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Your retirement should be your golden years, where you reap the rewards of decades of hard work.
But if you don't save enough to cover your living expenses or you get hit with bad luck, retirement can be a time of financial stress.
In addition, longer life expectancy has changed the calculus of retirement savings. If you retire at 65 and live to be 100, you may spend almost the same number of years in retirement as you did working. That means that for almost every working year, you need to fund a non-working year. No pressure, though.
Richard Hall, a financial planner at Pitzl Financial, told Business Insider about seven of the biggest money mistakes he sees people make before retirement and how to avoid them.
Here are the mistakes you should be avoiding as you near retirement age.
"Annuities are set to create a cash flow in retirement," Hall said. "A variable one is one that can invest in the market."
An annuity is an investment that gives you a monthly payout after a period of time, sort of like funding your own pension. Deferred annuities — the most common type — have a set payout amount on maturity.
That's the reason Hall put variable annuities on the top of his list of money mistakes before retirement.
"You're giving away 3% a year, almost," he said. "When you start to compound it, it becomes a pretty massive differentiator."
They buy timeshares.
When you think of a timeshare, you might picture yourself sitting on a balcony overlooking the ocean, sipping a piña colada. Hall sees an expensive boondoggle that drains funds you could be saving.
When people don't use their timeshares often, "they're really not coming out ahead from a vacation standpoint," Hall said. "I've had people come in where they've spent $20,000 on a timeshare they're not using."
In addition to the up-front expense, you'll have to pay an annual maintenance fee, which can cost as much as $3,000, according to Hall. In addition, a timeshare can be very hard to unwind, leaving you stuck with an annual fee for a vacation home you're not using.
"A lot of times you have to give them back to the timeshare company in order to rid yourself of them," Hall said.
On the flipside, NerdWallet reported that some people have picked up timeshares at steep discounts on the resale market. But only buy it if you're willing to use it.
They pay off low-interest debt — such as a mortgage — too quickly.
The idea of being completely debt-free is alluring, especially if you're approaching retirement. It's particularly tempting to get rid of what is likely your biggest monthly debt payment — your mortgage.
"Debt isn't always a negative thing," Hall said. "Individuals get so concentrated on paying off low-interest debt. Sometimes people pay off debt quicker than they need to."
He noted that the stress you feel from holding debt is an important consideration. But with historically low mortgage interest rates in recent years, you might be able to earn more by investing the extra money you're putting toward paying off your mortgage early.
"It's time in the market, not timing the market," Hall said. "The longer you can give your money to work for you, the greater the probability you'll have some success with it."
In other words, don't pay off your mortgage — or another low-interest debt — first and invest later. Invest now and pay the debt more slowly.
They take their Social Security benefits too early.
"That's a substantial increase," Hall said, adding that an 8% annual return is better than you would probably get from the stock market.
Deciding when to take benefits is a balancing act. If you delay, you give up years of extra income, but you also increase your income in later years. The benefits of delaying until 70 outweigh the costs if you live past 82, according to Hall.
"The hard thing about making the right decision is that you're not always guaranteed to be correct," he said.
After all, the one thing most of us can't know is how long we will live.
They endanger their retirement by helping other family members financially.
Hall doesn't want to discourage parents from helping their children afford college or make a down payment on a house. But he wants them to understand the consequences of their actions on their own lives and specifically their retirement.
"People need to recognize what the total impact is," he said. "You have to understand the trade-off."
He suggests thinking 20 years out before you give a chunk of money to a family member. If you do, you might decide to let your child take out a few more student loans, rather than hurting your chances for an easeful retirement.
They don't have emergency savings.
A recent study by the Federal Reserve Board found that 40% of US households wouldn't have enough money for monthly expenses if they had to cover an unexpected expense of $400 or more. That's better than 2013, when the figure was 50%, but it's still high.
Instead, many people turn to 401(k) loans. While Hall acknowledged that there are some scenarios where a 401(k) loan makes sense — such as paying off high-interest credit cards — it's not a good idea to dip into your retirement for emergencies. In the worst-case scenario, if you lose your job you could be forced to pay the loan back or take the money as an early withdrawal. If you do, you'll have to pay hefty penalties and taxes.
Hall said that he sees a lot of 401(k) loans taken out of the balance rather than being repaid. To avoid that, make sure you maintain emergency savings.
"Those who are able to establish an emergency fund and maintain it are able to ride those life moments when something pops up that you're not expecting," Hall said.
They take on additional debt without considering how it will affect their cash flow in retirement.
"A lot of baby boomers really valued having large homes," Hall said. "Millennials like smaller homes. In some cities, large homes are sitting on the market with no one to buy them."
Buying too much home and not getting enough market value back out of it as a risk for people who are near retirement. In addition, Hall noted that big houses cost more to maintain, which can be a strain on a fixed retirement income.
