Avoid These 3 Common Retirement Financial Mistakes
If you want to spend your golden years relaxing at tropical resorts or exploring new hobbies, you need a solid financial plan. Approximately 1 out of 5 Americans still work after the age of 65, and the number of potential retirees with jobs continues to grow. While some aging adults remain in the workforce for personal fulfillment, many do so because they cannot afford to quit their jobs. If you fear you may fall into the latter category, create a financial safety net for your future by avoiding these three common retirement mistakes.
Mistake #1: Treating Retirement Planning as a One-Time Activity
As you age, you may find your immediate and long-term expenses change. You may also experience significant income fluctuations or discover your investments are not performing well. These are all good reasons to adjust your retirement plan, but you will not know that if you don’t review it regularly.
Take a look at your retirement plan at least once a year to see how your investments are progressing. You should review it more often than that if a major change, such as a job loss or plummeting stock prices, occurs.
When you review your retirement plan, consider how much money you need to live comfortably. Have you recently discovered a newfound love for gourmet groceries or been diagnosed with a chronic medical condition? Do you like staying home and watching television, or do you love to visit restaurants and travel with friends? These are all things that affect your spending habits, so be honest with yourself when you consider your retirement needs.
Mistake #2: Relying on Someone Else to Fund Your Retirement
You may expect your spouse’s retirement earnings to cover your needs, but what happens if your loved one files for divorce or secretly spends some of the funds? It is important to make sure you have your own retirement account instead of just expecting to fund your needs with your spouse’s savings.
Your employer may offer to fund your retirement, but what are you going to do if you get fired or laid off without warning? Or what if you develop a serious medical condition that requires you to take an unpaid leave from the workforce? Explore self-managed plans as a backup so your retirement earnings are protected if either of these situations occurs.
Many aging adults assume Social Security payments will keep them afloat if one of the situations above occurs. Unfortunately, Social Security payments are not guaranteed, and you may not receive the anticipated amount of funds when you retire. Establishing your own retirement account can help you handle delayed or nonexistent Social Security payments.
Mistake #3: Not Saving Enough Money
The average American lives to be approximately 80 years old and some golden-agers continue to thrive well into their 90s and early 100s. Let’s say you decide to start saving for retirement at age 55 with the intentions of retiring at age 65, and you put aside $1,000 a month for 10 years. That gives you $120,000 to survive on for the next 15 to 30 years, possibly longer. That breaks down to just $8,000 per year for 15 years or $4,000 per year for 30 years.
You can help prevent this issue by saving for retirement as early as possible, preferably in your 20s or 30s. Increase the amount you contribute each year — or even each month — so you have plenty of savings when you are ready to leave the workforce.
It’s important to plan for potential issues in case life takes an unexpected direction. Plan for your retirement with the helpful tips above so you can enjoy your golden years rather than stressing about finances. Learn more about Riddle Village and how we can help you prepare for the future.