3 Costly Retirement Mistakes to Avoid
Though retirement is an exciting period of life, it can also be stressful — especially from a financial perspective. Think about it: You’re suddenly going from earning a paycheck to living on a fixed amount each month from Social Security and savings. That’s a scary prospect. But by not making these major mistakes, you can avoid the financial worries so many seniors come to face.
Many people think they can get away with not following a budgetOpens a New Window., during their working years as well as in retirement. But once you move over to a fixed income, knowing where your money is going becomes all the more crucial.
If you’re not used to following a budget, change your tune when you retire. Map out a list of your recurring expenses, factor in one-time expenses (like annual subscriptions or membership dues), and compare that to the monthly income you have to work with. Keep in mind that the money you withdraw from savings isn’t necessarily free of taxes. Unless you’re stashing that money into a Roth account, you’ll lose a chunk of your distributions to the IRS.
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Now, if you find that your monthly income is enough to cover your ongoing expenses, you’re in pretty good shape. Still, there should be a touch of wiggle room in your budget for unplanned bills. So if it’s not there, play around with some of your spending categories. You might, for example, dine out a bit less frequently or get a less expensive car to free up a little money. Either way, make sure you understand exactly where your income is going so you can make the most of it and, just as important, make sure you’re not overspending.
If you’re not used to following a budget, change your tune when you retire. Map out a list of your recurring expenses, factor in one-time expenses (like annual subscriptions or membership dues), and compare that to the monthly income you have to work with. Keep in mind that the money you withdraw from savings isn’t necessarily free of taxes. Unless you’re stashing that money into a Roth account, you’ll lose a chunk of your distributions to the IRS.
Now, if you find that your monthly income is enough to cover your ongoing expenses, you’re in pretty good shape. Still, there should be a touch of wiggle room in your budget for unplanned bills. So if it’s not there, play around with some of your spending categories. You might, for example, dine out a bit less frequently or get a less expensive car to free up a little money. Either way, make sure you understand exactly where your income is going so you can make the most of it and, just as important, make sure you’re not overspending.
