Common Financial Pitfalls of Early Retirement
Common Financial Pitfalls of Early Retirement – Find Out How to Avoid These Big Mistakes
Whether you’re retiring early because you want to or for other reasons, it’s important to ensure your finances are in order. Unfortunately, many people make some big financial mistakes when retiring early. It’s important to ensure you’re financially stable after retirement. Here’s a look at some common financial pitfalls of early retirement and information on how you can avoid these big mistakes.
1 – You Spend Too Much Money Too Early
When you retire early, it means that your money needs to last longer. Spending too much of your retirement money too soon is a common financial pitfall, and it can end in financial disaster. If you’re retiring early, you need a good financial plan that shows how much money you can spend yearly. Otherwise, you could end up needing to head back to work again. Avoid this mistake by creating a good budget, including regular and one-time expenses that tend to occur yearly. Once you create a budget, stick to it.
2 – Taking Out Social Security As Soon as Possible
Another financial pitfall you need to avoid is taking out Social Security as soon as possible. Social Security can be taken at age 62, but taking it that early may not be a good financial decision. Delaying the start of those benefits may prove financially beneficial, making your retirement money last longer. Avoid making a mistake by analyzing your benefits and then come up with a plan for when you want to start collecting those benefits. Consider talking to a financial advisor experienced in working with Social Security before making a decision.
3 – Setting Aside the Bare Minimum for Retirement
Setting aside the bare minimum for retirement is a huge pitfall and it leaves you at the mercy of inflation, investment earnings and emergencies. When saving for an early retirement, make sure you save more than just the bare minimum. Ensure that your retirement plan won’t be derailed by higher inflation rates or a year of low returns on your investments. Once you retire early, make sure you regularly review your retirement plan and make financial adjustments as needed. You may even want to keep your job skills current in case you need to use them to earn a bit of part-time income if you need a boost financially.
Retiring early is a dream for many people, but you’ll ruin your dream if you don’t plan carefully. Avoid the common financial pitfalls that often come with early retirement and you’ll be better able to enjoy all the benefits that accompany an early retirement.