Retirement planning is more than just dollars and cents. It involves your whole lifestyle, including how much you spend each year, what you need to survive in retirement, when you want to retire, and where you will live after retirement. Unfortunately, this makes it difficult for many people to maximize their savings. That is why so many people need professional help. However, even professionals can make mistakes when planning for retirement. Here are the seven most common mistakes that financial planners like Jeffrey Small Arbor Financial have seen in their careers:
1) Not saving enough
People often just do not save as much as they should for retirement. This may be due to having too high expenses now. Or, it could be due to thinking they can just earn more money later on in life. However, even if they earn more money later on, that does not mean that early retirement will still be feasible. This is why people need to start savings as soon as possible and never stop saving their entire lives.
2) Working too long
Working too long can actually be a mistake regarding retirement planning. This is because, for every year that someone continues to work, they delay their retirement by two years. This means that if you retire at 62 instead of 60, you will only have six years of retirement rather than eight years. And, if you retire later on, you will need to save more money.
3) Taking Social Security too early
This may not be a mistake for some people who are still very close to the average life expectancy of 78 years old. However, taking Social Security early can cost someone up to 30% of their benefits if they wait until age 69. That is a lot of money that could be used for retirement.
4) Not considering health care costs
Many people do not consider the high cost of health care when planning for retirement. This can be a huge mistake since people can easily spend $50,000 or more on health care costs in retirement. Therefore, it is important to have a plan in place for this.
5) Not taking inflation into account
Inflation is the rate at which the price of goods and services rises over time. When you are planning for retirement, it can be easy to forget that your money will not have the same buying power when it comes time to retire. If you think your savings will last 30 years, inflation will likely cause your money to buy less. That is why you need to save more money to cover yourself for the next 30 years of retirement.
6) Not leaving enough time to plan
Whether it is living or working, people are often in a hurry and they want everything now. While this is fine when it comes to working, it can be dangerous when it comes to planning for retirement. First, you will need time to see if you are on track to retire. And, if not, you will need time to make changes before it is too late.
7) Not having a solid financial plan
A financial plan should include building an emergency savings account, trying to pay off debts, saving for retirement, and having insurance. Without a solid financial plan in place, it will be difficult to make progress on any of these goals.
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