People who run out of money in retirement tend to display these 10 habits

There’s a significant gap between planning your retirement well and falling short.

The difference boils down to habits. Running out of money in your golden years often stems from certain behaviors that have been overlooked.

Retirees who manage their funds successfully, however, seem to have a set of habits that keep them on track.

In this article, we’ll explore these 10 habits that can make or break your financial security in retirement.

So sit up and pay attention; your future self might just thank you.

1) Failing to plan

It’s often said that failing to plan is planning to fail.

In retirement, this rings especially true.

Experts have noticed a trend among retirees who run out of money – a lack of financial planning. Many individuals underestimate the amount they’ll need to maintain their lifestyle in retirement.

Ignoring the need for a robust retirement plan is like navigating without a compass. You can’t predict the future, but you can prepare for it.

Consider it like this. It’s the reason behind every retirement calculator and financial advisor. They’re there to help you make informed decisions about your future.

When faced with the daunting task of planning for decades of life without a regular income, many people choose to ignore it hoping things will somehow work out.

If you want to secure your financial future in retirement, experts suggest doing the opposite – take control and plan ahead.

2) Neglecting to save early

Let me share a personal example with you.

When I was in my early 20s, retirement felt like a lifetime away. The idea of saving for it seemed almost laughable – there were so many other things that needed my attention and my money.

As I grew older, I started to realize the importance of starting to save early. But by then, I was playing catch-up. I had missed out on years of potential savings and compound interest. It was a tough lesson to learn.

Experts often point out that those who run out of money in retirement frequently share this habit – they didn’t start saving early enough.

It’s not just about how much you put away, but when you start. The earlier you begin, the more time your money has to grow, thanks to the power of compound interest.

So, learn from my experience. Start saving for retirement as soon as you can, no matter how small the amount may seem. Your future self will thank you for it.

3) Living beyond means

One of the most common habits among those who struggle financially in retirement is living beyond their means. This is not just a problem during retirement, but a habit that starts much earlier.

A study by the Federal Reserve found that nearly 40% of American adults wouldn’t be able to cover a $400 emergency expense. This suggests that a significant number of people are living paycheck to paycheck, spending more than they earn.

When this lifestyle continues into retirement, the results can be disastrous. With no regular income to cover the excessive spending, savings can quickly deplete.

Small, regular expenses can add up and have a significant impact on your finances. It’s crucial to live within your means both before and during retirement to ensure your savings last.

4) Ignoring inflation

Inflation is a subtle beast. It’s easy to overlook, but it can have a significant impact on your retirement savings.

Many retirees who run out of money tend to disregard inflation when planning for retirement. They plan based on their current expenses without taking into account that the cost of living will most likely increase in the future.

To protect your retirement savings from inflation, experts recommend investing in assets that have the potential to outpace inflation, like stocks or real estate.

5) Banking on social security alone

Many retirees who find themselves short on cash have put too much faith in their social security benefits without having other substantial savings or income streams.

The reality is that social security is designed to supplement retirement income, not to be the sole source.

The average monthly social security benefit is around $1,780, which might not be enough to cover all your expenses in retirement.

To avoid this pitfall, experts suggest creating diverse income streams for your retirement years. This could be through savings, investments, rental income, or part-time work.

6) Neglecting health care costs

It’s a harsh truth that as we age, our health often declines. And with it comes increasing medical costs, which can pose a significant strain on retirement savings.

Many retirees who run out of money have underestimated the potential impact of health care costs in their later years. It’s an easy mistake to make, especially if you’re currently in good health.

But even the healthiest among us can’t predict what the future holds. A sudden illness or injury could lead to unexpected medical bills and put a dent in your retirement savings.

So as you plan for your golden years, remember to factor in potential healthcare costs. Consider investing in a good health insurance policy or setting aside a separate emergency fund for unexpected medical expenses.

7) Avoiding financial education

I’ll be honest. For the longest time, I found anything finance-related incredibly intimidating. I didn’t understand it, and I didn’t want to. So, I avoided it.

But here’s what I’ve learned: avoiding financial education can lead to poor money management, especially in retirement.

Many retirees who struggle financially share this habit. They’ve avoided learning about finances throughout their lives and enter retirement without the necessary knowledge to manage their money effectively.

8) Chasing after high returns

Many retirees who find themselves short on cash in their golden years have chased high-return investments without considering the risks involved.

While these investments can indeed bring in substantial returns, they also come with a higher risk of loss. And sometimes, that loss can be significant enough to severely impact your retirement savings.

Experts suggest a more balanced approach. It’s about having a diverse portfolio that includes both higher-risk and lower-risk investments. That way, you’re not putting all your eggs in one basket.

9) Fearing market volatility

Many retirees who struggle financially tend to react impulsively to market changes. They may sell off their investments at the first sign of a downturn, potentially missing out on future gains when the market recovers.

Financial experts recommend a more measured approach. Instead of panicking and making rash decisions, it’s better to have a long-term investment strategy that factors in market volatility.

The market has its ups and downs, but it has always demonstrated an upward trend over the long term. Keep your emotions in check and stick to your plan.

10) Forgetting to adjust lifestyle

Your golden years should be about enjoying the fruits of your labor, not worrying about finances.

Adjusting your lifestyle to align with your retirement income can help ensure you don’t run out of money and can enjoy this well-earned phase of life.

Downsizing your home, cutting back on unnecessary expenses, and finding cost-effective hobbies are just a few ways to live within your means during retirement.

Final thoughts: The power lies within you

Albert Einstein once said, “Compound interest is the eighth wonder of the world. He who understands it, earns it; he who doesn’t, pays it.”

This wisdom holds true not just for financial investments but for investing in good habits too.

As you reflect on these habits identified by experts, remember – you’re not alone in this journey.

Start today, and with each small change, you’re one step closer to a financially secure retirement. Each decision you make is an investment in your future self.

And that’s a return worth striving for.