It’s no secret that most of us have bad habits when it comes to money management. Having a steady income from full-time employment tends to offer up some forgiveness for these transgressions. But bad money habits can follow us into retirement, long after the steady flow of money dries up to a dribble, and cause us to run out of money long before we run out of years. Here are five bad financial habits you should break now in order to keep them from breaking you during your golden years.
Not contributing to a retirement plan. Procrastination is the biggest reason that many seniors don’t have enough savings to cover their total cost of living during retirement. Although we have all been warned to save now, most of us can find plenty of reasons to put off saving until it becomes more financially feasible. Stop procrastinating now and start saving.
Thinking you will work longer. Many of us would like to think that we will retire early in life, but those who haven’t saved won’t be able to. Some people will try to work longer to make up for not saving as much as they should have earlier on. But delaying retirement might not work if you are forced into early retirement or sidelined by an illness or injury. Save now for retirement so that you can be prepared no matter when you end up retiring.
Depending on an inheritance. Whether you have a rich old uncle or not, you shouldn’t count on getting an inheritance that will fund your golden years. There is no guarantee that a wealthy relative will bequeath you enough money to live on for the rest of your life. And your relatives could end up spending the money themselves if they live longer than expected. It’s better to fund your own retirement than to count on a clause in a will.
Skimping on long-term care plans. You need a plan for taking care of yourself when you are no longer able to do it on your own. This means buying insurance that will cover the cost of long-term care. By buying an insurance policy now, you can help to ensure that your long-term care costs will be paid for long before you ever need to use them, saving you and your family a lot of grief in the future.
Taking Social Security too soon. You can start drawing Social Security benefits as early as 62. But for every year you forgo drawing Social Security benefits you will get a 7 to 8 percent raise in your monthly payments. So, by waiting until 65 or even 70 to start drawing Social Security, you can significantly increase your monthly income in retirement, and these payments will be adjusted for inflation each year.
Philip Taylor is the author of 104 Ways to Save Extra Money. Read his popular blog, PT Money: Personal Finance for more insightful money tips, like his recent suggestions for the best online checking accounts.