Life is hectic enough day to day and adding planning for retirement to the mix can be overwhelming. Many hard-working people will put off worrying about retirement because it seems so far away and it might seem intimidating investing and planning for it. In this article we will go over what NOT to do prior to reaching the retirement milestone.
Not Saving Enough
The number one factor that derails retirement dreams is not saving enough. Many workers want to retire by a certain age and live a certain quality of life. This takes a tremendous amount of planning. Saving is the fundamental component to help achieve your retirement goals. Don’t settle to just match your employer’s contribution to your retirement account, try to max it out or increase your contribution as you get raises.
Investing too Late (or not at all)
First save, then invest. The stock and bond market may seem risky or hard to understand, but it is imperative to retirement success. Not investing excess savings may cause loss of purchasing power due to rising inflation. It is vital to have an emergency reserve and it’s just as important to grow your money. Many people assume they just have to save and invest until they reach retirement, but in reality your portfolio needs to grow to support your lifestyle for many decades after retirement.
Spending too much on Children
This is a tough one. We all want our children to live great lives and to have opportunities that we did not. It is admirable to want to support your child’s education endeavors. With a little planning, saving and investing for college can be achieved. It’s important to set boundaries and expectations for helping your children. It’s okay to prioritize your own retirement over fully funding your child’s education.
Not Taking Advantage of Tax Strategies
Again, many people don’t know what they don’t know, that’s why Sharkey, Howes & Javer is here to help. With the tax code always changing, it’s hard to stay on top of it. Taking advantage of a Roth IRA could help provide tax-free funds and a lot of flexibility in retirement. If you believe tax brackets will go up, using tax free or tax deferred strategies can help the success of your retirement. When you officially retire, tax planning becomes an integral part of your financial strategy. If your portfolio is needed to supplement income, try to plan distributions so they don’t bump you into a higher tax bracket.
Planning for Long Term Care
It’s impossible to predict what will happen in the future, but one thing is for certain, long term care costs are expensive. Many policies today don’t give you a lot of bang for your buck, but that doesn’t mean you should disregard getting one. Alternatively some retirees will plan on using equity in their home or other assets to help insure against a long term care need.
Talking to a CFP® to organize and create a detailed plan could help you succeed before, during and after retirement. If you have questions take advantage of SHJ’s free consultation with one of our experienced Certified Financial Planners®