Retirement. It should be a magical time of playing with grandkids, traveling the world, and enjoying the fruits of your labor. Unfortunately, for far too many seniors, retirement means spending your days worriedly checking bank balances and wondering how you'll ever afford all the costs you have to pay. 

To make sure you're not one of the many seniors struggling to get by on and worried your money won't last, it's imperative you avoid these four big mistakes. 

Senior couple with calculator and financial papers

Image source: Getty Images.

1. Retiring too soon

Retiring too soon can be a problem for a few big reasons. First and foremost, your money will need to support you for longer -- and you'll forego the opportunity to save more. When you're over 50, you are eligible to make catch-up contributions to both a 401(k) and an IRA. The ability to put away more tax-free dollars allows you to build a much bigger nest egg.

In addition to limiting the time you have to save -- and forcing you to live on your savings for longer -- retiring too soon could also mean claiming Social Security benefits early. If you claim before full retirement age, benefits could be substantially reduced. In fact, if you take Social Security at 62 when, full retirement age is 67, monthly Social Security income would be 30% smaller for the rest of your life. 

To make sure you're ready to retire, figure out how much you can safely withdraw from your retirement accounts based on your current age. One way some people do this is by using Required Minimum Distribution tables prepared by the IRS. For example, according to the RMD tables, if you retire at 65, you would withdraw no more than 3.13%. You should also figure out what your Social Security benefits will be based on the age when you claim them. 

If the amount of money you can safely withdraw, combined with Social Security income, isn't enough to live on, you're not ready to retire. 

2. Thinking your spending will decline after you retire

Another common misconception many pre-retirees have is that they'll spend less after leaving the workforce. For many retirees, though, spending actually increases after you're no longer on the job.

In fact, close to half of all senior households increase spending during the first two years of retirement. The increase is a big one, with 30% of senior households spending around 120% more than while still working. Six years after quitting work, one in three senior households is still exceeding pre-retirement spending, and close to a quarter still exceed their prior expenditures by around 120%. 

In early retirement, much of this spending is discretionary -- often for travel or costs of indulging in hobbies. Unfortunately, later in retirement, additional spending is often caused by medical issues. Healthcare becomes very expensive for seniors, and this spending isn't typically optional. 

To ensure you don't underestimate retirement spending, consider basing your plans for retirement on the premise that you'll need at least 100% of pre-retirement income. You can also make a sample retirement budget to see if your savings gives you the money you need to survive and thrive. 

3. Not making the right investments in retirement

It's important to switch to more conservative investments as a senior to avoid being forced to withdraw funds during a market downturn, thus locking in losses.

However, while you want to avoid too much risk, there's also a danger to investing too conservatively. Say you have a retirement balance of around $500,000. If you withdrew $20,000 (4% of the balance) your first year and increased annual withdrawals by 2%, your savings would last you throughout retirement -- assuming you earned around an 8% rate of return. But, at a 2% rate of return, the money would run out in about 24 years -- and you may have many more years to live. 

There's a simple shortcut to decide how to allocate investments: Subtract your age from 110 to determine the percentage of your portfolio that should be invested in stocks. Using this approach, when you're 80, you'd invest 30% of your portfolio in the market. 

4. Not taking the right amount of money out of your retirement savings 

Far too many seniors make the mistake of withdrawing the wrong amount of money from retirement savings.

Withdrawing too much is obviously a big problem -- but withdrawing too little can be an issue as well. One recent survey from Blackrock found most current retirees still had at least 80% of pre-retirement savings two decades into retirement. In some cases, this is fine if you've simply saved a fortune and can live comfortably while withdrawing just a small percentage of your account. But, if you're scraping by because you're too afraid to take out money, you aren't doing yourself any favors. 

To enjoy the fruits of your labor -- without running out of money too early -- make a plan for withdrawals that makes sense. As mentioned above, many experts recommend using Required Minimum Distribution tables from the IRS as your guide because these tables allow you to account for life expectancy and fluctuations in the market.   

Don't make these retirement mistakes

When you work hard all your life, you deserve to enjoy retirement. Don't let these common mistakes turn the end of your life into a time of struggle. If you're smart about what you do with your money, you can live it up as a senior and still have a little cash left in the bank to leave to your heirs. 

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