There are many ways that could threaten your financial security in retirement. Knowing the common issues can ensure that you don’t fall into the traps.

Today’s financial headline comes from Yahoo Finance and is called 8 Ways Baby Boomers Become Poor in Retirement. Listen in to learn what they are so that you don’t drive yourself into the poorhouse.

Outline of This Episode

  • [1:22] 8 ways to become poor in retirement
  • [10:58] How can we determine the biases in an advisor

8 ways to ruin your financial security in retirement

  1. Carrying a balance on credit cards – Holding onto high-interest credit card debt will quickly deplete your savings. Carrying a balance on your credit card every month means you need more income than you earn. Get a better handle on your necessities by the time you transition to living off your savings.
  2. Collecting Social Security too early – Starting your Social Security benefits before full retirement age can result in significantly reduced monthly payouts whereas delaying Social Security can lead to higher benefits over time. Listen in to learn why this is especially important for married couples.
  3. Selling investments when the market drops – Panic-selling investments during market downturns will lock in your losses. A diversified portfolio and a long-term investment strategy will result in a more stable retirement income. Instead of trying to time the market, have a contingency plan. Know what you’ll do when the market goes down. Have a written plan and stick to it.
  4. Paying too much in housing costs – Housing expenses can strain retirement resources. While downsizing is tricky it is an idea worth exploring. Try downsizing or finding cost-effective housing options so that you have enough money for other essentials.
  5. Having an unrealistic budget – Failing to create a realistic budget that aligns with your fixed income can lead to overspending and financial stress. Create a detailed budget for essential and discretionary expenses. If you don’t have a budget, create a super-simple retirement budget by starting with your current net income.
  6. Not having a plan – A lack of a comprehensive retirement plan leads to poor financial decision-making and instability. Seek advice from financial professionals if you aren’t sure how to create one.
  7. Waiting too long to adjust your plan – Retirement plans may require adjustments over time due to various factors. Changing health, market conditions, or unexpected expenses should have you reviewing and adapting your financial plan. If you plan those adjustments by writing them into the plan ahead of time you won’t threaten your financial stability by reacting. Being proactive will always beat being reactive.
  8. Not planning for the unexpected – Unexpected expenses like medical bills or emergency repairs should be considered in your retirement budget. Failing to plan for these expenses can lead to reliance on credit cards or personal loans. Make sure to have funds outside of your retirement accounts ready and accessible to be able to handle emergencies. 3-6 months of retirement income is a great range for an emergency fund.

If you are looking for a financial advisor, make sure to listen to the listener question: how can we determine biases in a financial advisor?

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