2. Assuming your living costs will drop drastically

4 steps budget

Many people assume that once they retire, their living expenses will magically shrink. But chances are, your monthly bills won't change all that much once you're no longer working.

Think about the things you spend money on today, like housing, food, utilities, and clothing. These are all items you'll continue to need when you're older, and whether or not you're working at the time won't really matter. You may even come to find that some of your expenses go up in retirement, like healthcare and leisure.

In fact, the Employee Benefit Research Institute found last year that roughly 46% of households spend more money, not less, during their first two years of retirement, while 33% spend more for their first six years outside the workforce.

To avoid financial struggles later in life, map out a retirement budget that accurately reflects the costs you'll face, and make sure the income you anticipate is enough to support it. If not, you might consider postponing retirement until you're in a better place financially.

First published December 6, 2018: 4:06 PM ET

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