Many of us look forward to a retirement full of travel and relaxation. But having a successful retirement requires a lot of early planning. You can’t just expect for all the pieces to fall into the right place if you aren’t taking proactive measures to improve your financial situation. Here are a few common planning errors that can drastically reduce your chances of retiring comfortably.
Accumulating excessive debt. Carrying debt is not necessarily the kiss of death for your retirement. However, carrying large amounts of high interest debt can be. Few things are as devastating to your finances as credit card debt. Accumulating credit card debt can result in higher expenses down the road. Consider how you are spending your money, and how building large amounts of credit card debt might end up costing you in the future. It is extremely difficult to invest for retirement when you are still paying off past purchases.
Putting college ahead of retirement. Some couples make it a priority to pay their children’s college expenses so that their children will be able to begin their careers debt free. However, tapping into home equity, discontinuing retirement savings, or even raiding your retirement accounts to pay for college, may sacrifice your own retirement security. There are a variety of ways to finance college, but you can’t take out loans for retirement. This could be a golden opportunity to teach your kids about money, and set their financial goals on the right track at an early age.
Failing to plan for enjoyment. Knowing how you want to spend your time in retirement is important. Without this knowledge, it is difficult to make a realistic plan for a successful retirement. Spend some time thinking about what you want to accomplish during your retirement years, whether it be volunteering, traveling, a new hobby, or spending time with family. Decide what you want to spend your time doing and then determine the cost that will be associated with it. Once you have envisioned your retirement it is much easier to develop a plan to make it happen.
Ignoring your health. It’s not easy to enjoy retirement if you spend it in poor health. You can increase your odds of being healthy enough to enjoy your retirement by making healthier decisions now. While you don’t have to completely shun treats, an overall healthy diet, reasonable exercise, and fulfilling relationships can contribute to your overall health. If you are healthy, your costs will be lower and you will be able to enjoy life more.
Focusing on the short-term. Some people change their investment allocation based on the most recent financial news. This can be a very detrimental mistake. For example, if you had pulled out of equities when the market tanked in 2008, you would have missed the market recovery that has occurred since. When saving for retirement you have to accept that there will be short term fluctuations and be willing to invest for the long term. The best way to combat the problems associated with emotional investing is to adopt a well thought out investment strategy that balances financial needs with emotional demands. Then you have to stick to that plan throughout the short term financial storms that are sure to come along the way.