7 Retirement Planning Mistakes to Avoid
Congratulations! You are ready to start planning and preparing for your retirement. That can be exciting or that can be a scary proposition. One thing is for certain. The earlier you start planning for your retirement, the better off you will be.
The decision to start planning for retirement is a wise decision. As I stated above, the earlier you start, the better. Regardless of your current age, if you haven’t started to seriously and consistently save for retirement, start now. As the saying goes, the best time to plant a tree was twenty years ago; the next best time is right now!
With that said, mistakes and misjudgments are common so here is my list of mistakes you will want to avoid.
Not creating a budget for yourself and not tracking your spending. Not budgeting and not tracking your expenses generally leads to spending more money than you have.
Never spend money that you don’t have and never spend all your money on one investment. Ideally, it is best to start paying for all your purchases with cash, checks, or debit cards.
Another common mistake that people make when creating a financial retirement plan involves not taking health into consideration. You would be wise to remember the saying that “Your health is your wealth”. Much has been written about the longevity revolution we are in and that we have as many as 15, 20, or more years ahead of us in our post-career life. But while life span is important, your health span is even more important.
Health costs are generally the largest expense people have in their post-career life. Medicare is a good security blanket to have but most people will need some kind of supplemental insurance. Your health can change unexpectedly and is the great unknown during your retirement years.
These days, it is fairly common to live much longer than what people originally planned for. You don’t want to run out of retirement money because you lived much longer than expected.
Mistake # 3
In keeping with your health and wellbeing, it is important to condsider your spouse or significant other, and visa versa. There is a good chance that one of you will live longer than the other and possibly a significant amount of time longer. Ideally, make sure that you have enough money to retire on your own in the event that your spouse passes away before you do.
Not checking and updating all important documents and not letting a trusted family member know where you keep them. Make sure your will, mortgage, property deeds and any business records are in order and that they are designed to protect the surviving spouse.
Relying too much on Social Security is a mistake that many people make. For most people, Social Security will typically cover about 40% of your financial needs during retirement. That means you will have to create a plan for the other 60% of your financial needs. Again, if you don’t have a plan for the expected shortfall, now is the time to create one.
Mistake # 6
One of the biggest mistakes that many individuals make is dipping into their retirement savings before they are ready to retire. This is a huge mistake that can have a negative impact on your retirement and your finances in the future. Do not do this! You should never take money from your retirement funds unless it is a dire emergency. Always use your retirement savings as a last resort.
Mistake # 7
Not knowing all your saving options is another mistake that you will want to avoid making. Did you know that there are multiple ways that you can save money for retirement? There are, for example, an employer’s 401(k) program as well as Individual Retirement Accounts (IRAs). Others rely on a portfolio of stock and bonds to save money for retirement. In fact, it is advised that you diversify your retirement savings for maximum protection. Do the necessary research online or my advice is to work with a reputable financial advisor. The cost for sound financial advice will be well worth it.