3 Mistakes to Avoid Your First Year of Retirement

Congratulations--afteryearsofpluggingawayonthejob,you'refinallyfree.Retirementisanexcitingperiodoflifetokickoff,butthelastthingyouwanttodoisstartoutonthewrongfoot.You'llthereforeneedtosteerclearofthesemistakesthatcouldturnanotherwisepositivemilestoneintoanegative.

1.Notfollowingabudget

Justlikeyouneedtofollowabudgetduringyourworkingyears,youshouldalsoplanonhavingoneduringretirement--especiallyifyoudon'texpecttoworkinanycapacity,andwillthereforebelivingoffsavingsandSocialSecurity.Ofcourse,thetrickypartaboutsettingupabudgetforyourgoldenyearsisthatyoumaynothaveahandleonallofyourexpensesrightaway.Sure,youmightknowhowmuchyourcarinsurancecosts,orwhatyourcablebillentails.Butwhataboutexpenseslikehomemaintenanceandhealthcarethatarelargelyunpredictable?

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Yourbestbet,therefore,istotakesomeeducatedguesses.Forexample,theaveragehomeownerspends1%to4%oftheirhome'svalueonmaintenanceannually.Ifyourhomeisolder,veertowardthehigherendofthatrangeandseewherethatleavesyou.

Estimatingyourhealthcarecostsiseventrickier,butyoucanstartbyfactoringyourmonthlyMedicarepremiums(includingthecostofsupplementalinsurance,ifyouhaveany)andprescriptioncopaysintoyourbudget.Fromthere,youcanaddamodestamountofmoneyeachmonthtoallowforas-neededdoctorvisits,andadjustthatnumberdownthelineifyouseethatit'sreallyoff.

Thekeyistogetahandleonyourspendingearlyon.Thisway,ifyouseethatcertainexpensesarecostingyoumorethananticipated,youcancompensatebycuttingbackinotherareas.

2.Withdrawingtooaggressivelyfromyournestegg

Seniorsarelivinglongerthesedays,andifyouretireinyour60s,there'sagoodchanceyou'llneedyoursavingstolastaround30years.Butifyouwithdrawtoomuchmoneyfromyournesteggearlyon,you'llriskrunningoutofmoneylateroninretirement,andthat'sadangerouspositiontobein.Therefore,you'llneedtodeviseawithdrawalstrategythatgivesyouaccesstotheincomeyouneedwithoutgoingoverboard.

Foryears,financialexpertshavebeenadvocatingthe4%rule,whereyoustartbyremoving4%ofyoursavingsbalanceyourfirstyearofretirement,andthenadjustsubsequentwithdrawalsforinflation.Theruleisn'tperfect,butit'sadecentstartingpoint.

Thatsaid,ifyouretireontheearlierside(meaning,inyour50s),youmayneedtogowithamoreconservativewithdrawalrate--say,2%or3%.Andontheflipside,ifyouretirelater,5%ayearmightbefine.Justdon'tgettooaggressiveearlyon,oryou'llriskdepletingyournesteggbeforeyouknowit.

3.Lettingyourselfgetbored

There'sareasonwhyretirementincreasesyourchancesofbeingdiagnosedwithdepressionby40%,accordingtotheInstituteofEconomicAffairs--toomuchfreetimeonyourhandscanquicklyleadtofeelingsofworthlessnessandrestlessness.Thelessboredyouare,however,thelesslikelyyouaretogetdown,sotothisend,itpaystomapoutaschedulethatkeepsyourdaysoccupied.

Inthisregard,thepossibilitiesaretrulyendless.Youcanvolunteertwodaysaweekforalocalorganization,haveonemuseumoutingaweek,andspendanotherdaydoingprojectsathome.Ifyouhavefriendsinthearea,besocial.Startabookclub,ahikingclub,orarecipeclub.Or,sinksomehoursintothecreativeprojectyouimaginedbutneverhadtimeforduringyourworkingyears,whetherit'sthenovelyoualwayswantedtowriteorthephotoalbumyouwantedtocompile.

Furthermore,ifyoufindthatyou'renotfillingyourdaysadequately,getyourselfapart-timejob,evenifyoudon'tparticularlyneedthemoney.It'sabetterbetthanstaringoutthewindoworwatchingmindlessTV.

Youdeservetostartoffyourgoldenyearsonapositivenote.Avoidthesemistakes,andyou'llsetthestageforahappy,fulfillingretirement.

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