It sounds simple: Save money while working, invest responsibly, retire, and live on the nest egg you created. The dream of retirement includes living without worrying about running out of money. No doubt there were financial struggles during your life, but the goal is not to experience those struggles during retirement. Proper planning includes anticipating unknown expenses and projecting the income needed to live stress-free. Here’s a short list of things that people forget to consider during retirement planning:
1. Consider When You Will Retire
I’ve discussed delaying social security to receive higher benefits in previous blogs. In this case, I’m talking about allowing enough time to properly save. Early retirement sounds amazing but allowing enough time to build a nest egg is crucial. When planning, remember to calculate how many years you have left before retirement. That will drive how aggressively you save and invest. More importantly, this planning step calculates how big a nest egg you’ll need.
2. Consider Taxes
Most retirement accounts grow in a tax-advantaged way, allowing individuals to save more money. However, when that money is withdrawn, taxes must be paid on that income. Considering how much taxes you’ll pay in retirement is vital to determining how much savings is needed. Taxes can significantly eat into the income you’ve saved and failing to calculate can create an unexpected shortfall.
3. Consider Inflation
Inflation, or the rising cost of goods over time, is estimated to be between 2% and 3% yearly. Simply put, you must consider that the cost of living will be higher during retirement. When considering how much you’ll need in savings to live comfortably, these estimated increases are vital.
4. Consider Your Retirement Budget
After considering taxes and inflation, creating a retirement budget is the next logical step. It’s important to know the monthly income you’ll need to live, the expenditures you may incur and any discretionary spending (vacations, trips, etc.) you will need. This step also allows you to arrange your money in ways allowing continued growth while minimizing risk and receiving monthly income.
5. Consider Healthcare Costs
Aging, unfortunately, comes with health issues and health care costs are inevitable. Americans are living longer and planning for health expenses should be part of any retirement plan. These expenses can significantly deplete retirement income. Retirement planning should consider these costs along with any long-term care insurance needs. This not only protects retirement savings; it also will ease the burden on adult children and family caregivers and maintain your independence.
It never hurts to review your current retirement income plan. We invite you to schedule a time to discuss your financial future and make sure you have considered these obstacles. To schedule your no-obligation meeting, just click on the link below or call us today at 704-790-2583 (BLUE).
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