When you are 65 or above, your life changes in a very tricky way. Because the transition releases you from the rigid work routines that defined much of your adult life, it’s easy to indulge the temptation of losing oneself in the expected life of leisure that comes with retirement.
The question is should you? These five financial pitfalls older adults often make explain why you shouldn’t:
- Not Having an After-Death Plan
Many people feel uncomfortable including what happens after death in their life’s plan, especially because the idea simply feels like courting death. However, if you truly love your family—those people you would eventually leave behind—then after death planning becomes a necessity.
The two most important things to add to your after-death planning are your funeral plan and estate plan. Both see that your loved ones are taken care of after your passing. While estate planning involves a will and how your estate will be distributed when you are gone, funeral planning entails anything from taking out a life insurance to using one of the many funeral plan companies around to plan your funeral down to the smallest detail and spare your loved ones the financial costs.
- Failing to Curtail Your Spending
At this stage in life, older adults are obviously not thinking of going on a shopping spree or clubbing the rest of their life. Therefore, the mistake here is more about failing to understand that you are no longer earning. In fact, you are basically living off your reserve (whether pension or personal savings). Curtailing your spending in this case means finding a balance between your retirement desires and ensuring that your savings take you through your retirement.
- Failing to Seek Pension Advice
To collect their pensions in the UK, older adults are faced with six options. These options can become overwhelming if you have no viable plan on how to use your pension or no financial advisor behind you.
You are left wondering whether you should leave your pension pot untouched, take out an annuity with it, earn adjustable income with it, take cash from your pension pot in chunks, collect your whole pension in cash, or use mixed options.
Many pensioners fail to get financial advice before collecting their pensions and they end up depleting them before they are even halfway through their retirement. Always seek advice to know your options.
- Not Planning for Long-Term Care
We all can only hope and pray to enjoy a comfortable retirement filled with good health and spent around loved ones, but then hope is, well, hope, and a lot of prayers go unanswered. When you now consider that we all become more prone to illnesses as we grow older, you begin to see the wisdom in the saying “Hope for the best but plan for the worse”. Always plan for long-term care—know your options.
- Not Factoring in Inflation
Inflation is everywhere, and it simply implies that your money gradually loses value with time. This means that you shouldn’t expect, say, £50,000 to buy in your 80s what it can buy you in your 60s. Therefore, you need to account for the rise in prices when investing in (or generally planning) your retirement.
There you have it. Avoid these five financial pitfalls older adults make and you are on your way to enjoying a stable retirement.
How should I plan my life after retirement?