Jun 27, 2017
Pattie Lovett-Reid: 3 rookie mistakes to avoid in retirement planning
There are always going to be wildcards in retirement that could throw you off your plan – everything from spikes in inflation, living too darn long, to poor stock market performance. However, there are variables you can control and should control to ensure you don’t outlive your money:
1. Overspending. Spending too much early in retirement can deplete your retirement savings faster than you would like, and faster than you likely can afford. The risk for some retirees is moving 100 per cent into safety vehicles such as cash and GICs. After taxes and inflation, you will be losing money and not keeping up your purchasing power, along with spending too much money combined is a recipe for financial ruin at worse or major lifestyle changes at best.
2. Having too much home. Those retirees who haven’t saved enough and have a strong desire to stay in their family home, may have to reconsider their real estate options. Looking closely at the carrying costs and your ability to fund your home could result in tough decisions, including downsizing. Don’t fall in love with your assets and recognize too much home with too big a mortgage doesn’t equal retirement success. You can’t eat a brick in retirement.
3. Giving too much money too soon to your children. I’ve never met a parent who doesn’t want to help out their children. Families on occasion want to help their children out and pay out a “dividend” so to speak. But giving away too much money too soon could put extreme pressure on your financial situation. Having an estate is a good emergency fund – if you need to dip into it you can, and if you don’t need it, the children will still benefit.
There are enough uncertainties in retirement, and when we all enter the next chapter of our life, avoiding the rookie mistakes can make a big difference between a good retirement and a great retirement.
