A recent article in the Wall Street Journal discussed five mistakes retirees must avoid if they hope to protect their hard-earned nest eggs. Some of these mistakes can put a major dent in your life savings rather quickly, while others can lead to a steady loss that takes its toll down the road.
The big, extravagant purchase
At last, you’re retired. Years of hard work have paid off, and now you want to enjoy every second of your golden years. What better way to start than the wholehearted pursuit of the activity you’ve come to love? Let’s say it’s golf. True, your retirement plan called for withdrawing $25,000 a year from your nest egg… but wouldn’t it be great to become a member of that club you’ve passed every day on the way to work? But membership starts at $75,000. Should you make an exception to your planning, just this once? After all, you’ll get to play for free (except for the cart rental and annual dues) for the rest of your life. And the market’s been doing great, you’re even richer now than when you retired.
It’s something to think about, but you should definitely think twice. Maybe three times. If you make that big withdrawal, and the market heads south, you could be forced to live off much less than you anticipated.
(And yes, the same logic holds true for buying that 30-foot fishing boat, that Corvette, that timeshare in Hawaii and all the other goodies that we think we can splurge on right away in the hope that the stock market will make our nest egg continue to grow for years to come.)
Tomorrow: gruesome nest egg mistakes numbers two through five.
