In 2025, an average of 11,400 Americans will turn 65 every day; that amounts to 4.18 million people — the highest on record. So, we can expect, most likely, a record amount of people retiring this year. If you’re among those getting ready to retire this year — or hoping to — it’s time to get extra serious about where you stand financially, and where you’re headed as you set sail into your golden years.
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Part of getting extra serious about your financial standing is reviewing your lifestyle and habits and ensuring that they align with your goals and needs. GOBankingRates spoke with financial experts to learn about six bad habits you can’t afford if you’re planning on retiring in 2025 — and how to break them.
Living Beyond Your Means
You may have become accustomed to spending even just a hair more than your budget can comfortably tolerate. Even if it feels innocent, this is overspending, and it’s a bad habit that will 100% derail your retirement plans for 2025.
“Not only does this bad habit make it challenging to set aside money for savings and investments, but it also essentially hurts your future self and your ability to retire with a secure financial outlook,” said Steve Sexton, CEO of Sexton Advisory Group. “In most cases, overspending is so much more than just a money issue — it also comes down to your mindset.”
To overcome overspending, you’ll need to get to the root of the issue. What’s driving this overtly destructive behavior?
“It is important to understand the reasons behind your habits, in addition to putting in processes that help you succeed, like developing a budget, doing monthly money check-ins with yourself, allocating monthly caps for different spending categories and setting up automatic credit card balance alerts to be triggered when you reach a certain threshold,” Sexton said. “In some cases, you might consider therapy to get to the root of what causes you to overspend.”
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Avoiding Your Debt
Debt sucks. It sucks so much, you may not even want to face it. But if you have debt and you’ve been avoiding it, you need to face the (bad) music now.
“Going into retirement with unmanaged debt is a risky move that can completely throw your financial stability off course in your golden years,” Sexton said. “The stress of looming debt over your head can also impact the quality of your retirement.”
Ideally, you’ll be going into retirement without any debt, but that’s not the reality for most. So, if you’re carrying debt, draft and stick to a realistic plan to pay it off.
“The best way to tackle your debt is to list them all out and create a plan to pay them down every month, either via the snowball or avalanche methods,” Sexton said. “You’ll find that with consistency, you’ll build momentum and make progress over time. If you require something more drastic, consider downsizing or liquidating some of your assets to fast track your debt elimination plan.”
Putting Off Saving for Your Emergency Fund
Most Americans are sorely lacking when it comes to emergency funds. And understandably so. The cost of living is increasingly expensive and wages, overall, just aren’t keeping up with it. But please, don’t go into retirement without an emergency fund.
“Having a well-funded emergency fund is even more important in retirement, when you’ll be living off fixed income,” Sexton said. “By ‘well-funded,’ we mean having at least a six-month runway of living expenses saved in an accessible high yield savings account.”
Sexton finds that people often put their emergency funds at the bottom of their financial priority lists — a costly mistake.
“While you cannot control life’s unexpected turns, you can soften the financial blow with an emergency fund,” Sexton said.
Putting All Your Eggs in One Basket
Financial experts frequently preach the importance of a diversified investment portfolio. They’re doing that because if you go into retirement without one, you could be screwed.
“When it comes to investments, it is critical that your portfolio is diversified for your projected retirement date and expected lifestyle,” Sexton said. “Investing too conservatively puts you at risk for not having enough in retirement; similarly, having all your investments tied up in one asset is incredibly risky.”
Sexton recommended consulting with a financial professional to get an idea of whether your portfolio is on par with your targeted retirement age and lifestyle goals.
Ignoring the Importance of Financial Literacy
Generally, we’re not taught much about personal finance in school. It’s not uncommon to carry this dangerous lack of financial literacy throughout our lives. Not understanding your finances, or just doing whatever you think you’re supposed to be doing without thorough research, is a recipe for disaster in retirement.
“Make financial education part of your routine,” said Lane Martinsen, founder of Martinsen Wealth Management and author of “5W Retirement Blueprint.” “Spend 20-30 minutes each week learning something new about finances. You don’t need to become an expert overnight, but building a solid foundation will help you make more informed decisions. Understanding key concepts like tax strategies, retirement accounts and insurance will give you greater control over your financial future.”
Financially Helping Family Too Much
This is a tough one, potentially. Of course, as a family member (particularly as a parent or grandparent), you want to be there for your loved ones, and often that means helping them out financially. But if you’re not super careful here, you could seriously hurt your retirement.
“Many retirees fall into the trap of covering student loans, down payments or everyday expenses for adult children who are struggling to get on their feet,” said Andrew Latham, CFP, content director at Supermoney.com. “While generosity is admirable, your financial security should come first — because once your savings are gone, it’s much harder to recover.”
Keep in mind that though you may be your kids’ or grandkids’ most preferred option for financial help, you’re not their only resource.
“Remember, your kids can take out loans for education or a home, but you can’t take out a loan to fund your retirement,” Latham said. “Before offering financial help, take an honest look at your budget. If you’re on track with your retirement savings, then lending a hand might make sense. But if it puts you at risk of running out of money later in life, it’s time to set some boundaries.”
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This article originally appeared on GOBankingRates.com: 6 Bad Habits You Can’t Afford If You’re Planning On Retiring in 2025
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