once they retire. They hope to spend the latter years of their lives watching re-runs of old TV shows and spending money without any effort. People who have invested their savings in multiple avenues may actually accomplish this dream. However, people who don’t make an effort to plan their retirement days may end up figuring out how to take care of health bills and unforeseen expenses.
It is difficult to deal with this cold hard truth, but retirement is not easy for people who do not plan their finances. By having an accurate picture of your current spending, you can map out the direction of where your retirement days are heading.
Markets rise and fall as well as your expenses and income. It is crucial that each aspect of your retirement plan is inspected every few years to know if it is still valid. There are many life events, such as your spouse’s promotion or demotion, birth of another child and paying for your child’s college fee, which may prompt you to tweak your retirement plan every now and then.
You may be tempted to retire as soon as you reach a specific age. However, don’t stop working simply because you turned 65 this year. This is a big decision and requires quite a bit brainstorming and planning.
A well-thought-out plan must clearly spell out your spending needs after retirement and a high degree of confidence that all your funds will be sufficient to support those needs. Before you decide to call it quits, sit down with a financial expert for examining how solid your retirement funds are.
About the Author:
Elena is a financial writer, editor and a lifelong learner with a servant's heart who loves challenges. She has also written for The Huffington Post as well as other fun financial sites. She loves traveling, volunteering and scrapbooking. She's currently working as real estate financial advisor at Karkanja Gozo Property.