5 Basic Money Errors Retirees Make
Not understanding inflation can lead retirees to overoptimistic decisions to draw from their retirement resources early, he adds.
"Because there is a lack of understanding of the impact of inflation, individuals often start their retirement income sources as soon as they can without understanding the consequences," he says.
3. Drawing on savings too readily
Whether they understand inflation or not, a lot of retirees make the mistake of dipping into their Social Security benefits or retirement accounts as soon as they possibly can.
"Don't just make a knee-jerk reaction, 'Hey, I'm 62, I'm going to take it,'" Adam says on deciding when to draw Social Security benefits. "Think it through."Too often immediate gratification trumps long-term planning and patience, Tilp says. "The common refrain is 'I'm going to get the money now,'" Tilp says. "This applies to Social Security, pensions and annuity payments. These income sources are likely to continue to grow to a certain age if they are left untapped. Thus, by waiting, an individual can realize much more income later in their life when it may be needed to offset health care and possibly elder care expenses."
4. Loaning essential funds to family membersLoaning or giving money to family members, particularly if that money is critical to your retirement budget, is yet another way to invite financial threats into your retirement. Adam has seen clients dip into their nest eggs to pay rent for an adult child or private school tuition for grandchildren. "Maybe 10 percent get into trouble helping adult kids in their 30s and 40s," Adam says. "Sometimes, it's just paying rent. Usually the kids are underemployed." Some retirees may be tempted to help adult children who are having financial difficulties following a divorce or break-up. Josh Koehnen, a certified financial planner in San Diego, Calif., knows a retired couple who decided to draw from their savings when a daughter came to them after a broken engagement.
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