Hindsight is 20/20, but you don’t have to wait until you are in retirement to learn the hard lessons. You can avoid many of them by looking to current retirees. Their experiences — whether dealing with boredom, loneliness, or running short on cash — can teach you how to avoid the most common pitfalls.
“As you get to the retirement red zone, you are getting close to bringing out your best plays,” says Matt Radgowski, CEO of Halo Investing. “You also have to recognize that whatever path you lay out, you have to revisit that consistently.”
When it comes to retirement, some mistakes are far bigger than others. Here's a look at the "doozies" — the errors that can force you to change your lifestyle or even return to work — and, crucially, how you can prepare now to avoid them.
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1. You feel lost without your job
For many of us, our self-worth and sense of purpose are entwined with our jobs. We spend so much time at work that it's hard to separate it from the rest of our lives. It's where we find joy, social connections, accomplishments, and often pride. But when we retire, we lose that overnight.
That can lead to depression, which, if left unchecked, could be debilitating, especially if you want to return to work but find you can’t.
Thinking that work has to end the minute you retire is mistake number one, says Radgowski. Instead, he says people should approach retirement in phases. Start by reducing your hours, or move to part-time or consulting instead of retiring outright. If you can’t do that, line up volunteering work or a new part-time job before you exit the workforce so you don’t lose that sense of purpose or routine.
“You should plan for a glide path into retirement,” says Radgowski. "It doesn’t have to be a hard cutover," he says.
2. You're facing a retirement funding shortfall
Nobody wants to run out of money in retirement, yet it's a reality for many. Even with Social Security and savings, a sudden emergency or a period of high inflation can quickly create a shortfall, forcing retirees to drastically curb their lifestyle or return to the workforce.
But a retirement shortfall is a mistake that can be avoided, and Daniel Evans, a financial advisor at Bogart Wealth, says all it takes is planning. “The mistakes I see are not having a financial plan or at least not running the numbers and setting expectations,” said Evans.
Not only do you need a plan, but you have to stress test that plan, he said. “It's absolutely imperative. The longer you plan before retirement, the longer runway you have. That’s what helps that transition from working to retirement,” he says.
Evans says that in your mid to late 40s, you should get serious about your retirement plan, and in your 50s, you should fine-tune and revisit it.
3. You're bored and/or lonely
Retirement is supposed to be the time to check off all those bucket list items, to pursue those trips you never had a chance to get around to, and to spend quality time with friends, family and loved ones. But for some people, it ends up being a lot of idle time sitting in front of the TV.
The problem: they don’t have hobbies, friends or ways to spend all this newfound freedom. That boredom can be paralyzing, especially if you don’t know how to find a hobby or social connections.
It is also why Jeff Smith, founder of The Retirement Smith, says it's a big mistake not to have hobbies in place well in advance of your retirement date. “Lay the groundwork now while you’re still earning,” says Smith. “That way, you enter retirement with activities already in place.”
Evans recalls one client who retired from working as a safety engineer for an offshore drilling rig and never had any hobbies during his working life. But once he retired, he got involved in pickleball, which had a huge impact on the quality of his retirement life.
“He started to develop a network, and it also worked on his health; he lost weight and was in better shape,” said Evans. “It branched out into a volunteer position with a food bank. By avoiding a sedentary lifestyle and being active, it all snowballs into a compounding effect.”
4. Your health is suffering
Health care ain't cheap, and that’s particularly true in retirement. Even with Medicare, which kicks in at age 65 and covers about 80% of your health care expenses in retirement, Fidelity Investments estimates an individual will spend $172,500 in out-of-pocket expenses. That doesn’t take into account any illnesses, unexpected emergencies, or stints in a long-term care facility.
Despite the costs, many people don’t worry about their health in the run-up to retirement and face a shortfall when they do need long-term care.
The easiest way to avoid that is to live a healthy lifestyle. The healthier you are before you retire, the less money you’ll need to spend on your health in retirement. That’s not to say you won’t get sick — your family’s health history can give you insight into that — but you can avoid some chronic illnesses if you maintain a healthy weight, exercise regularly and eat properly.
“If you want to directly impact health costs in the future, making those healthy choices and avoiding a sedentary lifestyle is the most direct way you can lower the cost of health,” said Evans, noting it also increases longevity.
It's also worthwhile to plan for how you’ll cover any out-of-pocket health expenses in retirement ahead of time, whether it's through savings, a combination of savings and a Health Savings Account, or via long-term-care insurance.
Plan, plan and more planning
Retirement isn’t one of those things you can go into blindly or just say you’ll wing it. It requires a lot of preparation and planning, and then revisiting that plan over and over again until you retire. It shouldn’t be etched in stone, but rather a moving, flexible plan that can be altered as your goals change.
The sooner you get started planning and preparing for retirement, the better the likelihood you won’t make the mistakes of those who came before you.
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