17 Things Americans Should Never, Ever Do During Retirement
Reaching retirement is the ultimate goal for many American workers. After years of the daily grind, the idea of giving up your nine-to-five in exchange for relaxing golf games, afternoon book clubs, and early dinners sounds phenomenal.
While retirement can be an incredible time of life, it also brings its own anxieties. Chief among them is the thought that you could run out of money before you reach the end of life. Another common fear is that you’ll need more medical care than you could have anticipated.
There’s no way to perfectly predict a lifespan or what will happen as we age, but there are a few things experts recommend avoiding during retirement years. By avoiding pitfalls like these, you’re more likely to retain your health and have the money you need to enjoy your retirement.
1: Move, Just For Fun
According to an AARP report, more than 338,000 U.S. residents retired to a new home in 2023, a 44% jump from those who moved in 2022. While moving for retirement is common, it’s not always the best idea.
Moving for a solid reason, like the need to be closer to family, is one thing. Moving because you’ve always had a dream destination in mind is another. Many retirees find that they don’t enjoy their chosen retirement location as much as they thought they would.
While the lure of sunny skies or lack of state taxes make places like Florida or the Carolinas seem like great destinations, make sure you do your research before you pack your bags. You might also consider renting a place for a season or two before you make a bigger investment.
2: Falling For Bad Offers
Falling for a get-rich-quick scheme or other bad investments can seriously deplete your retirement funds, and it’s exceptionally common. In 2023, the FTC reported that individuals aged 60 and over lost a combined $3.4 billion due to targeted elder scams.
You might think you’re too smart to fall for a scammer’s ploys, but keep in mind that many fraudsters are good at what they do. Sometimes, they even effectively impersonate government officials, like the IRS, to gain access to your accounts.
The best way to avoid a scam is to remember that if something sounds too good to be true, it probably is. And, if anything seems off about an interaction, don’t be afraid to end it. Hang up the phone, don’t reply to the email, or call the company they claim to be with directly.
3: Isolating Yourself
If you don’t have a robust family life, you might find retirement lonely. Work may have been where you were best able to socialize. You may have to make an effort to find new friend groups or places to interact with others.
Even if you’re an introvert who relishes time alone inside the house, it’s best to find some sort of social activity to regularly engage in. Social isolation puts you at greater risk for depression and passing away at an earlier age.
4: Continuing To Work
According to a 2023 report by the Transamerica Center for Retirement Studies, 55% of American retirees plan to work in their retirement. Presumably, retirees hope to take on part-time employment to help supplement their income and, perhaps, to enhance their sense of purpose in life.
If you want to take on a part-time job for fun or other perks, like free golf or store discounts, there’s no issue doing so. However, you might run into other issues if you need to work to supplement your income.
Health problems, company layoffs, and an inability to keep your skills up to date could force you out of the workforce before you’re ready. Going into retirement, it’s best to assume you won’t be able to work through it and plan your finances accordingly.
5: Claiming Social Security Too Early
Americans are eligible to claim social security at 62 years old. However, as the SEC puts it, just because you’re eligible doesn’t mean you should.
If you begin taking benefits at 62, you get 25% less in benefits than you would at the full retirement age of 66. Waiting until age 70 ensures you get even more.
They suggest waiting as long as possible to claim your social security benefits. If you can wait until you’re 70, that’s the best scenario.
6: Keeping the Same Lifestyle
Once you retire, you’re essentially on a fixed income, which may mean changing your lifestyle. To stay within budget, you might need to reduce the amount you spend on dining, clothes, and entertainment.
It’s crucial to remember that other expenses, like healthcare, will likely increase as you age. Covering costs later could be tricky if you don’t make cuts to your lifestyle budget early.
7: Sticking With Risky Investments
Financial advisors usually recommend riding out market swings because, historically the market rises given enough time. That’s why, when you’re working, it makes sense to have a fair amount of your investments in aggressive growth funds. Even though they often have sharp swings, they tend to pay off in the long run.
However, once you retire, the SEC suggests that you start thinking on a more short-term basis. You may need to access your cash at any point, so you should move more of your investments into conservative funds.
