As we age, financial planning becomes increasingly important. Here are 10 common money mishaps and easy ways to avoid them.
Not preparing or updating a comprehensive personal financial plan By age 55, most individuals have undergone major life changes and have new financial goals and obligations. An updated plan can help position you for future financial success. A great place to start, says Cassandra Ryder, CPA, MBA, MSA, and adjunct professor at Columbia College, NAS JAX, is taking a second look at your life insurance policy to assure you’re paying for the correct type and amount of insurance for your current needs.
“Life insurance is intended to replace the need for income for those people who are dependent on your income,” Ryder says.
Not tracking your spending
“You cannot master what you do not measure,” Ryder says. Preparing a monthly budget and tracking your spending helps to quickly reveal where you’re overspending, forces you to prioritize spending and keeps you conscious of questionable charges on your bank accounts.
“Tracking your spending today has never been easier,” Ryder says. “Apps and other tools make it a breeze to track your spending and then budget accordingly. Further, now is the time to pay off all credit debt, so that you will be in the best position possible to enjoy whatever goals you have for your future.”
Neglecting retirement savings
Many people assume that they have enough time left to catch up on their retirement funds, but the reality is that the earlier you start saving, the better.
Underestimating healthcare costs
Healthcare expenses tend to rise as individuals age. It’s crucial to factor in these costs when creating a retirement budget. Consider purchasing long-term care insurance to help mitigate potential financial strain in the future.
Overlooking estate planning
Failing to create a comprehensive estate plan can result in unnecessary legal and financial complications for your loved ones when you pass away. Consult with an estate planning attorney to draft essential documents like wills, trusts and powers of attorney.
Ignoring tax-efficient strategies
This includes not taking full advantage of tax-advantaged retirement accounts or failing to plan for tax-efficient withdrawals during retirement.
Maintaining high debt levels
Carrying high levels of debt into retirement can be a significant burden. Prioritize paying down debts, especially high-interest ones, before retirement. Reducing debt will free up more of your income for retirement savings and daily expenses.
Underestimating longevity
People often underestimate their life expectancy when planning for retirement. While it’s challenging to predict precisely how long you will live, it’s essential to plan for a longer retirement to avoid running out of money.
Not diversifying investments
Relying too heavily on a single investment or asset class is a common mistake among older individuals. Diversifying your investments can help spread risk and improve the potential for stable returns.
Overspending in early retirement
Some retirees experience a surge in spending during the early years of retirement when they have more free time for travel and leisure activities. While enjoying retirement is essential, it’s crucial to set a realistic budget that considers both your immediate desires and long-term financial security.
There’s no shame in seeking help! The guidance of reputable financial professionals can help you stay informed about financial planning strategies to make the most of your retirement years.
Photo Credit: Tima Miroshnichenko
