Money mistakes are a common learning experience from which we can grow. However, when you’re in retirement, bad decisions can be catastrophic. A retiree’s ability to replenish savings is usually greatly diminished, since they are no longer generating income from a job. Luckily, you can learn from the experiences of others and avoid some of the more common mistakes. 1. Not Changing Lifestyle After Retirement Among the biggest mistakes retirees make is not adjusting their expenses to their new budget-dependent life. As a retiree, food, clothing and entertainment expenses can be scaled back. You will no longer need a work-wardrobe, will have more time to cook, and can do home cleaning and repairs as a way to stay fit. In addition, cutting back on expenses can help pay for increased healthcare and long term care costs that usually come into play as a person ages. 2. Failing to Move to More Conservative Investments Once you have retired, you can’t afford large negative swings in your savings. You regularly hear financial advisors recommending a long-term approach and touting the strategy of leaving money in the market regardless of the ups and downs. That’s because long term the stock market has historically risen. However, when you retire you have to think more short term as you will need to access cash, and will have less time to recover from a market crash. A financial advisor can offer advice on how your investments should be diversified to protect your money. 3. Applying for Social Security Too Early Just because you are eligible to apply for Social Security at age 62 does not mean you should. If you start taking benefits at 62, you will get about 25% less than what you would get on your full retirement age of 66. You will get 32% less than if you wait until age 70. If you have the means to pay your bills, try to delay your application for retirement benefits for a few more years. 4. Failure To Be Aware Of Frauds and Scams Retirees unfortunately are among the most targeted for scams. Be sure to consult an advisor prior to making any investment or laying out a large amount of cash on anything. Scammers will prey upon your desire to grow your savings. So do your research, ask questions, and make sure you understand your investments and the risks they entail. 5. Cashing Out Pension Too Soon Retirees can be swayed to cash out their entire pension with the promise of a higher return on a particular investment. This may not be the best move: many investments are highly unpredictable and it can be difficult to find one that pays as much as a pension over the long term. The longer your life, the more you are going to miss out on the benefits of the pension if you have cashed out early. 6. Not Being Effective Tax-Wise During Retirement Having multiple retirement accounts may sound ideal, but you have to remember that each retirement account is being taxed differently. If you don’t take money out of your assets properly, you could end up paying more taxes that you actually have to. Finding the most cost-efficient way of being taxed during retirement can be complicated, so you may need to consult with your financial advisor and a tax account. 7. Being House-Rich but Cash-Poor People often pay their mortgage for decades and end up with a lot of equity in their home, but may have saved little cash. While houses usually appreciate in value, the costs of taxes, utilities, services, repairs and maintenance may be too much for a retiree to handle. Once you have decided to get out of the work force, you can downsize your living expenses by selling your house and moving in to a smaller more-affordable home. If you’d rather not move, a reverse mortgage could help provide predictable income that supports you during retirement. 8. Not Staying Active Socially and Physically Possibly one of the worst things you can do when you retire is become reclusive and inactive. It’s important to maintain social connections and frequently enjoy the company of friends and family. The mind is like a muscle – if it is not exercised, its capabilities will fade. So in addition to continuing some sort of regular physical exercise, seniors should also exercise their brains with puzzles, games, books, music, classes, and conversation. Keeping active will help you stay mentally sharp and physically healthy, and will also elevate your mood for a happier life. At Penny Lane Financial, we work with our clients to help them avoid these common mistakes so they can fully enjoy retirement. Contact us today for your complimentary consultation.