My how time flies, right? It seems like just yesterday you were planning for college and now, as a baby boomer, you are making some final plans to get your retirement in place. That definitely requires some solid financial planning.
The best way to prepare is to learn from other people’s mistakes. If you’re curious about some of the financial planning faux pas that other people in your demographic have made, so that hopefully you can avoid them, we have summarised five for you.
Making assumptions about life expectancy. There are a lot of articles that provide statistical data to support the fact that people are living longer now than they have in decades. This means that when you are doing your financial planning, there is a good chance that you may have as much as 30-40 more years after you retire. That’s three or four more decades of living off your “nest egg”, so definitely be aware of the possibility of that time frame in mind. Just in case!
Taking care of everyone but yourself. There is an overwhelming amount of parents (and grandparents) who, whether due to the economy or the poor financial planning of their adult children, are in a situation where they are using their retirement to take care of other people’s responsibilities. It’s one thing to help out when you can. It’s another matter entirely to be a crutch, especially if it ends up leaving you without adequate finances. You might want to consider opening an account that can be for “family emergencies”, but make sure that it’s kept totally separate from your retirement fund.
Purchasing stuff you really don’t need. At some point, all of us are going to look back on our lives and realize that you bought a lot of “stuff” that you didn’t need and maybe don’t even like or use any more. There’s no time like the present to go through your house and get rid of what really has no lasting financial or sentimental value. You can then host a garage sale or sell the items on eBay or Craigslist. Moving forward, if you don’t need it and/or it won’t appreciate in value, it’s really something that you can go without.
Spending more than you can afford on your home. Many people use retirement as a turning point to move to another home, and often to another area from where they have been living. This can be a great way to free up some money, but only if you choose a new home that costs less and is not in need of a lot of renovation. The temptation can be to buy your dream home at the very time of life when downsizing might be a wiser decision.
Not enjoying life. It might sound like a bit of an odd financial planning point, but here’s why it’s on the list: Your retirement from your previous working life can be a wonderful time of life and should bring with it a lifestyle that you really enjoy. If you take on the mindset of poverty and lack, then your retirement will be miserable. Certainly there is much you can do that is free or doesn’t cost much. But if you have a special interest, sport, hobby or passion which really matters to you then you should follow your heart and engage in that activity as much as you are able to for as long as you can.
Of course there are also many wonderful ways you can enrich your lifestyle by planning a retirement lifestyle that involves income earning activities as well as the activities you love to pursue.