The allure of retirement is so strong, it may be impossible to keep a straight head as the closing date on the sale of your practice approaches. Ideally, you've spent the last few years planning and preparing for what you will do once you are officially retired. However, with all of the excitement, you might find yourself making simple mistakes that will cost you a ton in the long run. Here are some of the mistakes you need to avoid now that you are retired.
Not Realizing How Long Retirement Really Is
For decades we've been taught that you need a million dollars in retirement to live comfortably, and once you're retired you need that money to be in safe investments. While this advice isn't all bad, the reality is that people are living significantly longer than they used to. Instead of having a million dollars to last you through 10 years of retirement, you may have to stretch it 30 years! This is definitely a good thing, but it means that you need to plan better today. Moving all of your investments into safe areas may leave you without enough growth when you're older. In addition, a million dollars is no longer the magic number for retirement. Being aware of the new realities of retirement is a must.
Not Taking a Break
The sale of your practice is considered a windfall by most financial professionals. Once the closing has been completed, you may want to run out and celebrate right away. Most advisors say that you can celebrate for a day or two, but then you really need to slow down and take a deep breath. Don't rush into a new business venture. Don't invest the whole sum in high stakes investments. Don't go buy a new house, car, and boat all in the same week. You may eventually decide to do one or all of these things, but you need to pace yourself and have a clear understanding of where it will leave you financially.
Not Accounting for Lifestyle Changes
One of the many fallacies of retirement is that you can set yourself a yearly budget based on the amount you have in savings the day you retire. Then you can live on that annual budget year after year after year without making any changes. Realistically, not only will your expenses increase with age, your lifestyle should get better! Instead of planning a flat budget for the rest of your life, plan a budget that rises 2-3 percent at a time. This will feel like getting a raise, and will allow you to enjoy the finer things. Make sure your investment strategy can keep up with these raises.
There are many pitfalls that retired businessmen and women fall into each year. You can avoid them by planning early and gaining a deep understanding of how your life will change in retirement.