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5 Ways You're Sabotaging Your Retirement

By Maurie Backman - Updated May 25, 2018 at 9:08AM

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Sometimes, we're our own worst enemies.

Countless workers look forward to retirement and the opportunity to do what they want with their time. But if you're not careful, retirement could end up being nothing more than an extended period of financial stress. Here are a few moves that could leave you distraught and cash-strapped during your golden years, so be sure to avoid them at all costs.

1. Investing too conservatively

An estimated 60% of Americans are investing too conservatively for the future. They're therefore limiting their savings' growth and increasing their risk of running out of money. While it's natural to want to avoid losses, the fact of the matter is that if you give yourself ample time to ride out the stock market's ups and downs, you're more likely than not to come out ahead. By contrast, if you play it too safe, you'll increase your chances of not having enough money when you need it.

Older man scowling


Imagine you're able to save $200 a month for retirement over a 30-year time frame. Invest that money at an average annual 7% return, which is more than doable with stocks, and you'll wind up with $227,000 to work with. Stick to safer investments, like bonds, on the other hand, and you'll be looking at more like 3%, which will leave you with just $114,000.

If you're still 10 years or more away from retirement, it absolutely pays to load up on stocks in your portfolio. Even if you're much closer to that milestone, you should still put some of your savings into stocks to maximize growth while you can.

2. Relying too heavily on Social Security

Millions of seniors today collect Social Security, and those benefits help them pay their living expenses in the absence of a paycheck. But if you think you can live on those benefits alone, you're sorely mistaken. Social Security is designed to replace about 40% of the average worker's pre-retirement income. Most people, however, need closer to 80% of their former earnings to pay the bills when they're older. Therefore, if your plan is to neglect your savings, you'll likely to run out of money in the future. So don't do that. Make regular IRA or 401(k) contributions, and aim to ramp up your savings rate as much as you can over time.

3. Filing for Social Security too early

Though your Social Security benefits are calculated based on your personal earnings record, filing for them too early could cause your payments to shrink. That's why it pays to wait until full retirement age to take benefits -- in doing so, you guarantee that your payments aren't reduced. Most Americans, however, don't know their full retirement age (hint: It's either 66, 67, or somewhere in between), and even among those who do, many still opt to file for Social Security at the earliest possible age of 62. Doing so, however, could severely limit what turns out to be your primary income stream in retirement, so be careful about when you file.

If you're wondering what sort of hit you might take by claiming benefits ahead of full retirement age, imagine that yours is 67 and that you're entitled to a full monthly benefit of $1,600 at that time. Filing at 62 will cut that benefit down to $1,120, which means you'll reduce your annual income by over $5,700. Therefore, if you don't have a specific reason to take benefits right away, it's wise to hold off.

4. Not paying off debt

Americans are used to living with debt, whether it be of the mortgage, student loan, or credit card variety. The problem with carrying that debt into retirement, however, is that when you're living on a fixed income, you might struggle to afford those nagging payments. And the longer you hang on to that debt, the more money you'll throw away on interest.

It's estimated that nearly 50% of seniors 75 and older continue to carry debt, so don't put yourself in a position where you end up joining their ranks. Figure out which of your debts are costing you the most (it's probably your credit cards) and work on paying down your outstanding obligations before your career comes to a close. You may need to cut corners in your budget to allow for that, but you'll appreciate the effort when your limited retirement income isn't being eaten up by debt payments.

5. Not having a plan

There's a reason retirement increases the likelihood of suffering from depression by 40% -- when you go from a 40-hour workweek to having little to do with your time, it can wreak havoc on your well-being. One of the worst mistakes you could make going into retirement is not having a plan for how you'll spend your days. So be kinder to yourself by mapping one out. Maybe you'll take that French literature class you were always interested in at your local community college, or round up friends for weekly museum outings. The possibilities are pretty much endless, but go in with a solid idea of how you'll occupy yourself so you don't wind up feeling bored and restless.

You deserve a rewarding retirement, so don't ruin your chances of achieving that goal. Steer clear of the aforementioned mistakes, and with any luck, you'll come to enjoy your golden years to the fullest.

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