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Retirement Planning Mistakes You Can Avoid

Steer clear of the mistakes that could derail your retirement

January 1, 2016 | 2 min reading time

This article is 9 years old. It was published on January 1, 2016.

 Just the thought of retirement can cause anxiety and many people feel overwhelmed and unprepared for planning their retirement.  In fact, one of the biggest dilemmas for those approaching retirement is balancing the life they want to live today with the life they want to live in retirement.

There are some common, yet avoidable mistakes that prevent many people from retiring "on time."  With some planning, you can steer clear of the mistakes that could derail your retirement.  Common retirement planning mistakes:

#1  Living Too Large.  The general rule of thumb is to figure that you will need approximately 80% of your current annual income in retirement. Most people underestimate how much money they will need in retirement.  Keep in mind that retirees spend more on travel, entertainment and eating out especially earlier on in retirement when they have the time and good health to enjoy those activities.  In their later years, health care cost can escalate.

#2  Disregarding Higher Health Care Costs.  One of the most overlooked areas of retirement planning is estimating what health care costs could be in retirement, and including this in the calculation of income needs  Often, people assume Medicare will cover these expenses but this simply is not true.

#3  No Long-Term Care Plan.  According to the U.S. Department of Health, 70% of people over 65 will require care at some point in their lives.  Given that 50% of claims last more than one year and medical costs are  projected to continue rising faster than inflation, these costs add up quickly.  It's important to know your long-term care options and how you plan to pay for these future expenses if you need to.

#4  Not Saving Enough Then and Now.  Don't wait to start saving for retirement.  The sooner you get started, the greater your chance of reaching your retirement goal because compound interest can work its magic  Make saving for retirement a priority and start saving some amount each month.

#5  Not Updating Your Retirement Plan.  It is important that your retirement plan be revisited every few years to make sure it's not based on a lifestyle that is no longer relevant.

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