You know the importance of saving for retirement. You contributed to your 401(k) at work, you dabble in stocks, you have some savings accounts and CDs. That’s great, but there are some purchases that can derail your best intentions for retirement savings. Be aware of these pitfalls that can get in the way of a comfortable retirement. These four expenses can put a strain on your retirement budget if you don’t watch out.
- Large Home Renovations. Yes, you should budget for necessary home improvements, such as updating appliances and redecorating rooms. Yes, you want to leave some funds in an emergency home improvement account in case you are faced with a surprise repair. But don’t go crazy with the renovations now that aren’t necessary to your enjoyment of life or daily functionality. And don’t be tempted to take out a second mortgage or cash out your retirement account to finance a home improvement. Taking on more debt is not the solution.
- Big Hobbies. A hobby is a great way to spend your days – in fact, enjoying hobbies is what you’ve been looking forward to in retirement! But keep those dreams in check. You may desire to live on a Caribbean island and own a yacht, or open up a bed and breakfast in the countryside. These are both great ideas, but can you make it happen in terms of your nest egg? Many people in their early retirement years engage in excessive spending because they’re so happy to finally be retired, but this can drain a budget in a heartbeat. Have a spending plan in place that will fit your lifestyle and budget so that your retirement income can last 30 years, not just the first five.
- Caring for Your Parents. Many older adults these days are finding they have to care for their elderly parents who may suffer from Alzheimer’s. If they are living with you, this can get very expensive because you may have to retire early or hire nurses to help you. If your parent is still staying in their own home, you will still have to be in charge of groceries, meal prep, household tasks and improvements. Or, if you have no choice to put them in a nursing home and they have no money to pay for that, you will be left footing the bill. Nothing drains a retirement account like a $15,000 per month nursing home bill.
- Bailing out Your Kids. Financially bailing out your adult children can be tempting. After all, no parent wants to see their kids struggle. Your first instinct may be to help them buy a home or help them avert foreclosure on their existing one. While these are noble intentions, you have to look out for yourself first. If you have more than enough money to support you and your spouse through retirement and then some, great, go ahead and help your kids. If not, politely decline. After all, this is YOUR retirement. Your kids have more time to recover, get better jobs, and build a nest egg. You do not.
Make sure your investments are in line with your future plans, whether you are funding your retirement with savings, stocks and bonds, mutual funds or a combination. Be aware of who is managing your money and know the name of a trusted securities fraud attorney you can call should you feel the need.