A generation ago, people talked about retirement like a comfortable, boring inevitability. Today, aging workers and up-and-comers alike fear they’ll never reach that kind of financial security. Unfortunately, this fear can prevent many from even trying to achieve the dream of a stable retirement.
Planning for retirement isn’t easy and many folks try to start planning at a young age, but as jobs, economies, and incomes change, some become more able to save and some become less so. Regardless of your life’s ups and downs, here are the four worst mistakes you can make when planning for retirement.
Mistake #1: You Don’t Work with an Advisor
Many people start out trying to plan their future on their own. They make promises to themselves that they will put money into savings with the next paycheck, but life can be wildly unpredictable as some unforeseen expenses pop up requiring immediate attention. Rather than relying wholly on yourself to adequately pad your savings account, consider working with a financial advisor to not only grow the small amount you may be setting aside now but also to prepare a budget and allocate all of your funds. While finances are and should be a private matter, an advisor can be consulted in order to make the best decisions for your future. They live and breathe in the world of money and maintain a breadth of knowledge that can really help you live financially better now and in the future.
Mistake #2: You Don’t Plan For Medical Necessities
While it can be hard to imagine illness when you’re young and spry, there are a lot of additional medical necessities as we age. Doctor’s visits become more frequent, the medicine cabinet begins to fill up with prescriptions, and even specially prescribed diets can cause your food costs to rise. When you begin to plan for retirement, it’s absolutely necessary that you consider these added medical necessities. The money that gets you by today may not be enough further down the road when your situation is different. Each individual retiree in today’s society is expected to spend between $150-200 thousand dollars out-of-pocket over the course of their retirement. These numbers, though, can be widely variable depending on insurance coverage, prescription drug needs, and lifespan. And for those retiring in ten years, or twenty, such numbers are impossible to predict.
Mistake #3: You Remain Static
How you prepare and save for retirement should always directly relate to and depend on the lifestyle you choose and income you make at any given point in life. In your twenties, it might be a challenge even to set aside just $100 a month. As your career progresses, however, that number you set aside increases. There’s one rule about retirement planning you should always follow: when your income increases, so should your retirement contributions. Think of it as a percentage of your income that is dedicated to your retirement fund and is directly deposited into it.
This way, with any shifts up or down in income, you can make adjustments accordingly.
Mistake #4: You’re Not Fully Aware of All Your Assets
You’re likely to understand that your assets include cars, homes, and expensive jewelry, but many retirees or soon-to-be retirees may not understand that assets go beyond physical property. Planning for retirement is tricky enough as it is, but when you don’t know that some of your most long-term assets are big players in your retirement fund, you won’t have a full grasp on your options. One such asset is a life insurance policy. For many people entering their senior years and heading into retirement, life insurance policies (and their premiums) can become more of a burden than a blessing. What many don’t know is that life insurance policies can be sold in a life settlement, providing additional cash to make retirement easier. This money is often used to help pad the retirement fund and ensure a nice quality of life throughout retirement.
While there are many mistakes that can be made while planning for retirement, these are four that we’ve found to really have an impact of the quality of life before and after retirement. When you can plan for retirement properly, and understand what mistakes you should avoid, you’re setting yourself on the right path for success!
Leo LaGrotte is founder and chief executive officer of Life Settlement Advisors.