Not everyone's golden years are so golden. Believe it or not, many retirees still make basic money mistakes -- the type most commonly associated with younger and less financially experienced people. These errors can derail their plans for a peaceful and financially secure life after work. Most of these missteps can be avoided with planning and forethought. But if you fail to take the steps necessary to prevent them, your long-awaited golden years could quickly lose their shine. These are five basic money mistakes that retirees still make.
1. Failing to establish or follow a budget
Although it is one of the most elementary financial mistakes, living without a budget is a common pitfall for retirees. "People don't track their spending," says Mari Adam, a certified financial planner in Boca Raton, Fla. "They have no idea how much they spend. Overspending is the most common problem we see." Andy Tilp, a certified financial planner at Trillium Valley Financial Planning in Sherwood, Ore., says that many of his retired clients have no sense of their cash flow and aren't aware of how much money is coming in and going out each month. "Eight out of 10 times they don't have that," Tilp says. "I've actually had clients get mad at me. It's a real wake-up call. Because if you don't know your expenses, there's no way to really understand if you're going to be able to continue a lifestyle."
2. Not understanding inflation
Underestimating inflation -- or worse yet, failing to understand it -- can easily deflate a retirement plan. "I think one of the biggest errors a retiree can make is not planning for inevitable inflation," Tilp says. "It is statistically likely that a person age 65 will live at least two more decades. During that time, the purchasing power of an individual's money is halved assuming a historical 3 percent inflation rate."