Your golden years are supposed to be relaxing and stress-free. However, the mere thought of retirement planning can have the anxiety levels climbing. Some of the major issues in retirement planning are whether you will have enough money to retire comfortably, as well as, when and how to start planning. Your estate planning attorney can help, but here are some of the most common mistakes you need to avoid.
Not accumulating enough savings to have a comfortable retirement
A huge part of retirement planning is being sure you have enough money saved up to support your financial needs once you retire from the workforce. It should go without saying that, the sooner you start putting money aside, the more you can have saved up by the time retirement actually rolls around. So, if you haven’t already, open a savings account and start making your regular deposits immediately. The sooner the better because you will be able to benefit from more compound interest.
Consider this example. A 25-year-old who has a retirement goal of $1 million by the time she reaches age 65 would need to put aside approximately $345 per month for 20 years, earning 8% per year over 40 years. Consider, however, the 45-year-old with the same retirement goal of $1 million. She would need to save $1,698 per month for the next 20 years at the same interest rate. Start saving now!
Forgetting to update your retirement plan as the years go by
It is important to occasionally review your retirement plan to be sure that necessary changes are made. Just like an estate plan, a retirement plan needs to be reviewed sporadically so you can make necessary revisions and adjustments that will address changes in the market. Those changes could potentially have a negative effect on your investments. If they are not addressed you could lose out on a lot of income. You may also need to adjust your plan when there is a change in your income or expenses that may alter your overall plan.
Overlooking the potential need for long-term care during retirement
The amount of time and money needed to care for an aging parent can be significant. The costs of medical care alone can consume all of your savings unless you have a proper retirement and estate plan in place before the need arises. According to some reports, close to 70% of all retired folks will need some form of long-term health care at some point in their lives. That is usually during retirement.
For that reason, it is important to take a look at all of your long-term care options now and include those options as a part of your retirement plan. That way you can better anticipate the financial resources that will be needed so you can be sure to have sufficient funds to cover the costs of that care. If you never need long-term care that means you will have more money to spend during retirement.
Failing to consider the likelihood of higher health care costs in the future
The cost of long-term care is not the only concern. Even if you never need nursing home care, for instance, the need for regular health maintenance typically increases for everyone as they age. In other words, though not ever senior will need a nursing home, they may still require frequent trips to the family physician. That’s why another important aspect of retirement planning is addressing the cost of healthcare, as it will be in the future. Health care costs generally increase over time, so anticipating that increase is an important part of retirement planning. If you don’t consider the potential increase in cost, you may be setting yourself up for financial problems in the future.
Setting and maintaining unreasonable retirement goals
With all of the considerations needed in retirement planning, trying to set realistic goals can be a challenge. In fact, it is very common for clients to be uncertain about how to set those goals, especially how much income or savings they will actually need at retirement. It is not always easy to predict what you will need to maintain your lifestyle 20 to 30 years in the future. There are so many variables, all of which are subject to constant change.
The problem is if you don’t have sufficient financial resources during retirement you could face financial difficulties, but if your goals are unreasonably high, then you may never reach appropriate retirement goals at all. Your retirement planning attorney can help you develop a plan that is reasonable for your particular situation.
Join us for a free seminar! If you have questions regarding retirement goals, or any other retirement planning needs, please contact the Schomer Law Group for a consultation, either online or by calling us at (310) 337-7696.