A Gallup poll found that about half of Americans who are still working, don’t think they’ll have enough money to retire, but if you ask people who are already retired, 78% report that they do have enough money to live comfortably.
Whichever group you fall into, this Fox Business article, “10 mistakes that can sabotage your retirement savings,” offers ten retirement money mistakes to keep in mind.
- Failing to consider the effect of taxes on retirement income. You need to calculate how taxes could affect your savings. Some retirement savings plans are taxed, when they’re withdrawn. A big mistake many retirees make is believing that Social Security isn’t taxed, but 85% of Social Security can be taxed.
- Failing to consider the effect of health care costs in retirement. This can be expensive and includes things like deductibles and out of pocket payments—not just the costs for a health care plan.
- Failing to consider the effect of potential long-term care costs in retirement. It’s easy to forget to consider the day-to-day costs of long-term care, like assisted living, nursing homes, and in-home care. Medicare will pay for certain care for 30 days, but after that it has to come from your own savings.
- Failing to have enough liquidity and an emergency fund. You need to have money invested appropriately for retirement, so it can be accessed when you need cash.
- Having too much money tied up in your home. This isn’t a liquid investment, and if you have too much of your net worth tied up in your home, you may experience a lack of liquidity when you need it.
- Starting your retirement with significant levels of debt. Pay off or reduce your debt before retirement. Otherwise, your debt can debilitate your finances.
- Failing to plan for Social Security. There are a lot of strategies for using Social Security to maximize the amount of money you’ll receive. You can begin receiving Social Security payments at age 62. However, if you wait, you’ll see more money.
- Spending too much early in your retirement. Trips are nice, but your money has to last as long as you do! People who spend too much during the early part of their retirement years, can find themselves in a financial pinch later on.
- Failing to assess your risk. You need to have risk-appropriate investments in retirement. Consider your risk tolerance, since being too risk averse could eat into the value of a savings plan.
- Going it alone when it comes to an estate plan. An estate planning attorney will have the experience and insight to make sure that you and your family are protected from the inevitable: illness, disability, divorce, or death. Don’t leave this part out of your plan.
Reference: Fox Business (August 3, 2018) “10 mistakes that can sabotage your retirement savings”