A good retirement draws on a lifetime of saving and work. But, despite its huge importance, many people slip up in the years just before this milestone. Some of these mistakes are the result of not understanding retirement, while others are conscious decisions that simply have a greater impact than estimated. Here are five of the biggest mistakes people make as they approach retirement.
1. Decreasing Retirement Savings
As retirement gets closer, those with accounts projected to meet retirement needs often cut their savings, thinking that their money won’t grow much before retirement. You should remember that this money will actually keep growing until the end of retirement, 20 or 30 years down the road.
2. Not Preparing a Budget
Do not wait until retirement to make a detailed budget. Budgets built on “frugal” spending or optimistic estimations can be broken by relatively small lifestyle changes. Create your retirement budget years in advance and tweak it annually to improve its accuracy.
3. Taking Social Security Early
Those who take social security benefits before their full retirement (benefits are available as early as age 62) will receive reduced payments. If you are still working, tax repercussions may make delaying benefits a smart option.
4. Lending Too Much to Family
For most, supporting family is of the utmost importance. But retirees need to remember that children and grandchildren have decades more to recover from losses and debt than they do. It may be hard to say “no,” but if handing out loans scuttles your retirement, it will end up costing everyone in the family more money.
5. Relying on Home Values
Many people rely on their home equity to fund a substantial portion of their retirement. While using home equity is not necessarily a bad thing, diversify your assets as much as possible to avoid home prices from dictating your entire retirement.
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This article was written by Advicent Solutions, an entity unrelated to McCarthy Grittinger Financial Group. The information contained in this article is not intended to be tax, investment, or legal advice, and it may not be relied on for the purpose of avoiding any tax penalties. McCarthy Grittinger Financial Group does not provide tax or legal advice. You are encouraged to consult with your tax advisor or attorney regarding specific tax issues. © 2016 Advicent Solutions. All rights reserved.