Many people aren’t addressing the realities of retirement planning. They might open a 401k or other retirement savings plan, but often severely underestimate just how much they’ll really have to save to have a fulfilling retirement.
With today’s longer life expectancy, coupled with the high costs of things like health care, travel, and other daily expenses during retirement, you need to be proactive to make sure you’re prepared.
Here are some of the biggest ways you can fail to prepare adequately for retirement:
Underestimating Life Expectancy
Twenty-five years ago, insurance companies estimated life expectancy at 83 years. Despite the reliable data generated over recent years about our increasing life spans, many people still underestimate – often severely – just how long they could live.
This plays havoc with retirement planning and finances. Every extra year you live requires more savings, and if you don’t plan early you’ll find yourself running out of money with many healthy years ahead of you.
Many financial planners now recommend developing retirement plans based on life expectancy of 90 to 95 years. By recognizing that your retirement could last more than 10 years longer than it was expected twenty-five years ago, you can make sure you’re able to enjoy every year.
Failing to Consider Long-Term Care Need
The question you must ask yourself is, “Could your nest egg cover the potential cost of long-term care?”
Premature long-term care can be steep and difficult to cover. However, the notion of spending a few thousand dollars a year for long-term care insurance, versus the possibility of hundreds of thousands of dollars in the future, is smart money management.
Prepare for the worst to ensure you have everything you need if you ever do require long-term care. It’ll allow you to be more comfortable and take the stress off your family members.
Making Large Loans to Family Members
You’re retired or on track for a comfortable retirement. A family member asks you for a large loan for a house, college, or to start a business. And since you have savings built up, you say yes.
Though this generosity is a great trait, it could hurt you if you give away too much of your retirement, especially on a loan you’re not guaranteed to get back. Big withdrawals from your nest egg early in your retirement can seriously crimp your spending in later years.
Instead, offer your wisdom or connections. You could read through their business plan or help them apply to scholarships for college. That way, you’re still helping them achieve their dreams, without cutting into your savings.
Underestimating Expenses in Retirement
Don’t think you’ll be spending a lot less money when you retire! Today, many retirees are healthy, travel more, and spend time fixing up their houses.
Retirement is a great time to do all of the things you were too busy to do while working and raising a family. Your spending might slow in later years, but not at first. If you don’t have a handle on your current cash flow and expenses, you can’t get started on retirement planning.
Plan for the True Costs of Retirement with Brett Pittsenbargar in Austin TX
Many people don’t prepare well to retire, despite their best efforts.
Some invest money fairly consistently along the way, but don’t prepare for the expenses that come along with a long retirement.
BP Financial understands the realities of retirement and can help you make the right financial decisions today so you can have financial freedom tomorrow. Contact Brett Pittsenbargar today to learn how to prepare for your best retirement.