Funding retirement is one of life’s most important financial goals, but unfortunately many of us do not put enough effort into preparing for this time of our lives. Whether you’ve put off planning for retirement altogether or failed to create a truly comprehensive plan, you’re putting yourself at risk for a future of poverty, penny pinching, and dependence. The stakes could hardly be higher because you should treat retirement planning as if your life depended on it—because it does. To this end, even well-thought-out plans can contain fatal flaws you might not be aware of until it’s too late. Have you committed any of the following three deadly sins of retirement planning?
1: Not having an actual plan
You need to have a detailed, goal-oriented plan for your retirement so you will have a clear idea about whether or not your saving strategies are working adequately or not. Keep in mind that such plans aren’t just about calculating a retirement savings number, funding your 401(k), and then setting things on autopilot. Once you know how much you’ll need for retirement, you have to plan for exactly how you’ll accumulate that money and monitor your success. The plan should include clear-cut methods for increasing income, reducing spending, maximizing tax savings, and managing investments when and where needed.
What’s more, you should regularly review and update your asset allocation, investment performance, and savings goals to ensure you’re still on track to hit your target figure. It’s a good idea to adjust your saving strategies to match the specific needs of your new income level ad age at least once every decade. The plan should also take into consideration unforeseen contingencies, such as downturns in the economy, health emergencies, layoffs, and inflation.
2: Not maximizing the use of tax-saving retirement accounts
Whatever money you set aside for retirement is going to be taxed, but you can invest in tax-saving retirement accounts to significantly reduce the amount of taxes you’ll end up paying. Depending on your employment and financial situation, there are numerous different plans available. From traditional IRAs and 401(k)s to Roth IRAs and SEP Plans, you should consider using one or more of these investment vehicles to ensure you achieve the most tax savings possible.
You can also take advantage of the fact that many employers will match your contributions to these accounts, which is basically free money. If your employer offers matching funds, you should not only use these accounts, but also contribute the maximum amount allowed—and do so as early as possible.
Since figuring out which of these plans will offer the most tax savings can be tricky and because tax laws are constantly changing you should consult with us and a professional financial advisor to find the one(s) best suited for your particular situation.
3: Underestimating health-care costs
One of the most frequent mistakes people make when planning for retirement is assuming that things will always stay the same. Whether it’s tax laws, inflation, market conditions, or marital status, if you don’t carefully consider how your circumstances might change with time, you’re putting yourself and your savings at serious risk. While many such contingencies are mere possibilities, the one thing that’s certain to change with time is your body and mind. It’s an inescapable fact that our health naturally declines with age, so one of the riskiest things you can do is not plan for increased health-care expenses.
With many employers eliminating retiree health-care coverage, Medicare premiums rising, and the extremely volatile nature of health insurance law, planning for your future health-care expenses is absolutely critical. It’s even more important seeing that we’re now living longer than ever before. Plus, these considerations are assuming that you don’t fall victim to a catastrophic illness or accident. The natural aging process is expensive enough to manage, but a serious health-care emergency can wipe out even the most financially well off.
You should take advantage of every available precaution within your means to protect your future self. This might mean delaying retirement, purchasing supplemental insurance, investing in long-term care insurance, opening a Health Savings Account, or some combination of these options. We can advise you on precautions that are right for you and your family.
Start preparing for retirement now
The best way to maximize your retirement funding is to start planning and saving as soon as possible. In fact, your retirement savings can be exponentially increased simply by starting to plan at an early age.
No matter your age, income, or asset value, with us as your Personal Family Lawyer®, we can help you put the legal, insurance, financial, and tax systems (LIFT) in place to ensure you’re prepared for a thriving future. Contact us to schedule a Family Wealth Planning Session today to get started. We’ll review what you have in place now, what you need, introduce you to advisors you can trust, and ensure you and your family are well-protected and planned for no matter what.
This article is a service of Levi Alexander, Personal Family Lawyer®. We don’t just draft documents; we ensure you make informed and empowered decisions about life and death, for yourself and the people you love. That’s why we offer a Family Wealth Planning Session, ™ during which you will get more financially organized than you’ve ever been before and make all the best choices for the people you love. You can begin by calling our office today to schedule a Family Wealth Planning Session and mention this article to find out how to get this $750 session at no charge.