July 16, 2013 — Note: This is a 3 part series. Part 1 on the “Top 10 Retirement Mistakes” generated a lot (34) of comments. Part 3: Avoid These 6 Retirement-Wrecking Mistakes” was published in 2014.
Since it is so important that you seize the opportunity retirement represents – in essence it’s a partial do-over on life – we thought it would be worth revisiting the topic from a fresh perspective. In today’s article we first present a revised “10 worst” list, followed by a summary of our member’s comments to the original article. We are particularly interested in your new comments – please add them at the end of this article.
10 Retirement Mistakes You Don’t Want to Make
1. Start planning your retirement the day after you retire. That’s too late. A smart retirement has regular planning sessions with discussion about the W questions – Where, When, Why, What – and How you are going to afford it. Develop a plan and put it on paper at least a year before you retire.
2. Think you will work well into your 70s. Seven out of ten people say they will work for pay after they retire, according to the Employee Benefit Research Institute’s 23rd Retirement Confidence Survey. Usually their financial plans are based on the assumption of continued income. But the reality is somewhat different – about half of retirees stopped working before they thought they would because they tired of it, lost their jobs and couldn’t find a new one, or couldn’t work because of health issues. Only 14% worked past 65, and just 25% have any employment income at all. Premature retirement before you can really afford it can be disastrous. It’s hard to get back into the employment scene after you’ve left and your skills become rusty. Do not assume you will be employed and making money after you retire.
3. Keep living in the same house. Sure, you might want to spend your retirement in the same house you do now. But here are three reasons not to: Your maintenance, utility, and tax expenses will be much higher than they have to be. If you stay in the suburbs long enough and you can’t drive or are disabled, you will be trapped in your home, dependent on others for transportation. Chances are you will also be isolated socially than if you lived in more of a communal setting like a city, walkable town, active community, or independent/assisted living/CCRC facility.
4. Don’t visit enough places before you decide where you are going to live. You might think you have a good idea of what a place is like, but until you have visited and stayed in a community for at least a few weeks you are taking a chance. Explore several different places and be sure.
5. Don’t rent before you buy. You wouldn’t be the first person to visit a town or community and buy a brand new unit during your visit. We have heard this refrain enough times to repeat it again – “if only I had rented first, I would have known…” Renting is easy, and almost always a good idea.
6. Don’t do enough due diligence. We are always amazed at the otherwise careful people who brush over some of the most basic due diligence issues before they buy. The list of issues you need to check up on is long, and important. Those include reading the Home Owners Association rules, studying the most recent financial reports, getting minutes from HOA meetings, finding out about foreclosures and dues arrears, finding out what your neighbors are like, getting a fix on maintenance sinking funds, etc. If it’s a new community there will be other questions – how likely is it the community will sell out, what happens when ownership is transferred, what kind of obligations and assets will be transferred to the Home Owners association. Your realtor and attorney should be able to help you with all of these. Too many communities are having too many issues for you not to investigate everything carefully.
7. Move too far from family & friends. In our experience the #1 reason behind an unsuccessful retirement move is that the person moved too far from their families and/or friends. Most people miss being close to their children and grandchildren.
8. Be a burden to your kids. Sure you value your independence, and you think you will be forever young. The problem is that if you live long enough you could become an enormous burden on your kids, who have their own lives and responsibilities. Do them a favor and develop a plan on where and how you can age gracefully without disrupting the lives of your children. Make sure you have a current will. De-acquisition your stuff while you can, so they don’t have to do it for you.
9. Move to the wrong environment. Examples would be moving to an active adult community if you hate rules, moving to a rural environment if you crave lots of things to do, or moving to a liberal environment when you are a conservative person. Visit before you rent, rent before you buy, and there will be fewer surprises.
10. Underestimate how long your retirement will be. According to the Social Security Administration if you are fortunate enough to live to age 65 chances are you you will live to age 84 if you are a man and 86 if you are a woman. But you might live much longer than that. So you have to have the money to support you much longer than you think, along with increased medical expenses.
Summary: The Comments Made to our first article
Our members more or less concurred with the retirement mistakes we listed, yet they added more useful detail. They also listed some new mistakes to look out for. Here is a summary of what our members think are the biggest retirement mistakes:
- Retiring too soon. Nothing is guaranteed so be sure you are ready.
- Universal design. Our faithful correspondent Jan Cullinane reminded us to be sure to look for universal design principles in our retirement homes. Door handles instead of knobs, no steps, accessible counter heights, stepless showers, etc. You never know when you might find your own home unsuitable for your physical capabilities.
- Not renting first. Rob realized too late that the community he bought into wasn’t a good fit. He also had a rude awakening in the next item (work).
- Couldn’t find good work. Rob assumed he could keep working in his chosen field after he retired. Unfortunately he found out what so many others have – older people have a lot of trouble landing good jobs, no matter how talented they are.
- Didn’t live enough before retiring. We like this thought from Jean Lac a lot. The essence is – don’t put off living and traveling and enjoying life for some magic retirement. Get ready for retirement, but start good habits with hobbies and enjoying your family.
- Moved to close to the children. We have seen this commment before and am sure it is common. Sometimes it is not so good to be close to the children, particularly when the relationship is strained or you feel you are being taken advantage of. Or, moving to an area that has the kids but just isn’t what you were looking for.
Retirement Poll – The Big Lie and the Big Fantasy
- Retirement Ranger
- Quiz: How Ready for Retirement Are You?
- Countdown to Retirement Success
What do you think are the worst retirement mistakes? Have you made some yourself? Please share your ideas about retirement mistakes – and successes – in the Comments section below.