Retirement Planning Mistakes to Avoid
1. Expect inflation. Inflation affects prices today and will tomorrow. Most financial analysts expect inflation to increase over the next two to three decades. The cost of living will increase accordingly to double or triple current rates. Inflation will impact finances, especially for those on a fixed income. Pre-planning to allow for inflation rates can protect seniors by providing an adequate supply of money to foot the bills despite rising inflation costs. By putting away two to three times more than needed for the current economy, a secure future can be assured.
2. Don’t count on investment returns allow to cover financial needs. Many people believe that if they build a substantial nest egg and then can live off the dividends or interest payments. This theory is sometimes sound but it depends on the investments. Today’s stock market is precarious and can destroy a carefully planned financial foundation with a single market fluctuation. If investing, do it in real property or sound investments that are not as related to economical surges or downfalls. And, it’s wise to remember that investments, dividends, and interest payments may provide a financial foundtaion but dealing with them can create headaches for the heirs.
3. Remember risks when gathering assets. Age makes a difference when determining what assets (stocks, bonds, and cash) should play a role in a personal portfolio. Workers in their thirties can handle more risk than workers in their fifties or sixties. Invest with wisdom and remember the risk factor. Losing or diminishing the value of assets at the threshhold of retirment can prove disasterous to many senior citizens.
4. Think about taxes. Remember that while investing in tax deferred programs such as IRA’s or 401K plans only defers the tax until retirement. When the funds are withdrawn from either plan, accumulated funds are subject to tax so figure the tax into planning or the size of the expected nest egg may be smaller than expected.
5. Be realistic about retirement spending. Many soon-to-be retirees believe that their expenses will be minimal after retirement but this is not always the case. Some statistics show that many recent retirees spend up to 85% of their retirement income on retirement. This may be relocation expenses, purchase or a retirement home or maintenace on a long time home. Remember as well that in addition to day to day living expenses, many seniors face unexpected financial burdens with health care, home improvement or repair costs, or long term care. Fun things like dining out and travel should be anticipated and the money should be allocated early. More money that needed is a better choice than not enough.
6. Don’t expect more investment returns than are feasible. Have long term objectives and investments that stand the test of time rtaher than flash in the pan, get rich quick hopes for unrealistic returns. Have a sound financial floor to build retirement upon.
7. Plan for a long life. Many retirees don’t expect retirement to last as long as career years but with today’s increasing life expectancies, improved medical care, better nutrition, health and excercise conciousness, and modern conveniences, people live longer than ever before. It’s not a fantasy that retirement may last two, three and even four decades for some seniors so plan ahead for the long term and don’t short change finances with short term funding.
8. Plan ahead for health care. Have solid insurance – don’t count on Medicare alone to float senior health bills. Have and maintain a comphrehensive policy that provides not only for short term illness, surgery, or hospitalization but for long term care as well. Many seniors will find long term care necessary at some point and it’s important to have such care covered to avoid even greater medical costs that can wreck a retirement budget.
