When it comes to planning for their retirement, many people, especially those in their 20s and 30s, often feel overwhelmed and unprepared.
One of the biggest challenges they face is balancing the life they live now with the life they want to live in retirement. This article looks at some of the common (yet avoidable) mistakes people make when planning for retirement.
Over several years of helping various clients successfully plan their retirement premiums, we have noticed that the most common mistake people make is living too extravagantly on their current income.
Most people underestimate how much they need in retirement. Retirees are known to spend more on entertainment, traveling, eating out and healthcare (which gets more expensive as they get older).
Pro tip: A general rule of thumb is to understand that you will need about 80% of your current annual income if you want to live comfortably in retirement.
Another common mistake when it comes to planning for retirement is disregarding the fact that healthcare costs are getting increasingly expensive.
Healthcare is one of the most overlooked areas of retirement planning. Many people end up underestimating the potential cost during retirement and fail to account for it when calculating their income needs.
Pro tip: When you disregard the high possibility of increased healthcare costs during retirement, you could end up spending more than you planned and run out of cash when you need it most.
If you’ve ever cared for an elderly parent (or you’re close to someone who does), you know first-hand the toll it can take on your emotional and financial well-being. Both the time and the money needed to provide high-quality care can be staggering.
According to the US Department of Health, 70% of people over the age of 65 will require care at some point in their lives. Yet most people fail to prepare for this inevitable time of their lives. It is very important to know your long-term care options and how you plan to pay for these future expenses if (or when) you need to.
Pro tip: If you don’t want to be a burden to your loved ones when you’re old, start planning for your future long-term care needs. Your future self will be thankful.
These mistakes are common, but they are also avoidable. Prepare for your future by planning for your retirement. Do you need expert help in choosing the right retirement plan for yourself? Contact us today for a FREE consultation.