When you dream of retiring, you think you will finally enjoy a worry-free life. The first few years, however, can be surprisingly exciting.
A big cash expense or an expensive divorce can put off your best plans. Getting caught in a scam or buying the wrong insurance can sabotage your early retirement.
There is a natural urge to save it after retirement. Why are you waiting You hear stories of the extremely frugal type who are reluctant to spend their 60s and 70s, only to overwhelm themselves with illness or injury when they are ready to tap their savings.
“The problem with retirement is: the less money you can spend in the early years, the better off you will be financially in later years, when the ability to do fun things is the opposite,” said Matt Paronish, Indianapolis-based. Advisor
To reduce your risk, make wise financial decisions in the first five years of retirement. Here are five examples of smart steps that can save your resources (and prudence):
1. Beware of large, open costs. Although it is sometimes difficult to predict when you will need a new car or a new roof, think ahead and figure out what the five- or even six-figure cost will be in the near future. Ideally, you should avoid these huge expenses as soon as you retire.
“You want to save cash early in retirement,” said James Reagan, a Phoenix-based financial adviser. This gives your home eggs more space to grow in the bull market — and a chance to recover from a bear market.
Advance planning and research can eliminate bad surprises. If you want to sell your home and reduce the size, for example, ask your local real estate agent about any unexpected costs to sellers in your area.
In Florida, home sellers may think they can name their prices along with the surge in buyers in the state. But those buyers need to get homeowner insurance, and most carriers will not issue an insurance policy in Florida if the roof is more than 15 years old. As a result, sellers may have to pay for a new roof before the property changes hands.
2. Delay Grand Gesture. Either way, celebrate your leisure by treating yourself to some suffering. Take a trip, throw a party, add an additional streaming service or three
Don’t just go hog-wild.
In the first five years of his retirement, Reagan says, people give big bucks to cash in on what they enjoy. While it is true that these years you are the most active and have the most fun, there are ways to make a big living without losing your savings anytime soon.
Regan warns newly mixed retirees against buying a second home. Even if they set aside a down payment and think they can afford it, waiting a few years can be more meaningful.
“My advice is to budget for a second property but don’t buy it right now,” he said. “It’s good [rent] Instead of promising a big purchase for a month where you will have real estate taxes, utilities and maintenance. “
3. Review your life insurance. Retired people who bought a life insurance policy decades ago may become so accustomed to paying premiums every month, quarterly or yearly that they no longer think twice. Maybe they should.
Matthew Schwartz, a Minneapolis-based certified financial planner, said: “This is one of those set-and-end-it-it bills that people pay.” “You can pay automatically through your checking account.”
Anyone who bought term life insurance years ago can continue to pay for it through annual renewable term coverage for their children to be permanent until they turn 18, Schwartz added. Yet retirees are no longer needed.
4. Reconsider divorce. In the first five years of retirement, people often reflect on their lives and reset their priorities. Some people decide to end a long-term relationship and start anew.
From a financial standpoint, divorce-and the associated costs can be a major problem.
“Depending on the settlement, divorce can really hurt a retirement plan,” Paronish said.
Divorce can have a detrimental effect on taxes and may not save you much on daily expenses. Just because you agree to give more than half of your retirement assets to your ex-spouse does not mean that you are surviving on half of what you have spent in the past. The total cost for a couple is not more than the cost for just one person.
5. Avoid scams. The steps you take to stay away from scandals when you retire are no different from the preventative measures you take at every stage of life. But as you get older, scammers are more likely to target you.
According to the FBI, cybercrime cost Americans in their 50s and nearly $ 3 billion by 2021. So once you retire, fight fraud more carefully than before.
Do not disclose your personal information to the Company unless absolutely necessary. Whenever you open an account with a different bank, for example, you provide your data to another business that is at risk of being hacked.