Whether you are young or old, financial planning for retirement has probably crossed your mind at some point. And if you are like most people, you do not want to find yourself at retirement age without the means to retire comfortably. The following considers five of the biggest mistakes that you can make in regards to financial planning for retirement:
1.Waiting Too Long to Start Saving
Do not tell yourself you’ll start saving next month, next year, or after you buy your first home. The time to start saving for retirement is right now. Retirement is expensive. You should be putting away a significant portion of your income into a retirement fund starting immediately – the older you are and the younger you want to retire, the more you should put in.
- Entering Retirement with Too Much Debt
Another big mistake that many retirees make is entering the retirement phase of their lives with too much debt. Some debt is okay – and might even be a good thing – but excessive real estate debt will quickly drain your savings account too quickly. Financial planning for retirement should include a strategy that seeks to help you pay off your home while you are still working.
- Failing to Income Plan
Financial planning for retirement should include an income plan. This type of plan refers to a plan for how much you will take out of your retirement account every month as “income.” This amount should be consistent, stable, and manageable over the long-term. Too often, retirees pull money from their savings account at random intervals, which can fuel high spending habits. Set a budget for yourself, and stick to it.
- Not Accounting for Long-term Care Expenses
No one likes to think about the prospect of long-term care services, such as living in a nursing home. However, the fact of the matter is that 70 percent of people over age 65 will require this type of care at some point in their life. Healthcare in a care facility, private home care, and the like is extremely expensive – if you haven’t planned for it, the burden may fall on your children.
- Not Having a Retirement Plan
Okay, so you have a 401(k), Roth IRA, SEP IRA, or a combination of retirement savings accounts. But do you have a plan for those accounts?
Not only do income levels rise and fall, but so do markets. What’s more, life changes. Maybe you originally planned on retiring at 65, but now are feeling like calling it quits at 58. Or, maybe you were thinking 62 sounded great, until you and your spouse unexpectedly found out you were pregnant, and that time frame needs to be pushed back to save for the child’s college expenses. Do not just set up a retirement fund and walk away – check in on your account regularly and make changes as necessary.
Financial planning for retirement is one of the most important things that you can do. If you do not have a plan in place, or have questions about how much you will need or how much to save, you should meet with a financial professional.