Despite the plethora of websites, books, magazines, advisors and other financial information and services available for retirees, there will always be a contingent of people who fail to make their retirement savings last for the rest of their lives. There are many ways to avoid this, some of which are more proactive while others are reactive in nature. But none of them are particularly difficult; all any of them really require is discipline and common sense. Here are a few ways you might be endangering your retirement.

IN PICTURES: 10 Retirement-Wrecking Moves

  1. Too Much Risk
    You worked and sweated for years to accumulate enough money to be able to live a comfortable retirement. Therefore, this is probably not money that you want to use to start trading commodities futures contracts unless you are very experienced with them. Derivatives, small cap stocks and other high-risk ventures should be approached with caution and used judiciously as part of a well-thought out investment strategy.

  2. Too Little Risk
    This mistake can be every bit as costly as the previous one; those who invest their portfolios too conservatively may find that their expenses are outgrowing their income. Treasury securities and CDs can be great foundations for any retirement portfolio, but virtually all retirees need to have at least a small portion of their assets invested in either equities or real estate in order to provide themselves a hedge against inflation.

  3. Retiring Too Early
    Early retirement has become something of a status symbol among the upper-middle class. However, early retirement can be disastrous for those who are not adequately prepared for it. For every five years that one wishes to retire early, at least $100,000 of additional assets should be saved (assuming a payout of $2,000 per month and a rate of 6%).
    Those who choose this path should therefore be prepared to accept a reduced payout and a smaller Social Security check every month if they have not done this. (For related information, take a look at How Much Social Security Will You Get?)

  4. Failure to Plan for Long-Term Care
    Nothing can destroy a retirement portfolio like having to pay for the cost of a nursing home or other long-term care without any kind of insurance protection. Nursing home care can easily cost up to $60,000 a year, depending upon various factors such as the level of care needed and your geographic location. Medicare seldom if ever pays for long-term care expenses and Medicaid is not a reliable source of aid for this either.
    There are "spend down" plans available for those who wish to follow their rules, but these plans can be substantially disruptive to daily living in most cases. Purchasing a long-term care insurance policy is usually the preferable alternative for those who can afford it. Other alternatives include annuities and cash-value life insurance policies with long-term care riders. (Protect your nest egg with LTC insurance. Don't miss LTC Insurance: The Umbrella Every Boomer Needs.)

  5. Retiring All at Once
    For some people, the radical adjustments that come from retirement are too much to absorb all at one time. It may be necessary to work another, lesser job for a time, such as a part-time job with an employer in a field in which you have an interest. A few years of this type of work may allow you to "gear down" sufficiently to total retirement at some point. This strategy can also help to stretch an insufficient retirement portfolio a long way.

  6. Living beyond Your Means
    As obvious as this is, those who spend more than they have in retirement will find themselves in dire straits at some point. Run the numbers carefully before you buy that 54-foot yacht or that vacation home. These items often fail to fetch their purchase prices if you have to sell them, so think twice before you plunge into a major pleasure purchase that will eat up a material chunk of your savings. (If you hope to enjoy a comfortable retirement, it's time to get real. Learn more in 4 Retirement Reality Checks.)

The Bottom Line
These are just some of the ways that you can ruin your retirement if you're not careful. Those who think that Social Security alone will sustain them in retirement are also in for a rude surprise. For more information on how you can avoid these mistakes during retirement, consult your financial advisor.

Catch up on your financial news; read Water Cooler Finance: Billionaire Pledges and Other Positive Press.

Related Articles
  1. Retirement

    What's a Defined Contribution Plan?

    A defined contribution plan is a company retirement plan that specifies the amount of money contributed to it.
  2. Retirement

    Infographic: How Much Money Do You Need to Retire in Hawaii?

    In this infographic we break down cost of living in Honolulu, Hawaii in terms of taxes, rent, food and other expenses and offer comparison to the cost of living in New York, Los Angeles, San ...
  3. Term

    What are Pension Funds?

    A pension fund is a company-sponsored fund that provides income for employees in retirement.
  4. Retirement

    Overhaul Social Security to Fix Retirement Shortfall

    There are several theories and ideas about how we can make up for the $6.6 trillion retirement savings shortfall in America. Adjustments to Social Security and our retirement savings plans are ...
  5. Investing News

    How Does US Social Security Measure Up Abroad?

    Social Security is a hotly debated topic. After examining the retirement plans of three different countries, the U.S.'s does not come out the winner.
  6. Investing

    Five Things to Consider Now for Your 401(k)

    If you can’t stand still, when it comes to checking your 401 (k) balance, focus on these 5 steps to help channel your worries in a more productive manner.
  7. Retirement

    The World's Most Luxurious Retirement Destinations

    If money is no object (or if you would just like to dream), these five spots are the crème de la crème.
  8. Professionals

    How to Protect Elderly Clients from Predators

    Advisors dealing with older clients face a specific set of difficulties. Here's how to help protect them.
  9. Professionals

    Social Security 'Start, Stop, Start' Explained

    The start, stop, start Social Security strategy is complicated. Here's what retirees considering it need to consider.
  10. Retirement

    Strategies for a Worry-Free Retirement

    Worried about retirement? Here are several strategies to greatly reduce the chance your nest egg will end up depleted.
RELATED TERMS
  1. Dynamic Updating

    A method of determining how much to withdraw from retirement ...
  2. Possibility Of Failure (POF) Rates

    The likelihood that a retiree will run out of money prematurely ...
  3. Safe Withdrawal Rate (SWR) Method

    A method to determine how much retirees can withdraw from their ...
  4. Mandatory Distribution

    The amount an individual must withdraw from certain types of ...
  5. Auto Enrollment Plan

    An employer’s decision to sign employees up to have a percentage ...
  6. Backdoor Roth IRA

    A method that taxpayers can use to place retirement savings in ...
RELATED FAQS
  1. Are spousal Social Security benefits taxable?

    Your spousal Social Security benefits may be taxable, depending on your total household income for the year. About one-third ... Read Full Answer >>
  2. Are spousal Social Security benefits retroactive?

    Spousal Social Security benefits are retroactive. These benefits are quite complicated, and anyone in this type of situation ... Read Full Answer >>
  3. Why are IRA, Roth IRAs and 401(k) contributions limited?

    Contributions to IRA, Roth IRA, 401(k) and other retirement savings plans are limited by the IRS to prevent the very wealthy ... Read Full Answer >>
  4. How do you calculate penalties on an IRA or Roth IRA early withdrawal?

    With a few exceptions, early withdrawals from traditional or Roth IRAs generally incur a tax penalty equal to 10% of the ... Read Full Answer >>
  5. What is the Social Security administration responsible for?

    The main responsibility of the U.S. Social Security Administration, or SSA, is overseeing the country's Social Security program. ... Read Full Answer >>
  6. What are Social Security spousal benefits?

    Social Security spousal benefits are partial retirement or disability benefits granted to the spouses of qualifying taxpayers.  Qualifying ... Read Full Answer >>

You May Also Like

Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!