Retirement should be a time to do everything you have always wanted – taking a cruise to an exotic island or moving into your dream retirement home. Though retirement dreams are almost guaranteed upon retirement, there are things that can make those dreams become less of a reality. Knowing the common things that ruin retirement may help you be better prepared to live out your retirement the way you see fit.
Co-Signing Credit Applications
Whether it is for your own children or grandchildren, co-signing an application for a credit card or other loan is a big decision. Though co-signing may seem innocent enough, if the individual you co-sign for does not pay back his debt, you will then be liable for those debts. That means your retirement fund may have to be used to pay off debts that are not even yours.
Retiring Too Early
Retirement is a time people leave the workforce and enter into relaxation. Though this age and time will vary from person to person, the time you decide to retire should be backed up financially with a retirement fund and savings. Someone that tries to claim Social Security will have a reduced rate if she retires too early.
Not Saving Enough
Before planning on a date to retire, you should start years earlier in saving enough money to actually retire. According to Consumer Reports an individual should have an idea of when he plans to retire and how much he will need by the age of 40. Estimate how much money you will be spending during retirement for cost of living, purchases and vacations. Create a savings goal so that you have enough money saved before you pick a date for retirement.
Relying on Home Equity
Though equity built in a home is a good investment, it should not be your sole means for retirement. In the financial world a home's equity is not considered an asset due to the constantly changing housing market. Use your home equity as a back-up plan only, but not as your sole retirement plan.
When an individual works, she has a social life and is often are more obligated to get out of the house. Upon retirement, many people can feel isolated from the rest of the world. The best way to combat this is to plan a hobby to keep you busy throughout the day. If you have grandchildren, offer to spend time with them during the day. Join a retiree group in your neighborhood, or create your own social events by hosting poker or bingo nights with other local retirees.
Single Source of Retirement Income
There should never be just one source of retirement income. Individuals relying solely on Social Security may be surprised to find it does not cover all expenses upon retirement. You should have several financial back-up plans, such as savings and retirement funds that will continue to grow and gain interest long after you retire.
Often when you plan for retirement you plan on taking care of yourself, not your spouse. Ensure that when you plan out how much money you will need for retirement that it also covers those who will be living under your roof.
Not Taking Care of Debt
Before retirement you should pay off any debts that you can. These can include credit cards, small loans and other financial obligations. For debts that are too large to pay off prior to retirement, discuss options for refinancing and reducing interest rates and payments. Pay off as much as you can before you actually retire to bring the balance down. It can be a financial struggle to have to deal with debts and monthly payments when you no longer have a steady stream of income.
Ignoring Your Budget
A retirement budget needs to be followed precisely, especially since you will not have the option of working overtime to make up for lost money. Create a budget that you can reasonably follow, then ensure that you actually follow it.
Passing Up Saving Opportunities
Opportunities to save more money may be there, but people do not always take advantage of them. For example, putting more money into your 401(k) rather than taking money in your paycheck each month is an easy way to save while you are working, but not everyone takes advantage of this. Take opportunities to save a few extra dollars each month wherever you can to ensure you will have enough saved for retirement.