8: Cashing Out Pension Too Soon
Many retirees cash out their pensions in favor of more aggressive investment funds. By moving your pension into a different investment vehicle, you might get a bigger return.
However, investment funds, especially those with more aggressive portfolios, come with risks. While you might end up with a bigger return, you also might lose a lot of your pension.
Before cashing out your pension, talk to a trusted financial advisor and ensure you weigh all the pros and cons. Often, leaving your pension where it is makes the best return.
9: Paying More Taxes Than Necessary
Many people think having multiple retirement accounts is the best option. After all, why put all your eggs in one basket?
Many fail to realize that the government taxes each retirement account type differently. By having your assets in several types of accounts, you may end up paying more taxes than you need to. That said, it’s a good idea to speak with a certified financial planner prior to making drastic changes to your retirement accounts, as every situation is different.
10: Supporting Grown Children
As a parent, your children are your everything, even when they’re no longer children. That said, if your children can take care of themselves, they should.
Providing continued financial support to your kids who can have a job and take out their own loans can be problematic. No one wants to go broke during retirement, but spending too much on your children is one way you might get there.
11: Relying On Your Home’s Equity
Many retirees are house-rich and cash-poor, which makes it tempting to use their home’s equity for extra spending money. While your home’s equity can be a useful source of income, it’s important to think long and hard before you take on another monthly bill or otherwise detract from your home’s value.
Instead of taking out a reverse mortgage, secondary mortgage, or other home equity loan, consider downsizing. Tiny homes are exceptionally affordable, and many retirees find they enjoy living for a year or two while traveling in an RV.
12: Giving Up Hobbies
You might think retirement is the time to revamp your life, and it can be tempting to stop participating in the things you used to. But just because a lot of your life is changing doesn’t mean your likes and interests will disappear.
Sticking with hobbies you’ve always enjoyed is a good idea. Whether it’s pottery or Tai Chi, you should continue to participate in the things you know you enjoy doing. Of course, it’s also okay to explore new hobbies now that you have more time.
13: Paying For Unnecessary Home Repairs
You might be spending more time at home now that you’re retired, and it’s only natural to want to improve your space. While there’s nothing wrong with making home upgrades, it’s important to be cautious about improvement expenditures.
According to a U.S. Houzz and Home Study on Renovation Trends, 31% of people who embarked on home renovations went over budget. Going a little over budget might not be a big deal when you’re working, but it could be detrimental to a fixed income.
14: Purchasing Excess Life Insurance
By the time you retire, you often have fewer debts and fewer people depending on you financially. Your children are likely grown and taking care of themselves. And your house is probably paid off.
That means more life insurance isn’t typically necessary. Also, purchasing a policy at or near retirement age is often exorbitantly expensive.
15: Using Out-Of-Network Medical Providers
Increasing medical expenses are almost a guarantee during retirement. According to Fidelity Investment’s 2022 Retiree Health Care Cost Estimate, retirees can expect to spend $315,000 per couple on healthcare.
Medical expenses are already high in the later years of life; there’s no need to add to them unnecessarily. Most insurance providers charge more or cover less when you use an out-of-network provider. So, it’s in your best interest to look for in-network hospitals and providers before undergoing any sort of treatment.
16: Stopping Exercise
One way to lower healthcare expenses in retirement is to focus on preventative care. One of the best ways to prevent illness and debilitating mobility issues is to stay active.
Studies show that exercise, including low-impact exercise like walking and swimming, improves physical and cognitive health in seniors. This leads to fewer falls and fewer depressive symptoms.
17: Extreme Decluttering
Many people decide to embark on a deep decluttering during retirement. This could be part of downsizing or an attempt to make it easier for heirs to handle things after they pass away.
While decluttering your home isn’t bad, it’s important to be careful about what you throw away. If you own your own business or practice, you might want to check with a lawyer before you trash certain records. The law requires dentists, doctors, and other professionals to keep their business records for a certain number of years, even after retirement.
Tax records are another thing you should keep on hand. The IRS provides recommendations on how long to keep your tax records, but usually, it’s at least three years from when you filed.
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