Too many senior citizens get caught in the same retirement jam: not enough money saved to sustain their standard of living. This happens because of retirement planning mistakes made well before the age of 65.
Thankfully, it’s never too late to make a change.
Common Retirement Planning Mistakes to Avoid
1) Not Saving Enough Each Month
Like most Americans, it’s likely that you have a retirement savings plan, but are you saving as much as you need to in order to comfortably retire?
Experts recommend saving between 10 and 15 percent of your income beginning in your 20s.
Even if you have reached that threshold, it’s important to periodically revisit your retirement contributions to see if you can do better.
If you are not actively saving for retirement each month, you are putting yourself at a serious disadvantage, because you will likely spend much of what you don’t set aside for the future.
If you haven’t been fully contributing to your retirement, set a series of goals to help you save more.
- Increase the size of your retirement contribution each time your income level rises.
- Contribute the maximum allowable contribution to your 401(k).
2) Not Starting to Save Early in Life
In retirement planning, procrastination can be expensive. With 401(k) matching funds, investment gains and more, each year you wait to start saving is a missed opportunity to grow your nest egg.
If you would like to make up for lost time, it’s easy to increase the size of your monthly retirement contribution. Or, you can remain in the workforce a few extra years to increase the size of your Social Security benefits.
3) Underestimating your Retirement Expenses
Planning for retirement is much more than just building a savings account. You should also map out how much you will need to spend each month to maintain the standard of living you desire once you exit the workforce.
A retirement budget will include additions as well as subtractions.
- You will no longer be commuting, but instead you may have to pay for gas or airfare for trips to see your grandchildren.
- You won’t have to pay FICA taxes on your full-time pay, but you never know what your health care costs might be.
You can approximate how much you will need to save for retirement by creating an estimated budget of expenses.
While it may seem costly to start, a strong retirement fund pays off greatly in old age. By learning to avoid these retirement planning mistakes, you can enjoy your golden years with less financial worries.