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, youโre 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 youโve come to love? Letโs say itโs golf. True, your retirement plan called for withdrawing $25,000 a year from your nest eggโฆ but wouldnโt it be great to become a member of that club youโve 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, youโll get to play for free (except for the cart rental and annual dues) for the rest of your life. And the marketโs been doing great, youโre even richer now than when you retired.
Itโs 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.
