Retirement is one of the biggest life changes that a person can make, but many people are unsure of how to make a smooth transition from being part of the workforce to enjoying a more laid-back lifestyle. We're here to help with our ten worst mistakes that people make as they retire, and how to avoid them...
1. Not living within your means
Matching your lifestyle to your income is probably going to be the most immediate challenge. It’s possible to forget that you are living on less than when you were earning, and get a bit carried away with shopping and entertainment expenses. Always budget in advance, and don’t forget to ask for senior discounts – after all, you qualify now!
2. Splashing out with a big chunk of cash
On a related note, make sure the size of a possible lump sum doesn’t overexcite you. The idea is to live on the money for a long time (as long as possible!), so take care not to spend it all at once.
3. Putting all your eggs in one basket
You should also be wary of ploughing all of your funds into a single investment, however good it may seem: a balanced portfolio is most likely to withstand any market fluctuations.
Be aware that while you may no longer be earning, you still have to pay tax on your investments. Talk to a financial advisor to make sure that if you have multiple accounts, they are arranged so as to not incur unnecessary taxes.
4. Not planning for future care needs
While no one likes to think of the possibility of ill health, you mustn’t ignore its potential impact on your finances. While the NHS can deal with a lot of things, remember to plan for the possibility of needing residential care or other forms of private support, as these can get expensive.
5. Being too generous
You should also make sure that you have made plans for any adult children. Some families find that the very people they expected to support them in old age are in fact hoping for financial support themselves. If you want to help, check that you really can afford to do so before making any commitments.
6. Staying in the family home
If your children have moved out of the family home, you can also consider downsizing in order to reinvest your capital without the expenses of maintaining a larger home. Beware of staying put purely for sentimental reasons.
7. Failing to invest
It’s also important to make sure that your savings are being put to the best use possible via investment. Once retired, you need relatively quick access to your money, so less risky investments can make more sense. If you want to discuss how to access your pension fund, clear explanations can be found at Pension wise.
8. Not claiming your full pension entitlement
Even if you have always paid into a pension scheme, you are still entitled to claim a state pension. If you reached state pension age (which varies by gender and the year in which you were born) before 6th April 2016, you are entitled to the old state pension, whereas if your age is later on, there is a new system. Pension ages and regulations have been changed frequently in recent years, so make sure to check for the most up-to-date information.
9. Falling for scams
Sadly, older people are often perceived as easy targets for fraud, so make sure to be careful who you trust when it comes to money. If you have any concerns, a list of organisations who can help you steer clear of all kinds of scams is provided by the police.
10. Not getting out and about
Some people feel that retirement has to be a literal retreat from the world. This isn’t the case at all. In fact, making sure to see friends and get some exercise is one of the best investments you can make; it helps to ensure your health and happiness, making your retirement a long and pleasant one.
Click below to download you Free Guide to Staying Healthy As you Age...