Fortunately, with proper planning, you can avoid feeling anxious. To help you avoid making mistakes during retirement planning, here are some common mistakes people make and how to fix them.
Saving too little
No one thinks that they will soon retire. Some people wait until they are in their 40’s to start saving for retirement. If you haven’t started saving up for retirement, the best time to start is now. For people not in formal employment, you can focus on creating guaranteed income streams from cash value of life insurance policies and annuities. Being in the workforce longer allows you to increase your social security benefits.
Failure to factor in taxes
A lot of seniors do not understand that deductions increase in retirement. This means that their tax rate goes up. Even though your lifestyle hasn’t changed, you could end up paying more in taxes. Nonetheless, you can minimize taxes in retirement by investing in Roth accounts, owning a home and timing your retirement accounts to coincide with low income.
Not having an estate plan
Most families end up spending a lot of money and time trying to get the property their loved one left. This problem can be easily solved by having an estate plan. It doesn’t have to be complicated. You can contact an attorney who can help you draft a simple will. This ensures that when you become incapacitated or die, your family is rest assured that you had things in order and they won’t have to spend money on attorneys trying to settle court cases.
Underestimating medical expenses
As people grow older, they become more prone to certain lifestyle and chronic conditions. Research carried out by Sun Life Financial estimates that over 90% of people have no idea what their future medical costs will be. 75% of the respondents said they had no plan for paying for post-retirement medical costs.
To help avoid running into financial problems later on, you should consider buying supplemental health insurance coverage and plan for long term care. Check to see if you’ll be comfortable having an in home care service or visiting an assisted living facility.
Saving in the wrong places
Most people are afraid of the stock market and end up putting their money in fixed deposit accounts. Inflation affects these savings and your money loses value over time, If you fear losing your money. You can have a certain percentage in fixed investments and another in safe certificates. Diversification is the key to smart investing.
If you are nearing retirement, these are some of the mistakes you can avoid in advance. For the young, it’s never too early to start planning for retirement.
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- Simon Schuster
- Jane Bryant Quinn
- Simon & Schuster
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