Many financially successful individuals begin retirement with the belief that their personal savings and holdings, coupled with company retirement packages and Social Security will enable them to retire comfortably. The cliché "ignorance is bliss" may apply in some situations but certainly not when it comes to retirement planning. Failing to accurately calculate what your income and expenses will be during retirement can keep you from enjoying what should be one of the most relaxing and best times of your life.
Before you make any major decisions, it may be beneficial to review some of the common mistakes people make in retirement planning. Doing so can not only help you avoid such errors, but may motivate you to do some serious planning and saving before it is too late.
When it comes to retirement planning, many think that it is better late than never. While you can always begin planning later in life, the options and opportunities available begin to dwindle as you get older. If you do start later, you will have a harder time recovering from any life events or economic situations that may occur. Remember, you can never start saving and planning for retirement too early.
Keep in mind that the retirement benefits your company offers may alone not be enough during retirement. People often misunderstand what their company benefits are and how they work. Make sure you understand and track your benefits so you will be able to make any necessary ongoing adjustments to your plan.
The Social Security Trap
Social Security should not be viewed as a safety net for individuals who retire with little to no income and assets, especially given the current situation of Social Security. At most, the program should provide a small buffer to help financially when you no longer have a steady income. Play it safe and keep in mind that Social Security should only be a small part of your overall retirement plan.
While Medicare is often the main health insurance for older individuals, it will not be enough to cover all health care costs. The costs of Medicare increase often and any difference in cost will have to be made up in some form, whether directly out of your pocket or ultimately from the cost of any additional health insurance you obtain. Be sure to take this into consideration during your retirement planning.
Perhaps one of the biggest mistakes people make is they seem to think they will need less money to live on during retirement. The cost of living does not decrease during retirement! While some individuals may be able to live on less during retirement, most can not. A number of things may attribute to this including rising health costs during retirement, leisure and entertainment costs, and travel expenses. In addition, individuals who may have had children later in life may be faced with college tuition costs. It is imperative that you closely (and realistically) analyze what your expenses will be during retirement so you can include them in your retirement plans. One of the best ways to achieve such an objective is to hire a financial analyst to help you plan your retirement. Doing so will ensure that you spend your golden years enjoying life to the fullest, not trying to make ends meet.