Retirement is supposed to be your “golden years”! Beware of traps that could undermine your financial stability.
Retirement Trap: Over Spending
At long last you are retired! You can do all those activities you couldn’t do while you were working. You are traveling overseas, taking cruises and generally enjoying a life of leisure.
Or… you’re trying new hobbies, acquiring all the gear and necessary equipment that is needed.
An increase in living expenses is common in the first few years of retirement. Yet it is hard to pull back once you get started.
I encourage pre-retirees to practice living on their proposed retirement budget while they are still working. Any savings generated can be used to pay cash for the next car or increase their emergency fund.
Once you retire, continue living on the “budget” for day to day living. Be conscious of when you are using more retirement funds and how much for those activities you have waited until retirement to do.
Many retirees feel compelled to be active, travel and play while their health allows them to. This is understandable. Yet using a significant amount of capital early in a retirement impedes the growth of your retirement funds. Funds that often need to last for 30 years.