6 Common Mistakes Made by Retirees

When you were younger, you saw decades of work ahead of you. You knew that if you made any financial mistakes, you could hopefully make up for them over time. But once you enter retirement, the game has changed. You probably don’t want to be forced back to work, or to ask your children for help if you get into a jam.

Unfortunately, that sometimes happens to retirees who make these mistakes. Learn from their misadventures, and you can hopefully prevent these fates from befalling you.

Neglecting your credit rating. During your working years, you knew that a solid credit score was your ticket to a beneficial car loan or mortgage. But for some reason, some older people fail to safeguard their credit scores. Remember that even if you never plan to purchase another home or car, your credit score also impacts things like car insurance premiums and your ability to borrow money in an emergency. Check your credit report regularly for errors, and keep a detailed calendar of payments so that you are never late.

Failing to pay down debt before you retire. Retirement can bring surprises, such as health care expenses or personal emergencies, but these surprises are much more difficult to navigate on a fixed income. It’s best to pay off debt before you retire, so that you have more “wiggle room” in your budget. Even if this means working an extra year or two, it’s worth it in the long run.

Counting upon your home’s equity. Many retirees hope that the equity in their homes will help to fund retirement. This can sometimes be true, but remember that the stock market is known to be unstable. When home values decline, you might not be able to cash out much equity from selling your home. Make sure you have planned for some other form of retirement income.

Underestimating health care expenses. Retirees often expect that Medicare will pay all of their medical bills, but that simply is not true. You will still have premiums, co-pays, and a deductible. You might also need equipment or prescriptions that are covered in only limited amounts. If you ever need long-term nursing care, you will be shocked to discover Medicare pays very little of the cost. Before you retire, investigate options such as long-term care insurance, Medicare supplemental plans, or health care savings accounts.

Overestimating your tolerance for risk. You might eagerly anticipate the possible payoff from a riskier investment decision, but the downside is that you could also lose money! Once you’ve entered retirement, don’t risk more than you can stand to lose. Most retirees find that switching to a low-risk, more stable retirement strategy is better for their long-term stability.

Neglecting to seek expert advice. When you need a car repair, you take your vehicle to a mechanic. When you need a new roof on your home, you hire a roofer. A do-it-yourself attitude is admirable, but you run the risk of losing money if you take this approach with your finances. Don’t try to make complicated financial decisions without the skilled expertise of a financial advisor. Give us a call, and we can help guide you toward the retirement planning decisions that benefit you.