Too many Americans postpone retirement planning. When it suddenly shows up, they’re caught unprepared for meeting expenses, with a reduced income that can quickly wipe out savings and rob them of peace of mind and enjoying their Golden Years. These are the 10 biggest retirement planning mistakes:
1. Failing to plan
As the saying goes, “Most people don’t plan to fail, they simply fail to plan.” More than 64 percent of Americans have no plan at all for retirement. This has to be one of the absolutely worst retirement mistakes. Planning ahead of time gives you and your family peace of mind that when the need arises, you’ll be ready.
2. Putting all of your retirement nest eggs into one basket
Among the mistakes retirees make is relying solely on a pension for retirement and failing to invest along the way. Include investments and other forms of income, in addition to pensions puts you in a much better position if one source dries up.
3. Lack of preparation for anticipated medical expenses
Remember that Medicare only covers 80 percent of most (covered) expenses. Medical bills can become quite substantial; hospital stays, medications or surgeries can be crushing to your retirement savings. Do you have a Medicare supplemental policy in place to pick up most of the remaining copays? Will insurance or savings be enough?
4. Not planning for longevity
More people are living longer – well into their 80s and beyond. Not planning for the possibility of a 20 to 30-year retirement can leave many running out of their savings, especially if much of that goes to pay healthcare and nursing home expenses.
5. Avoiding Long Term care planning
A 2017 study found that the national median cost of assisted living is $45,000 annually, with a private room in a nursing home priced at $97,000 per year. Medicare doesn’t cover most of this, so consider having long-term care insurance to help with these expenses.
6. Postponing saving when younger
Try to put something away into a retirement fund with each paycheck and invest if possible. The alternative is to keep working and contributing to Social Security as long as possible. Otherwise, try to diversify for multiple streams of income.
7. Failing to review goals and finances annually
Even after retirement, you’ll need to review your income and expenses annually, especially if you’ve incurred additional medical bills or other expenses.
8. Not considering account fees or tax implications when investing
Many people hoping to live on their portfolio stocks or bonds income could be in for an unpleasant surprise if left with a shortfall. Having income from both principal as well as interest can help reduce both ordinary income as well as taxes. Be careful, too, with 401(k) fees: a plan with a 1.5% annual fee could reduce the balance by as much as 28% compared to one charging just 0.5%.
9. Competing expenses with retirement savings
Most experts recommend that you not tap into your home’s equity, IRA or other savings to pay for college or other expenses. Grants and other sources of funding may help your college-bound student with tuition and other expenses, leaving you with more savings for retirement.
10. Relocation mistakes
Other retirement mistakes boomers should avoid are relocating before vetting a new location. You may find that a slower lifestyle, endless golf and walks on beaches can get boring quickly. Try to rent before buying property in a new location.
Don’t fall victim to the 10 biggest retirement planning mistakes! Get the help you need. Long term Living Association (LTLA) helps people take control of their lives and finances for meeting the future challenges of aging. Take the first step toward peace of mind by using LTLA’s convenient online scheduling system or call at 800-868-1193 for more information about what we can do for you or your loved ones.
Retirement Income and Long Term Care Insurance Specialist
MICHAEL B. FITZPATRICK