The worst financial mistakes to make after retirement
Everybody makes money mistakes when growing up, but the results can be a little more catastrophic when you’re in retirement. Here are the 5 worst financial mistakes people make after retirement:
Not Changing Lifestyle After Retirement
One of the biggest mistakes retirees make is not adjusting their expenses to their new budget-dependent life. It’s easy to see why this is so common: people who have worked for many years usually find it hard to reconcile the fact that food, clothing and entertainment expenses need to be adjusted because they are no longer earning the same amount of money as they were while working. You might be used to dining out a lot for example, and may need to consider the amount of money you spend doing this.
Spending Too Much Money Too Soon
Before finalising your retirement, take into account that you may be living on a fixed amount of money. Oftentimes the amount of retirement savings can seem quite large, but retirees must keep in mind that that money will have to last a very long time (we hope)! Avoid the temptation to spend large chunks of it early in retirement. The temptation to spend your money can be huge, but be disciplined. Depleting your money beyond the interest that it earns will hurt the principal and would leave you with nothing after just a few years.
Failing to Be Aware Of Scams And Fraud
Unfortunately, the retired are among the most targeted for scams as they are often seen as vulnerable. Be sure to consult an advisor prior to making any investment or laying out a large amount of cash on anything. Scammers prey upon your desire to grow your savings.
Even if you are not retired or about to retire, always be sceptical when it comes to any investments being presented to you. Do your research first: ask about it and search for it online. You might just find out that what is being presented as genuine is just an elaborate way for people to get money out of you.
Cashing Out Your Pension Too Soon
Retirees can be easily swayed by the promise of a higher return once they try to put their money on a particular investment which pushes them to cash out their entire pension. This is not always the best move to make: investments are highly unpredictable and it can be hard to look for one that could pay just as much as the pension over the long term.
Cashing out on a pension early can come at a big cost. Again, be sceptical and weigh your options well. The longer your life, the more you are going to miss out on the benefits of the pension if you have cashed it out early.
Not Being Effective Tax-Wise During Retirement
Having multiple retirement accounts may sound like a good idea but you have to remember that each retirement account is being taxed differently. If you do not find a tax efficient way to take out your money from your assets and your accounts, you could end up paying more tax than you actually have to.
Finding the most cost-efficient way of being taxed during retirement is a complicated manner so you might want to make sure that you have a trusted financial planner to help you along the way.
If we can help you in any way – please don’t hesitate to get in touch at firstname.lastname@example.org or tweet us @MACFinancial