Many look forward to the wonderful image of retirement. They see themselves spending the rest of their golden years chilling out and enjoying fun activities, such as taking a dream vacation.
When you make the sacrifice of stashing away extra money in your retirement account, you want to make sure that you use those funds wisely. Making financial blunders with your money could prevent you from leading a comfortable life during your senior years.
As you get ready for retirement, take care to avoid making these six financial pitfalls:
- Moving Elsewhere on a Whim
Warm and comfortable climates are the siren call for individuals who are nearing their retirement. If you are thinking of heading to Florida and buying a homethere, you’ll want to test the waters first before relocating.
Many retirees who trudge off to their “dream destination” willy-nilly end up getting bored with the place eventually. The slow-paced lifestyle, along with endless rounds of beach strolls and golf, can become tiresome.
Years before your planned date of retirement, go on an extended vacation in your chosen area to get a feel of the location’s lifestyle, culture and people. This is incredibly important if you have plans retiring overseas where new customs, rules and languages can overwhelm retirees.
Once you do have a location in mind, don’t forget to do some house hunting in your preferred destination. Although the process may take years of house visits, home inspections and price negotiations, you want to make sure that the house you choose is perfect for you.
- Investing in Money-Making Ventures You Don’t Understand
Stay away from unfamiliar and dodgy investment schemes. If you’ve been invited to a business seminar with a free dinner, this income-earning opportunity could be a Ponzi scheme or a fraud.
If you are going to take the self-employed route when you retire, such as starting a printing business, you’ll need to learn the ropes of becoming an entrepreneur. Take up business courses and consult mentors should you want to pursue this venture.
- Gambling on Stocks
Refrain from allocating a huge chunk of your valuable retirement money on stocks that are purportedly the next big Apple, Google, Facebook or Amazon. Although the notion of taking home big gains is exciting, look at this approach as going to a casino in Las Vegas and betting a large portion of your hard-earned cash on black or red.
If you want to satisfy your thrill of betting into stocks, do it using small amounts of money. Of course, the better thing to do here is to avoid gambling on stocks at all. Make sure you do your homework before you make an investment decision.
- Taking Money out of Your 401(k)
Borrowing from your 401(k) retirement savings funds can be tempting. After all, this is your money and you can do whatever you want with it.
Tapping your retirement money, however, is a terrible idea. You’ll miss out on the investment growth from the cash you borrowed and the missed contributions.
Another drawback to taking money out of your retirement account is the payback scheme. When you get a 401(k) loan, you’re obligated to pay back the money over a maximum of five years. If you leave your company before paying off the loan, you’ll be required to settle the outstanding balance in full within 60 to 90 days.
Before you tap from your 401(k), look at other loan options. If you’re funding tuition for college, for instance, you could explore student loans. When you need to repair a damaged part of your house, consider financing this project with a home equity line of credit.
- Thinking About Working Indefinitely
Some soon-to-be retirees have plans on working beyond age 65. They do this either to keep their mind sharp, earn money to pay off debt and make the most of their Social Security checks.
This plan, however, could backfire. The company, for instance, could force you to retire early. This may be due to several reasons, such as health-related problems, business-related issues like downsizing and the inability of older employees to keep their skills up to date. The best advice you can take here is to save early (and often) and assume the worst.
- Failing to Account for Medical Costs
Although many retirees have Medicare, they will still have to shell out cash for uncovered medical procedures and deductibles. Rather than over-rely on Medicare, earmark some funds for health care costs that will occur as you grow older.
Get the most out of your retirement money by not incurring these six financial mistakes. Before you retire, take the time to create a financial retirement plan with the help of an experienced and trustworthy financial advisor.
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