Retirement planning is hard. It’s an activity you start when you are young and forego instant gratification for an abstract concept for when you are older. Having a plan in place while you are in your prime earning years is paramount, but there are also ways you can sabotage your own retirement.
There are several pitfalls along the way in life that can lay waste to the best planned retirements, but you can avoid these be taking proactive steps or merely having the potential problem on your radar. Like most things when it comes to finances or savings, a little bit of discipline goes a long way in avoiding these issues.
Here are some ways you can sink your retirement savings before it gets started or burn through it too quickly when you reach that stage in your life.
Retiring Too Soon
Today, it is seen as point of pride to be able to retire early. While some people can pull it off, those who are ill-prepared for an early retirement can find a tough road ahead. It is said that for every five years that you want to retire early, you should have at least an additional $100,000 of assets should be saved.
It should also be noted that those you venture down this trail will have a smaller Social Security check per month if you retire early. Keep that in your calculations as you plot a retirement course.
Living Past What You Take In
One of the more obvious points, but nonetheless one that clips a lot of those in retirement—living too luxuriously. If you are spending more than your monthly allocation, you will find yourself in a bad place eventually. So, if you are eyeing a big retirement purchase, it’s a good idea to think twice about the purchase. Do you need it and can you get your money back if you need to sell it for any reason? Pleasure purchases can eat huge chunks away of your retirement, so tread lightly.
Too Much Risk or Not Enough Risk
If investments are a part of your retirement plan, which it likely is, it’s important not too gamble too much of it away while in retirement. Unless you are a seasoned-veteran at trading, using your retirement savings on commodity trading might be too much risk for with the rationed monthly installments you have.
On the flip side, investing too conservatively can be harmful too, especially if your expenses begin outpacing money you are bringing in. Relying primarily on treasury securities or CDs may not be enough to retire on comfortably. Financial planners suggest that having at least a small percentage of your assets be in equities or real estate. These are good ways to protect yourself against inflation.
Retiring All at Once
Transitioning to retirement can be a drastic change for some people and can be a lot to take in at one time. It may be a good idea to switch to a lesser position, like working part-time. This way you can gradually ease into retirement while at the same time stretching out your retirement savings since you will still be earning an income. After a year or two of part-time work, you can transition to total retirement.