9 dumb moves to ruin your retirement

By Bankrate.com

Many people carry their retirement concepts around in their heads.

They may imagine a luxurious recreational vehicle parked near a Florida theme park. Playing golf. Boating. Shopping. Taking a creative-writing class. Gardening. Who wouldn't look forward to such a future?

Smell that coffee? Retiree wannabes need to indulge in some serious reality tweaking or their dreams will hit the wall faster than a roller-derby queen on a greased track.

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If you crave the rush that comes from having to cash in empty beer bottles to pay your mortgage, here are a few strategies guaranteed to turn your retirement into one memorable financial catastrophe after another.

Buy more home than you can afford

There's no time like retirement to grab that McMansion you've always wanted. By opting for a house that'll turn into an albatross in the face of climbing property taxes and soaring insurance premiums, you can ensure your home will become a real burden in your old age. Another instant path to bag-lady-hood: escalating maintenance and upkeep.

Dave Ramsey, a personal-finance expert and talk-radio host, says to temper wants with needs. He cited a recent poll in which 80% of Americans said they believed their standard of living would go up at retirement.

"Our culture today tells us that we deserve to have everything we want because we can charge it," Ramsey says. "Previous generations thought you could only have something if you could pay for it. Their lifestyles were much simpler, and retirement was a time to simplify even more."

Do it right: Pay off your debts, including your home if you can afford to do so, before retiring. If you have to move, or simply want to, don't buy something you can't afford in the long term. And minimize repairs by keeping up with the maintenance.

Ignore the effects of inflation

You calculated your cost of living against your projected retirement income, and things look pretty darned rosy. Chances are you didn't factor nasty old inflation into your budget.

Assuming an inflation rate of 2.2% that rises to 3% starting in 2017, what costs $10,000 in 2008 will go for $12,528 by 2018. In 2028, that figure will rise to $16,837. And in 2038, you'll need $22,628 for the same expenditure. If 2038 sounds like "Star Trek" and beyond, look at it this way: If you retire at age 55 in 2008, you will be 65 in 2018, 75 in 2028 and 85 in 2038.

People live longer these days, but unfortunately for many, their money won't go the distance.

Richard Suzman, the director for the Behavioral and Social Research Program at the National Institute on Aging, says that although life-expectancy gains have slowed in the past few years, we're in for another upturn.

"If that happens, more people will be outliving their resources," Suzman says.

Do it right: Calculate future expenses with an eye on both inflation and increased longevity.

This means allocating a portion of your nest egg to higher-risk, higher-return investments such as equity mutual funds or purchasing an immediate annuity with an inflation-adjustment component.

Raid your 401(k) early

Not everyone is lucky enough to have his or her own personal loan company, but with a 401(k), you can borrow your own money and, even better, pull it all out if you change jobs. What a cool way to pay off your credit cards or buy that boat you've always wanted. Not.

Getting your hands on a boatload of cash might seem tempting, but Bonnie Fawcett, the director of 401(k) programs at PNC Financial Services, says going into your retirement savings before you retire should be a plan of last resort.

Do it right: Dip into your 401(k) only when there is no other choice and the reason is an especially good one, such as purchasing your first home.

Count on Social Security

You don't want any regrets when you look back at your life, so you've made a habit of living for the moment. Now the moment when you want to retire is nigh, and you plan to let the government take care of you. Way to go -- that's the kind of thinking that could land you below the poverty line in retirement.

Social Security has helped lower cases of poverty among the elderly in this country, but it stands on unstable financial ground.

"It's never too late to start saving and investing for retirement, but you have to get intense and do what it takes to win," financial expert Ramsey says. "If you aren't willing to sacrifice, you won't get anywhere."

Do it right: Diversify your sources of retirement income as early in the game as possible. That means save in as many different types of tax-favorable investment vehicles as you can manage, such as a 401(k) plan and an individual retirement account. And save as much as you can.

MORE: RETIREMENT PLANNING - INFLATION - 401(k) - HEALTH COSTS - RETIREMENT BENEFITS

Continued: Don't count on your pension

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