You have worked hard to build up your retirement and now it is time to enjoy your golden years. However, those years can be anything but if you deplete your nest egg prematurely.
To avoid this, it helps to have a plan of action. Tracking your spending habits is the obvious solution, but learning from other people's mistakes can save you from having to go through those hardships yourself. When it comes to finances, many retirees are guilty of wasting their savings by making certain common money mistakes. Here we look at eight of those:
1. Not taking advantage of senior discounts. Every little bit adds up, but when it comes to senior discounts, the rewards can be more significant than you realize. According to Money Talks News, some stores offer discounts that can range from 5% to 20%. The benefits don't stop there, though. From cheaper meals to discounted hotel rooms, it pays to do some investigating.
2. Tapping into retirement funds for home remodeling projects. You have built up a sizable nest egg and now that you are spending more time at home you may start thinking about certain home improvement projects. Ty C. Hodges, a financial advisor in San Antonio, said it is common for new retirees to start dreaming about how they are going to spend their money. Some may even withdraw funds from their retirement accounts to do so, but this is a big mistake, The Simple Dollar noted.
"Pulling cash from your retirement funds could leave you strapped for money later in life, at a time when medical bills are mounting and no additional money is coming in," said Hodges. "Even if you feel comfortable pulling a certain amount from retirement accounts for a remodel, it's easy to overspend."
3. Chasing down those bargains. You have all this free time on your hands but you don't want to spend it in the malls, where you can burn through your savings. Rummaging around flea markets and garage sales may seem like the perfect alternative but if you are not careful, you could easily overspend, Cheapism reported. You may also end up with hordes of junk taking up unnecessary space in your home.
4. Financially supporting your grown children. You may want to help your children in every way possible, but providing financial assistance can hurt you in the long run. Money Talks News reported that parents spend around $500 billion annually to support their adult children. For retirees, this is money they cannot afford to spend.
5. Collecting Social Security too early. According to financial advisor Benjamin Brandt, too many people choose to collect their Social Security payout at an early age and this could cost them, The Simple Dollar noted.
"There isn't a one-size-fits-all answer for the ideal Social Security claiming age, but with over 40% of beneficiaries planning to claim early, it's safe to say not enough people see the value in waiting," he said.
You can collect your Social Security from as early as age 62, but ideally you would try to put it off to as close to 70 as possible. Your Social Security benefit is reduced by 30% if you start collecting it at 62, Bankrate reported. This figure drops to 6.7% if you start collecting at age 66.
6. Not downsizing. You could save on insurance, utilities, and mortgage payments by moving into a smaller home, Cheapism noted. Meanwhile, your expenses will be a lot higher if you choose to stay, or move, into a larger home.
7. Holding on to two cars. Retirees have far more flexible schedules and can get by with one vehicle. You will cut your costs dramatically by opting to go this route rather than choosing to fork out on the expenses that come with maintaining two vehicles, Money Talks News said.
8. Overspending on travel. There is nothing wrong with wanting to take time to see the world during your golden years, but the mistake many retirees make is overspending on their travel plans. Stick to your budget and look into traveling outside of peak holiday seasons, when the prices on airfare and hotels are notably lower, Cheapism advised.
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