When it comes to a comfortable retirement, planning is key. Not only do you need a plan, but your plan needs to have different levels of preparedness. It’s not something you can put together in an afternoon and then put on autopilot. It your goal is to live well in retirement, you are going to have to keep a close eye on your finances. Staying on top of things is a way to stay on track and keep worries about money at bay.
Failure to have an emergency fund.
If you are working, ideally you should have six-twelve months of living expenses available to you. In retirement, you should be able to access 12-24 months of expense money if necessary.
Being too optimistic about your finances.
While we want to think that everything will go well for us, life may throw a few curve balls at us along the way. We may have to leave the workforce before we had planned due to job loss or a disability. We may become widowed or divorced. These major life events have financial, as well as emotional implications, and we should at least consider the possibility that we may face them at some point.
Allowing your emotions to take the lead in your financial choices.
It’s not a good idea to make major financial decisions during times of extreme stress. If you are in the midst of something major, do consult with an experienced financial planner and ask what you need to deal with right now and what matters can wait until you feel ready to tackle them. You’ll be in a better position to make the right decisions for you once you feel more in control.
Not having enough insurance or having too much coverage in place.
Life insurance coverage is a product your buy to replace your income. If you took out a policy when you were in your prime earning years, you likely were looking at making sure you had enough protection in place to cover your mortgage (assuming you didn’t have insurance through your lender), any debts you have, as well as the cost of child care, and sending your children to college or university.
If you are at or close to retirement age, your financial needs have likely changed since you bought your insurance coverage. It’s a good idea to review the level of coverage you have in place and make changes as appropriate.
Assuming too much risk in your investments.
Although every investment has a degree of risk if you find that you’re not sleeping because you’re worrying about your money you may have taken on more risk than you’re comfortable with. Generally the level of risk recommended in a portfolio is based on your age, stage in life, how soon you’ll need the money, your investment objectives, and your financial goals. A financial advisor can help you decide what level of risk is right for you.
With careful planning, you can avoid these 5 financial mistakes and have a comfortable retirement. As an experienced financial advisor, I can answer your questions and help you develop strategies that will work for you. Contact me for a personal consultation.