One of the common worries that all retirees have is whether their retirement savings will last until they die. There’s perhaps no greater fear than running out of money in old age and being forced to live your final years in poverty and ill health. If you’ve budgeted well, saved consistently, and retire with enough money you should be set. But there are still some potential financial pitfalls that you’ll have to avoid.
Spending Too Much on Your House
You probably bought your house to provide enough room for you and your children. But your children have grown up and moved out and now you’re left with a lot of empty space. That’s space that needs to be heated in the winter and cooled in the summer. And don’t forget the property taxes you have to pay every year. Downsizing to a smaller house might not be a bad option.
If you haven’t paid off the mortgage on your house by the time you retire, you might be tempted to speed up your payments, but that might not be such a great idea. It takes a lot of money out of your retirement savings up front and won’t necessarily provide you with many benefits, especially if you’re enjoying a low-interest rate right now. This is another reason you might want to downsize. If you have enough equity in your house, the price you realize in selling your larger house might be enough to buy a smaller house, pay off the remainder of your mortgage, and still have some money left over.
Spending Too Much Too Soon
Now that your time belongs only to you, you might be tempted to do all the things you couldn’t do while you were working. Travel, vacations, new hobbies, you name it. If you spend too much of your principal early on in your retirement, you’ll have less money to rely on later on. That $5,000 vacation you take today at age 65 could mean anywhere from $15,000 to $30,000 less in your retirement accounts by the time you reach 85. You don’t need to be miserly, but don’t be a spendthrift either.
Spending on Children
It’s natural for parents to want to help out their children, but spending too much on them can deplete your retirement savings quickly. Adult children need to realize that they can’t draw on the bank of Mom & Dad forever. And it’s not just big-ticket items like student loans, rent, or down payments on houses that can drain your savings. Little things like cell phone bills or utility expenses can eat up thousands of dollars a year, detracting from what you’re able to live on.
Helping out Relatives
You might be tempted to help out relatives too. Whether it’s one-off emergencies or help to start a new business, you might look at the size of your nest egg and think that there’s plenty to share. But beware, that money won’t last forever. Every time you dip into it, you’re taking money away from your future retirement. Before you know it, you’ll be looking at your accounts and wondering where all your money went.
If your retirement finances are in good shape right now, if your assets are well-diversified in a portfolio that includes precious metals, and if you’ve established a reasonable budget for retirement you’re almost all set. Just avoid these potential pitfalls and you’ll be well on your way to enjoying your golden years.