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Top Financial Mistakes Retirees Make 

• Written by @Lifeline24


You’ve worked hard for most of your life, diligently saving a part of your earnings and patiently waiting for the day when you’re ready to retire. Now that you have crossed that line, you can finally slow down and enjoy your hard-earned savings right? 

While you certainly can, this doesn’t mean that you’re immune to making crippling financial mistakes. Even those who have retired early with savings that are more than enough to last them for a lifetime can still sabotage their retirement. The challenge, then, is to find out what the possible financial mistakes are and learn how to avoid them. 

In this article, allow us to help you by pointing out the top financial mistakes retirees make and offering suggestions instead.  

Mistake No. 1: Investing too Conservatively 

It is understandable why a lot of retirees feel wary of investing their money, especially in financial products that involve high risks. After all, they don’t want to lose money at this point in their life. This is also the reason why most seniors prefer to stash their savings in cash.  

The problem is, playing it too safe might not be enough to beat the rising inflation rate. Somebody with several thousands of pounds in savings might be shocked to discover that the purchasing power of their money has decreased by nearly 50% since the year 2000. The interest rate on a savings account will almost never beat inflation, so if you're stashing cash away for many years, be prepared for it to lose purchasing power in the long run. If you want to beat inflation, you'll usually need to invest. Just bear in mind that with higher rewards come higher risks, so don't invest anything you can't afford to lose.

The Solution: We’re not saying to invest with abandon. Instead, you want to invest wisely. Diversify your portfolio. Don’t be afraid to consult with a financial expert. Utilize online platforms, especially those equipped with artificial intelligence and advanced analytics. 

Mistake No. 2: Putting a Little Bit of Your Money in a Lot of Different Places 

As mentioned, diversification does help in keeping your investments protected一especially in minimising risks. Just think of the age-old adage “Don’t keep all your eggs in one basket, lest it falls.”  

However, it doesn’t necessarily mean that you should spread your assets too thin. You’ll only be limiting the earning potential of each of your investments this way.

Investing your money in a particular financial product at different institutions also doesn’t translate to proper diversification (such as having 20 mutual fund accounts). It might seem diverse, but it really isn’t. You’re better off investing in two different products within a single institution.

The Solution: Focus on different underlying assets. Only stick to the ones that best fit your needs, preferences, and risk appetite. It is also highly recommended to get a financial expert for a look-through analysis of your portfolio and make sure that your underlying holdings are diverse enough to minimize risks but not so much that it will limit ROI.

Mistake No. 3: Being Anchored by Your Own Home 

Most retirees consider their house as their primary asset. If you consider yourself to be in a similar position, then congratulations. It can certainly help in achieving financial freedom. After all, it will free you from worrying about rent and similar expenses.

Paying off your mortgage is also a great achievement. It’s probably something that you might want to pass your house on to your kids. You can certainly do so. There’s nothing wrong with that. However, it can also make the decision to sell your property all the more difficult should it be required.

There are many reasons why you might want to consider selling your house. For instance, suppose there’s no one willing to inherit it? What if it’s located in a central business district with high costs of living? It might have made sense to live near your work and your kids’ schools back then, but that might not be the case today.

You might have needed a house with four bedrooms once, but you might not need that space anymore with the kids gone. It might be financially wiser to downsize your living spaces instead. It can even help lessen your utility expenses.

The Solution: Don’t let yourself be emotionally anchored by an asset. The memories in that property have already been made. Wouldn’t it be better to buy a less expensive property and make new memories with the difference?

Mistake No. 4: Not Investing in Your Child’s Financial Literacy 

Taking classes to improve your financial literacy? Take your child with you. Not only will it serve as a good bonding experience, but it will also help prevent them from making financial mistakes that might jeopardize your own financial future.

A report revealed that half of UK parents helped their adult children financially in the three months leading up to February 2021. Roughly 2% of parents say they spent £10,000 or more supporting their grown-up children over those three months. It is easy to see why it is problematic.

The Solution: It’s never too late for a person to learn something, financial literacy included. By teaching your child financial literacy, you'll be giving them a valuable life skill and safeguarding your own future.

Mistake No. 5: Being Too Afraid to Spend Your Money 

While it is indeed ideal to put money away rather than spend it, it is more important to remember why you’ve been working hard on saving it all these years. What was your goal? Was it to travel and enjoy what the world has to offer? How about going on a cruise? If there's something you really want to do, then why not do it now?

Don’t be afraid to reward yourself. You deserve it. You have worked hard for decades. You’ve supported your family the best you can. And now you’ve reached your long-awaited retirement years. How do you want to spend them? By living so frugally that you don't spend any money on the finer things in life? Or by finally allowing yourself to enjoy the things you’ve always wanted to? 

The only solution remaining is to have courage. Good luck!

For more money-saving tips and advice, read Top 10 Finance Tips for Older People

Support from Lifeline24

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